Reading time: 12 minutes · Topics: lease negotiation, tenant rights, commercial real estate, NNN leases, lease terms

A commercial lease is not a form. It is a negotiated legal contract, often 30–60 pages long, that governs where your business operates and what you pay for the next 3, 5, or 10 years. Every clause in it was written by the landlord’s attorney to protect the landlord’s interests.

Most tenants sign leases they have not fully read, let alone negotiated. This is how businesses end up locked into terms they did not know were negotiable, personal guarantees that run the full lease term, HVAC obligations on aging equipment, restoration requirements that cost tens of thousands of dollars at move-out.

This article covers 25 clauses that appear in most commercial leases. It explains what each clause does, what to watch for, and whether it is a point worth pushing on. The goal is not to make you a real estate attorney. It is to make sure you know what you are signing.

Almost everything in a commercial lease is negotiable, but only before you sign. Once the lease is executed, the terms are locked in for the length of your term.

How to Read the Risk Labels

HIGH RISK = clauses with significant financial or legal exposure that deserve close attention. NEGOTIATE = clauses that are routinely negotiated and where tenant-friendly language is often achievable. ROUTINE = standard clauses that typically don’t require major changes but should be confirmed.

Rent and Economics

1. Base Rent | HIGH RISK

The fixed monthly rent amount, stated in dollars per square foot per year or as a flat monthly figure. This is the foundation of the lease economics. Everything else, escalations, operating expenses, concessions, layers on top of it.

Watch for: Whether rent is quoted on a gross, modified gross, or NNN basis. The quoted rate is meaningless without knowing what additional charges you are responsible for.

2. Rent Escalations | HIGH RISK

Most commercial leases include annual rent increases, typically a fixed percentage (often 3%) or a CPI adjustment tied to an inflation index. On a long lease, these add up. A 3% annual escalation on a 10-year lease means your rent in year 10 is roughly 34% higher than year 1.

Watch for: Whether escalations are fixed or CPI-based. CPI escalations with no cap can produce significant jumps in high-inflation years. Push for a fixed percentage or a CPI cap.

3. Free Rent Period | NEGOTIATE

A period at the start of the lease, typically measured in months, during which no base rent is owed. Landlords offer free rent as a concession to attract tenants. In a soft market, this can run 2–6 months on a 5-year deal. It is one of the most negotiable items in any lease.

Watch for: Whether operating expenses are still owed during the free rent period. Some leases provide only base rent abatement, not full abatement. Clarify exactly what is free.

4. Operating Expense Passthrough (NNN) | HIGH RISK

In a triple net (NNN) lease, the tenant pays base rent plus a proportionate share of the building’s operating expenses, taxes, insurance, and common area maintenance (CAM). These charges can add $2–$8 per square foot per year on top of base rent, and they fluctuate annually.

Watch for: Whether the NNN estimate given at lease signing is realistic. Ask for three years of actual expense history. Also look for management fee inclusions, which can inflate the CAM charge by 10–15%.

5. CAM Caps | NEGOTIATE

A cap limits how much controllable operating expenses can increase from year to year, typically expressed as a percentage. If the lease includes a 5% CAM cap on controllable expenses, the landlord cannot pass through controllable cost increases above that amount, even if actual costs ran higher.

Watch for: The distinction between controllable and uncontrollable expenses. Taxes and insurance are usually excluded from caps. Make sure the cap applies to management fees, landscaping, repairs, and other controllable line items.

6. Security Deposit | NEGOTIATE

The amount held by the landlord as security against default, typically equal to one to three months of base rent. The conditions for return and the allowable deductions should be spelled out clearly. On a new or smaller business, landlords sometimes ask for a larger deposit.

Watch for: Whether the deposit earns interest (rare but worth asking), the timeline for return after lease expiration, and the specific conditions under which the landlord can draw from it.

Space and Term

7. Usable vs. Rentable Square Footage | HIGH RISK

Usable square footage is the space your business actually occupies. Rentable square footage adds a load factor, your proportionate share of common areas like lobbies, hallways, restrooms, and mechanical rooms. You pay rent on rentable square feet, not usable. The difference is called the loss factor, and it commonly runs 10–20%.

Watch for: The load factor percentage and how it is calculated. Ask the landlord to confirm the usable square footage of your specific suite separately from the rentable figure.

8. Lease Commencement Date | NEGOTIATE

The date rent officially begins. When a tenant improvement build-out is involved, the commencement date may be tied to substantial completion of construction rather than a fixed calendar date. This matters if construction runs long, you do not want to start paying rent on space you cannot occupy.

Watch for: Whether the commencement date is fixed or construction-contingent. If it is construction-contingent, confirm the lease defines substantial completion clearly and includes a landlord delivery deadline with tenant remedies for delays.

9. Lease Term | NEGOTIATE

The total duration of the lease, typically expressed in months or years. Longer terms often produce better economics, more free rent, higher tenant improvement allowances, lower per-square-foot rates. Shorter terms give you flexibility. The right term length depends on your business’s stability and space requirements.

