Signing a commercial lease is the beginning of a business relationship spanning several years. Some of the most costly issues we encounter happen months or years later because a critical deadline or obligation was overlooked. Business leaders should treat leases as operating documents, know the fundamentals, and monitor compliance.
Calendar key dates
Track important milestones, including scheduled rent increases, tenant improvement (TI) deadlines, and renewal or expiration dates. Renewal and option deadlines are often strictly enforced; missing a date or failing to follow proper notice could mean waiving your rights.
Review rent and operating expenses
Don't assume every invoice is correct. Commercial leases usually require tenants to pay more than base rent, including property taxes, insurance, operating expenses, and common area maintenance (CAM) charges for shared spaces. Amounts are often estimated and then reconciled periodically. Understand how these charges are calculated under the lease and review reconciliations to identify any errors and ensure the right amounts are being paid.
Follow insurance requirements
Most leases require tenants to maintain specific insurance coverages, name landlords as additional insured and provide certificates of insurance throughout the term. Neglecting these requirements creates unnecessary risk or could place the tenant in default.
Analyze estoppel certificates
At some point during the lease, the landlord may ask the tenant to sign an estoppel certificate. An estoppel certificate is a written confirmation of key facts about the lease, such as current rent, term, security deposit, and whether either party is aware of any defaults or outstanding obligations. These are often requested when the property is being sold or refinanced. Although common requests, estoppels should not be treated as routine paperwork. Once signed, estoppels can limit a tenant’s ability to later assert facts to the extent inconsistent with certifications. Confirm the information accurately reflects the lease, any amendments, and unresolved issues between the parties.
Monitor assignment requirements
Most commercial leases require the landlord's consent before the tenant may assign the lease or sublet the premises, and many require the landlord's consent in connection with a change of control or change of ownership of the tenant. Review these provisions prior to any major transaction.
A well-negotiated lease for a commercial property can be a valuable asset for your business. Protect that value by managing the lease throughout its term.
