Here’re a few steps to read a commercial real estate lease
Signing a commercial lease is one of the most important decisions you’ll make as a business owner or investor. It’s not just about agreeing on rent—it’s about protecting your interests, planning for growth, and avoiding costly surprises. A well-structured lease can make or break your business, so learning how to read one like a pro is essential.
The good news? You don’t need a law degree to read a lease like a pro—you just need to know what to look for. Here’s a step-by-step guide to help you break down the fine print and understand exactly what you’re signing.
Start with the Basics
First and foremost, when you look at a lease, do not look at it in terms of whether it works for your business today, but rather, does it work for your business today, and if so will it allow you to grow your business? If you don’t anticipate needing different space as you grow, you will still want to review the lease to see how it will interact with what you expect your business to be 3 or 4 years from now.
Before diving into legal jargon, zoom out and confirm that the key deal points actually match what you negotiated.
Premises – What space are you leasing, exactly? Double-check the square footage, suite numbers, and boundaries. Confirm the load factors are correct for useable vs. rentable square footage.
Lease Term – How long does the lease run? Do you have renewal options?
Rent and Increases – What’s the base rent, and how does it increase over time?
Pro Tip: If these basics don’t line up with what you agreed to verbally, stop here and get clarity before moving further.
Understand Rent Structures
Commercial rent isn’t always straightforward. Beyond the base rent, you may be responsible for additional costs:
Base Rent – The minimum amount due each month.
Operating Expenses (CAM) – Your share of property taxes, insurance, and common area maintenance.
Percentage Rent – In some retail leases, you may owe a percentage of your sales above a certain threshold.
Ask for a detailed breakdown of operating expenses (and what is included in reimbursements, and what is not). Surprise charges like roof repairs, parking lot resurfacing, or landscaping upgrades can add up fast.
Look Closely at Renewal & Termination Clauses
Flexibility is power in business. Make sure you understand:
Renewal Options – Can you extend your lease, what is the timing to do that and at what cost?
Termination Rights – Under what circumstances can either party exit the lease?
Holdover Penalties – What happens if you stay past the expiration date?
Takeover or Moving Rights – what rights do you have to take over adjacent space if it becomes available and you need it; alternatively, a landlord may have rights to move you within the center/building, or take space back that you are trying to sublet for a short time.
These clauses can either give you room to grow or trap you in a costly commitment.
Know Your Responsibilities
Every lease spells out who handles what. Don’t make assumptions—confirm the details:
Maintenance & Repairs – Who fixes HVAC, plumbing, or the roof?
Alterations & Improvements – Can you customize the space? And do improvements stay with the landlord if you leave?
Insurance Requirements – What coverage must you carry, and who is liable in different scenarios?
The more clarity you have here, the fewer disputes you’ll face down the road.
Pay Attention to Subleasing & Assignment
What if your business outgrows the space—or downsizes? The ability to sublease or assign your lease can be a lifesaver. Watch out for these.
Approval Process – When does the landlord have to give consent? Can they withhold approval “reasonably” or “at their sole discretion” or take back space you are trying to sublease?
Profit Sharing – If you sublease at a higher rent, does the landlord take a percentage?
Having flexibility here gives you options if your needs change.
Watch for Hidden Costs & Risks
Some of the most expensive surprises come from overlooked clauses, for example, lack of operating expense caps, after-hours HVAC charges, parking fees, or restoration requirements when the lease ends. A single overlooked line can mean thousands in unexpected costs.
Reading a commercial lease like a pro isn’t about memorizing legal jargon—it’s about knowing what matters most, asking smart questions, and protecting your bottom line. Approach each lease with curiosity, caution, and the right advisors by your side. Remember: A lease isn’t just paperwork. It’s a business strategy.