Watch for: Whether the stated term aligns with your actual business plans, and whether the lease includes any early termination rights if your space needs change significantly.

10. Permitted Use | HIGH RISK

This clause defines exactly what business activities are allowed in the space. Landlords write permitted use clauses narrowly to control what happens in their building. If your permitted use is defined too tightly, you may be in default if your business evolves, even slightly.

Watch for: Language that restricts use to a specific named activity (e.g., “general office use only”) versus broader language (e.g., “any lawful commercial use”). Push for the broadest permitted use the landlord will allow.

Improvements and Alterations

11. Tenant Improvement Allowance (TI) | NEGOTIATE

The landlord’s contribution toward the cost of building out your space, new walls, flooring, lighting, electrical, HVAC modifications. TI is typically expressed as a dollar amount per square foot and disbursed against approved contractor invoices. Negotiating a meaningful TI allowance is one of the highest-value items in any lease negotiation.

Watch for: What the TI covers and what it excludes. Many TI allowances exclude furniture, fixtures, and equipment. Also confirm whether unused TI can be applied to free rent or taken as a rent credit.

12. As-Is Condition vs. Landlord Work Letter | HIGH RISK

An as-is lease means you take the space in its current condition. A work letter specifies improvements the landlord agrees to complete before delivery. When landlord work is involved, the work letter becomes as important as the lease itself, it defines exactly what you are getting.

Watch for: Vague work letters that describe improvements in general terms without specifications, drawings, or timelines. A work letter should be specific enough that a contractor could bid from it.

13. Alterations and Improvements Clause | NEGOTIATE

This clause governs changes you want to make to the space after lease commencement, adding walls, upgrading power, installing equipment. Most leases require landlord consent for alterations above a certain cost threshold. Some require landlord-approved contractors, which can increase costs significantly.

Watch for: Whether the landlord can require restoration of alterations at lease expiration. If you install specialized improvements, being required to remove them at your cost is a material expense.

14. Restoration Obligation | HIGH RISK

A restoration clause requires you to return the space to its original condition at the end of the lease, removing improvements, patching walls, restoring flooring. The scope of what must be restored varies widely and can represent a significant cost if improvements were substantial.

Watch for: Which specific improvements trigger restoration obligations and whether the landlord will waive restoration for standard build-out items. Get restoration obligations carved out in writing at lease signing, not at move-out.

Assignment, Subletting, and Options

15. Assignment and Subletting | NEGOTIATE

Assignment transfers the entire lease to a new tenant. Subletting leases a portion of your space (or all of it) to a subtenant while you remain on the lease. Both typically require landlord consent. If your business is acquired, changes ownership, or needs to shed space, these rights determine your flexibility.

Watch for: Whether the landlord can withhold consent unreasonably, and whether landlord consent triggers recapture rights, allowing the landlord to take back the space directly rather than consent to your sublease.

16. Renewal Option | NEGOTIATE

A renewal option gives you the right, but not the obligation, to extend the lease for an additional term, usually at a rent to be determined at the time of renewal. Renewal options are valuable because they give you certainty of continued occupancy in a location your business depends on.

Watch for: How the renewal rent is determined. “Fair market value” sounds reasonable but is subjective and can lead to disputes. Push for a defined methodology, a rent range, or a fixed escalation from the prior term’s rate.

17. Right of First Refusal (ROFR) | NEGOTIATE

If adjacent space becomes available, a ROFR gives you the right to match any offer the landlord receives before they lease that space to another tenant. This matters if your business is likely to grow and you want to expand within the same building.

Watch for: The timeline for exercising the ROFR, often very short (5–10 business days). Also confirm whether the right survives if the adjacent space is leased to an existing tenant who expands.

18. Early Termination Option | NEGOTIATE

An early termination clause gives you the right to exit the lease before the natural expiration date, typically by providing advance notice and paying a termination fee. These rights are valuable for businesses with uncertain growth trajectories or businesses in lease terms longer than 5 years.

Watch for: The termination fee, it is often calculated as a multiple of remaining rent plus unamortized TI and landlord costs. Model what the fee would actually be at each possible exercise point before signing.

Landlord and Tenant Obligations

19. Maintenance and Repair Responsibilities | HIGH RISK

This clause divides maintenance obligations between landlord and tenant. In most commercial leases, the landlord maintains the roof, structure, and building systems (HVAC, plumbing, electrical). The tenant maintains the interior of the space. The actual division varies significantly by lease type and property.

Watch for: Whether HVAC maintenance is your obligation. Many commercial leases push HVAC maintenance and even replacement to the tenant. An aging HVAC system with short remaining useful life is a material liability worth pricing into the deal.

20. Landlord’s Right of Entry | NEGOTIATE

This clause gives the landlord the right to enter your space for inspections, repairs, and showing the space to prospective tenants. The scope of this right should be clearly defined, with reasonable notice requirements and limitations on when entry can occur.

