What Should I Check in a Commercial Lease?

Why Commercial Leases Are So Dangerous to Sign Blind

Residential tenants are protected by extensive legislation; commercial tenants are not. Commercial leases in both Canada and the US are governed almost entirely by the contract itself, because the law assumes two sophisticated businesses negotiating at arm's length. Courts therefore enforce the lease as written — including one-sided remedies and cost allocations — and there is little statutory relief to fall back on. The practical consequence is stark: whatever you sign is what you are bound to for the full term, so every protection you want must be negotiated before signature, not argued about afterward. Even the 'offer to lease' is often binding, so it needs the same scrutiny as the formal lease.

The single largest hidden risk is the personal guarantee. Landlords routinely ask business owners to guarantee the lease personally, which makes you liable for the entire remaining term if the business fails — completely defeating the liability shield your corporation was supposed to provide. This is negotiable: push to cap the guarantee to a fixed dollar amount or a set number of months, make it 'burn off' after a period of on-time payment, or substitute a larger security deposit. An uncapped multi-year personal guarantee is one of the most consequential things a small-business owner ever signs.

Additional Rent: The Cost That Isn't the Rent

In net and especially triple-net (NNN) leases, the quoted base rent is only part of the story. You also pay 'additional rent' — your proportionate share of property taxes, building insurance, and common-area maintenance or operating costs (CAM). These charges can equal or exceed the base rent and typically rise every year, and landlords sometimes slip capital or structural expenses, management fees, and their own costs into the pool. Before signing, model your total occupancy cost across the full term, and negotiate a cap on controllable operating costs, explicit exclusions for capital and structural items, and an audit right so you can verify what you are billed.

Repair and restoration clauses are the other cost trap. Leases often push responsibility for the roof, structure, and HVAC onto the tenant, and a 'make-good' or restoration clause can require you to strip out your improvements and return the premises to base-building condition at the end of the term — a substantial and easily overlooked exit cost. Clarify who bears each category of repair, and try to negotiate handing the space back 'as is' or capping restoration. These allocations are entirely a matter of negotiation and drafting.

Your Exit, Your Location, and Getting Advice in Time

Two clauses determine whether a lease can flex with your business. Assignment and subletting rights are usually your only exit if you sell or the business struggles — insist that landlord consent be 'not to be unreasonably withheld' and, crucially, that you get a release from liability on assignment, or you can remain on the hook for a successor's default. Renewal options protect the location you invest in building, but only if they specify how renewal rent is set (a formula or capped fair-market with a dispute mechanism) and the notice window; an option to renew 'at rent to be agreed' is close to worthless. For retail, exclusivity and co-tenancy clauses can be central to your revenue.

If a dispute or default is already underway, speed matters. Commercial landlords hold powerful remedies — distraint (seizing your goods for arrears) and re-entry or termination for default — and can sometimes act with limited notice. Relief from forfeiture may be available, but the windows are short. Whether you are about to sign or already in trouble, a commercial lease lawyer's review is inexpensive relative to a multi-year fixed liability, and it is the difference between negotiating protections while you still have leverage and discovering them when it is too late.

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