Commercial Building Lease

Renting commercial space instead of buying it is the preferred choice for most small businesses. Your business needs should shape your choice of commercial space, and your expected gross monthly income will determine how much rent you can afford to pay. But although the rent is important, it isn't the only factor to consider when negotiating with a prospective landlord. Lease terms covering items such as the deposit, common area use, insurance, and maintenance can make the difference between a punishing lease and one that you can live with.

Common Lease Terms

Here are some common lease terms and their meaning. Additional articles about commercial leases on discuss them in more detail.

Clause name

What it's about

Parties, Lessor and Lessee, or Landlord and Tenant

The names of the landlord and tenant


A description of the space for rent


Explains how the rent is calculated


When the lease begins and ends


The security deposit required by the landlord

Hold Over

The consequences of not moving out at the end of your lease


Requirements and restrictions on how you
use your rented space


How utilities are metered and
how costs are apportioned


Describes which taxes tenants will have to pay, and how much

Insurance & Indemnity

The insurance policies tenants must take out or pay for


Building security and who pays for it


Describes available parking and how it's paid for


Covers common area maintenance (CAM) costs tenants have to pay for

Alterations & Repairs

Explains alterations tenants may make and when they need permission; may delegate some repair duties

Assignment & Subletting

Describes when and how tenants can turn over space to another tenant


Describes rights to extend, expand, or contract the amount of space rented or the lease term. May also cover the right to buy the property

Defaults & Remedies

The consequences if the tenant or the landlord fails to live up to the lease


What happens if all or part of the building is destroyed


Describes what happens to the lease if a government entity condemns the building

Subordination, Nondisturbance, & Attornment

Financing clauses describing what happens if the landlord defaults on a mortgage payment or the landlord's lender forecloses on a loan that's secured by the building


Explains the tenant's duty to provide a signed statement that tenant and landlord are complying with the lease terms

Attorney Fees

An agreement as to who pays the winner's fees and costs if a disagreement ends in litigation


The name of someone who will guarantee the tenant's financial responsibilities under the lease. The guarantor must also sign the lease

Dispute Resolution

The chosen mechanism for settling disputes, by using mediation or arbitration, before or in place of filing a lawsuit

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