What could possibly go wrong with a new commercial lease? As it turns out—a lot. From hidden costs to restrictions on renovations, the wrong lease can severely restrict your business’s ability to grow or even survive. That’s why understanding the fine print before you sign anything is one of the most important steps for any business owner.
At Jabaly Law, we help businesses across Virginia and Washington, DC protect their investments with strategic, legally sound lease reviews and negotiations. Whether you’re signing your first lease or renegotiating an existing one, having a real estate attorney on your side is a smart, preventive measure. Our firm is one of the leading real estate law firms in DC and Northern Virginia, and we’re here to support you every step of the way.
This guide will walk through some things business tenants should consider before signing commercial leases, from lease types and common clauses to negotiation tips and legal protections you should consider having in place.
Understanding the Types of Commercial Leases
Not all leases are the same. The first thing to know is what type of commercial lease you’re being offered. This has major implications for your costs and responsibilities as a tenant.
Here are the most common types:
Gross Lease: The landlord covers most expenses, including taxes, insurance, and maintenance. You pay a fixed rent amount.
Net Lease: You pay base rent plus some or all additional expenses (taxes, insurance, maintenance).
- Single Net Lease (N Lease)
- Double Net Lease (NN Lease)
- Triple Net Lease (NNN Lease)
Modified Gross Lease: A hybrid where the tenant and landlord split operating expenses.
Percentage Lease: Typically used in retail; tenants pay base rent plus a percentage of gross revenue.
Each of these lease structures can work, depending on your business type and budget. But they each carry different obligations that need to be clearly understood.
Essential Terms to Watch For in a Commercial Lease
Once you know the lease type, your focus should shift to the specific terms of the agreement. Here are some of the most critical to examine:
- Lease Term and Renewal:Is it a short-term or long-term lease? Are there automatic renewals, or must you give notice?
- Rent Escalation Clauses:Will your rent increase over time? If so, how is the increase calculated?
- Common Area Maintenance (CAM) Fees:These fees can be unpredictable and sometimes excessive. Make sure they are clearly defined.
- Use Clause:This defines what type of business activity is allowed. Be sure it’s broad enough to cover your operations.
- Exclusive Use Clause:This can prevent competitors from leasing in the same building or center.
- Improvement and Alteration Terms:Who pays for improvements, and what approvals are required?
- Assignment and Subletting:Can you sublet or assign the lease if your business needs change and under what conditions?
- Personal Guarantee:Many landlords require owners to personally guarantee the lease. This puts your personal assets at risk.
Hidden Costs That Can Hurt Your Bottom Line
Many tenants sign commercial leases without fully understanding the extent of additional costs they may be responsible for beyond the base rent. These expenses, often overlooked, can significantly affect your monthly budget and overall profitability. Being aware of these hidden costs before signing can prevent unpleasant surprises down the road.
- Utilities and Janitorial Services:While some leases include utilities like water, electricity, and gas in the rent, others require tenants to pay for these separately. Janitorial services are often excluded as well, which means you might need to hire cleaning crews at your own expense. These operational costs can add up quickly, especially if the building’s systems are older or less efficient.
- HVAC Maintenance:Heating, ventilation, and air conditioning systems are critical to maintaining a comfortable business environment. In many commercial leases, tenants bear the responsibility for maintaining, repairing, and even replacing HVAC equipment. This can be costly, especially if the system is shared or aging, so it’s important to clarify exactly who is accountable for these expenses before committing.
- Property Taxes and Insurance:Under triple net (NNN) leases, landlords typically pass property taxes and insurance costs on to tenants. These charges can fluctuate annually and may become a substantial financial burden. Request detailed information on historical costs and how increases are calculated to avoid unexpected spikes.
- Parking and Security Fees:Additional fees for parking spaces or building security may be included in your lease but sometimes are tucked away in the fine print. If your business depends on customer or employee parking, understanding these fees upfront is essential to avoid budget issues.
It’s important to request a clear breakdown of all expected charges, not just base rent. This will help you properly budget and avoid surprises.
Key Legal Protections You Should Have
As commercial tenants, it is important to ensure that the contract protects your rights, not just the landlord’s. Here are some additional terms a tenant should review closely:
- Default and Termination Clauses:What happens if you fall behind on rent? Are there grace periods or penalties?
- Dispute Resolution:Does the lease require arbitration or litigation? Where must disputes be handled?
- Tenant Improvements:Are you allowed to make changes to the space? Can you remove improvements when the lease ends?
- Indemnification Clauses:These may hold you responsible for damages even if they weren’t your fault.
- Force Majeure Clauses:Covers unforeseen events like pandemics or natural disasters. A lease should have one.
Getting legal advice before you sign can help you catch provisions that could be harmful and ensure changes are made that may even benefit your business.
Negotiating Your Lease: Yes, You Can
Many tenants assume that leases are non-negotiable. That’s rarely true. Landlords expect negotiation, especially in competitive markets or longer-term arrangements.
Here are the points we often negotiate:
- Base Rent:Ask for a reduction or rent-free months at the start.
- Renewal Terms:Seek the right to renew on favorable terms on an easy-to-understand timetable.
- CAM Fee Caps:Request a maximum annual increase.
- Right to Sublease or Assign:Important if your business grows or relocates.
- Tenant Improvement Allowance:Ask the landlord to contribute to renovations.
A qualified real estate attorney with experience in negotiating leases in Northern Virginia and Washington, DC can help you structure a fair agreement.
Common Pitfalls We See Business Tenants Make
In our experience assisting business clients, we’ve seen patterns in the mistakes tenants often make. Here are some of the most common:
- Signing a Lease Without Legal Review
- Underestimating Total Costs
- Failing to Match Lease Length to Business Plan
- Ignoring Exit Clauses or Penalties
- Not Clarifying Maintenance Responsibilities
- Failing to Document Verbal Agreements or Modifications to the Agreement
These issues can usually be prevented with due diligence at the outset and ongoing legal support.
Questions to Ask Before Signing a Commercial Lease
Before you put pen to paper, make sure you have answers to these critical questions:
- What exactly is included in the rent?
- Are there any additional charges, and how are they calculated?
- Can I make changes to the space?
- What happens if I need to leave early?
- Are there renewal options, and on what terms?
- Will I have exclusive rights to operate my type of business in the development?
- What maintenance am I responsible for?
- Who handles taxes and insurance, how is it calculated, and who pays for it?
- What are the consequences of default?
- Can I assign or sublease the lease if my business changes?
Having a real estate lawyer walk you through these points will often bring to light issues you hadn’t even considered.
The Smartest Step Before You Sign Anything
Would you ever buy a business without reviewing the contract with a legal professional? Probably not. Yet many business owners sign multi-year leases worth as much, if not more, with little or no legal oversight.
That’s why it’s so important to have an experienced real estate attorney in Fairfax, Arlington, or Washington, DC by your side when reviewing commercial leases. At Jabaly Law, we work closely with commercial tenants to make sure lease agreements are fair, understandable, transparent, and aligned with their long-term goals. We are a full service business and real estate law firm in Washington, DC and Northern Virginia, and we know how to protect your business interests.
Whether you’re opening a retail storefront, leasing office space, or expanding to a second location, our legal team helps you avoid costly missteps and gain peace of mind.
Contact Jabaly Law today to schedule a consultation with a knowledgeable real estate attorney. We’ll review your lease, explain your options, and help you negotiate the terms that give your business the stability and flexibility it needs to grow.
