The 6 Commercial Lease Clauses That Can Make or Break Your Small Business
Commercial leases can be long, technical, and in many instances, drafted to protect the landlord. Hidden inside are clauses that can dramatically affect your monthly costs, your ability to grow, and even the survival of your business. Understanding a few key terms can save you thousands of dollars and countless headaches.
Below are the six lease clauses every small business owner should understand before signing on the dotted line.
1. CAM Charges: The Silent Budget Killer
What are they?
CAM charges, or Common Area Maintenance charges, are fees that commercial tenants pay in addition to their base rent to cover the costs of operating and maintaining shared spaces in a commercial property. While every commercial space looks different, CAM charges typically cover expenses such as:
Landscaping and grounds maintenance
Parking lot upkeep and repairs
Snow removal
Janitorial services for common areas like lobbies and bathrooms
Property management fees
Security services
Repairs and maintenance of shared facilities and equipment
Why they matter:
A lease with unclear or uncapped CAM charges can turn a “great deal” into a surprisingly bad financial decision.
What to look for:
Clear list of what’s included
Caps on annual increases
Exclusions for capital improvements
Audit rights
Like most provisions of a lease, CAM items are negotiable. Fill out our contact form for a free consultation on how we can represent you.
2. Repair & Maintenance Responsibilities
What is it:
Repair and maintenance responsibilities in a commercial lease define who is responsible for fixing and maintaining various parts of the property, such as HVAC systems, roofs, parking lots, and structural elements. These clauses specify whether the landlord or tenant must cover costs for repairs, replacements, and ongoing upkeep.
Why it matters:
Understanding these responsibilities is crucial because unexpected repair bills can be substantial and financially damaging. If the lease places too much responsibility on the tenant, you could face costly repairs that impact your business’s profitability.
Things to look out for:
Clear distinctions between repair and replacement obligations, especially for major systems like HVAC
Specific clauses about roof and structural repairs—these are often costly and should typically be the landlord’s responsibility
Details on parking lot maintenance, including resurfacing versus minor patching
Whether operating costs or CAM charges include capital expenditures or major repairs, which can significantly increase your expenses
Any language that might shift unexpected costs to the tenant, such as “all repairs” or “full maintenance” without limits
Provisions allowing you to audit or dispute repair charges
Although this section likely won’t make or break your decision to rent a space for your business, it can save you from surprise expenses later down the road.
3. Rent (No surprise here)
This one’s pretty obvious, as locking yourself into a lease that is even $1.00/SF/YEAR above market can lose your business thousands of dollars.
What to look for:
The frequency your rent payments become due.
Late rent fees
Whether your lease is triple net (NNN) or gross.
Concessions being offer.
4. Assignment & Subleasing Rights
Businesses evolve. You may grow, downsize, sell, or pivot. Your lease should give you the ability to leave early in the future if you determine you need to move earlier. Both subleasing and assignment of your lease would allow you to leave early while effectively. Howev Additionally, you may be able to assign your lease, which would release you from all obligations under your lease agreement.
Why it matters:
A restrictive assignment clause can trap you in a space you no longer need, potentially costing your business tens of thousands of dollars.
What to look for:
“Reasonable” landlord consent
Release of guarantors upon assignment
Ability to transfer to affiliates
Credit-worthiness requirements of new tenants
5. Renewal Options
Your first lease term goes by faster than you think. Renewal options determine whether you can stay and at what price.
Why it matters:
Without a renewal option, you may face a massive rent increase or be forced to relocate.
What to look for:
Number of renewal terms
How renewal rent is calculated (FMV vs. fixed increases)
Whether options transfer if you sell your business
6. Delivery Condition
What is it:
The delivery condition describes the exact physical state of the space when the landlord hands it over to you at the start of the lease. This clause defines whether you’re receiving a cold shell, warm shell, vanilla/white box, or a more finished turnkey space. Here are the main types:
Cold Shell - a minimally improved space that requires the tenant to perform nearly all improvements (partitions, plumbing, etc.)
Warm Shell - a partially improved space with basic systems in place, such as lighting, restroom rough ins, etc.
White Box - A near move-in ready space most commonly seen in retail. Usually includes primed drywall, flooring, and electrical work.
Turn-Key - The space is built out to the tenant’s specs before move in, or the space needs no improvement for the tenant
Why it’s important:
Delivery condition directly affects your build‑out cost, timeline, and ability to open for business. Typically, a tenant improvement allowance (TI Allowance) is marketed to tenants by landlords as an incentive to sign a lease. Understanding what condition you’re receiving
What to look out for:
Exact definition of the condition
Landlord work vs. tenant work
Possession and readiness dates
Existing defects
Build‑out compatibility
Coordination with contractors
Final Thoughts
Commercial leases are negotiable, and often more than tenants realize. A few well‑placed edits in these long and often complex documents can save thousands of dollars and provide your business with the flexibility it needs. Shelton Law offers a free consultation to businesses and property owner’s looking for commercial lease representation.