Watch for: Whether the clause requires advance notice (typically 24–48 hours) and whether emergency entry rights are scoped narrowly. Also review whether the landlord can show your space to prospective tenants within the last 12–18 months of your term.

21. Insurance Requirements | NEGOTIATE

Commercial leases specify the types and minimum amounts of insurance the tenant must carry, general liability, property, workers’ compensation, and sometimes business interruption coverage. The landlord must be named as an additional insured. Review these requirements with your insurance broker before signing.

Watch for: Minimum coverage amounts that exceed your current policy limits. Upgrading to meet lease requirements adds cost. Also look for requirements to carry business interruption insurance, which some tenants overlook.

22. Indemnification Clause | HIGH RISK

An indemnification clause requires one party to defend and hold harmless the other against specified claims or losses. In commercial leases, these clauses are often heavily weighted toward the landlord. A one-sided indemnification can expose you to liability for conditions you did not create.

Watch for: Whether the indemnification is mutual, protecting both parties equally, or one-sided. Push for mutual indemnification and for carve-outs that limit your exposure to claims arising from your own negligence, not the landlord’s.

Default and Tenant Protections

23. Default and Cure Periods | HIGH RISK

A default clause defines what constitutes a lease default, usually nonpayment of rent or violation of lease terms, and the cure period during which you can fix the problem before the landlord pursues remedies. Cure periods for monetary defaults typically run 3–5 days. Non-monetary defaults usually get 30 days.

Watch for: Whether non-monetary defaults with longer cure timelines (permitting issues, construction delays) include extended cure periods when the problem requires more than 30 days to resolve but you are diligently working toward resolution.

24. Subordination, Non-Disturbance, and Attornment (SNDA) | HIGH RISK

An SNDA is a three-part agreement that governs what happens to your lease if the landlord’s lender forecloses on the property. Subordination means your lease is junior to the lender’s mortgage. Non-disturbance is the critical protection: the lender agrees not to terminate your lease if they foreclose, as long as you are not in default. Attornment means you agree to recognize the new owner after foreclosure.

Watch for: Whether the non-disturbance agreement is in place. Without it, a foreclosing lender can terminate your lease. In a building with significant mortgage debt, this is not a theoretical risk. Do not sign a lease in a mortgaged building without a non-disturbance agreement.

25. Personal Guarantee | HIGH RISK

A personal guarantee makes you personally liable for the lease obligations of your business entity. If the business defaults, the landlord can pursue your personal assets. Landlords often require personal guarantees from smaller businesses or businesses without an established operating history. The scope and duration of the guarantee is negotiable.

Watch for: Whether the guarantee is unlimited and for the full lease term, or whether it is capped, by dollar amount, by duration, or burned down over time as the tenancy establishes a track record. A “good guy” guarantee clause is worth negotiating: it limits personal liability once proper notice is given and the space is vacated.

The Bottom Line on Lease Review

No list replaces reading the actual lease. Clause names and standard descriptions give you a framework, but the language in your specific lease is what governs, and lease language varies significantly from one landlord, building, and attorney to the next.

Before you sign, have someone in your corner who has read hundreds of these documents. A tenant rep reviews lease as part of representing you is part of the job, not an add-on service. You should also consult with your own attorney. They will flag the clauses and, identify the points worth pushing on, and know from experience what this particular landlord is likely to move on.

The clauses above are where the money is. Understand them before you sit at the signing table.

The landlord’s attorney drafted the lease. The landlord’s broker negotiated the deal. Without your own representation, you are the only party at the table without someone working for you.

Important Legal Notice

PLEASE BE AWARE THAT COMMERCIAL REAL ESTATE GROUP OF TUCSON LLC , AND ITS BROKERS, INCLUDING MICHAEL CORETZ, ARE NOT ATTORNEYS. WE ARE OBLIGATED BY THE ARIZONA DEPARTMENT OF REAL ESTATE TO NOTIFY YOU THAT YOU SHOULD CONSULT A REAL ESTATE OR OTHER ATTORNEY OF YOUR CHOICE IN ALL MATTERS RELATED TO REAL ESTATE CONTRACTS, INCLUDING BUT NOT LIMITED TO COMMERCIAL LEASES, SUBLEASES, ASSIGNMENTS OF LEASE, LICENSE AGREEMENTS, SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENTS, PURCHASE CONTRACTS AND NON-DISCLOSURE AGREEMENTS.

IF YOU MIGHT NEED A REFERRAL TO A LOCAL REAL ESTATE ATTORNEY IN ARIZONA, WE CAN PROVIDE SEVERAL QUALIFIED CHOICES FOR YOU TO CONTACT.

Get Your Commercial Lease Reviewed Before You Sign

A lease is a legal contract. Get it reviewed before you sign.

Most of the clauses in this article are negotiable, but only before the lease is executed. Once you sign, the terms are set for the length of your term.

Commercial Real Estate Group of Tucson represents tenants, owner-users, and buyers in Southern Arizona. We review lease language, run comparable market data, and negotiate on your behalf, at no direct cost to you.

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