Questions to Ask When Leasing a Commercial Space
Questions to put to a landlord or leasing broker before you sign a commercial lease, covering rent structure, operating charges, build-out, maintenance duties, and exit terms. Written for small business owners touring space for the first time.
The questions
Open any question for the note
What is the base rent, and how was the rentable square footage measured?
Why ask it
Rentable square footage usually includes a share of lobbies, corridors and restrooms, so the space you can actually use may be ten to twenty percent smaller than the number on the quote. If nobody can tell you which measurement standard was used, the rent per usable foot is unknowable.
Is this a gross lease, a modified gross lease, or triple net?
Why ask it
This single answer decides whether the quoted rent is close to your real monthly cost or roughly two thirds of it. A vague answer, or a landlord who uses the terms interchangeably, is a sign the numbers have not been worked out and you will absorb the difference.
What do the CAM or operating charges cover, and what were they per square foot in each of the last three years?
Why ask it
Three years of actual figures show the trend, which is the part nobody volunteers. A landlord who quotes only an estimate for next year is often hiding a jump from a recent roof job, a tax reassessment or a new management fee.
How much does the rent increase each year, and is the increase a fixed percentage or tied to an index?
Why ask it
Fixed bumps let you build a five year budget, index-linked bumps hand you an unknown. Watch for escalations that apply to the operating charges as well as the base rent, which is how a three percent bump becomes closer to six.
How long is the initial term, and do I have a renewal option at a rate set in advance?
Why ask it
A renewal option that says rent will be at market rate is barely an option, since you will be negotiating from a position where moving costs you your customers. What you want is a stated rate or a capped increase written into the lease now.
Is there any rent-free period while I build out and move in?
Why ask it
Most landlords expect to give some free months, so hearing no usually means it is available and has not been asked for. Check whether operating charges are also abated, because paying CAM on an empty shell for three months is a real cost.
What tenant improvement allowance comes with the space, and who hires and supervises the contractor?
Why ask it
Who controls the build-out matters more than the dollar figure. A landlord-managed build-out on a tight allowance tends to produce the cheapest compliant finish, while a tenant-managed one leaves you carrying overruns and permit delays.
Who is responsible for repairing the HVAC, the roof, the plumbing and the parking lot?
Why ask it
In many small commercial leases the tenant is quietly made responsible for the rooftop unit serving their suite, which is a five figure exposure. Ask for the answer by system and by dollar threshold, not as a general assurance that maintenance is handled.
How old is the HVAC equipment serving this suite, and when was it last serviced?
Why ask it
Age tells you whether a replacement lands during your term. If no service records exist, assume the unit has been run to failure and negotiate either a landlord repair obligation or a cap on your share of capital work.
Will you require a personal guaranty, and will it reduce or end after a period of on-time payments?
Why ask it
A personal guaranty puts your house behind the business, so the useful question is not whether you can avoid it but whether it burns off. Landlords often accept a guaranty limited to a set number of months of rent once you ask.
How much is the security deposit, and what specifically has to be true for me to get it back?
Why ask it
The answer usually surfaces restoration obligations: returning the space to its original condition can mean tearing out the very improvements you paid for. Get the required end-of-term condition described in writing before you design anything.
Is my intended use permitted under the zoning and the building's certificate of occupancy?
Why ask it
Landlords are not obliged to know, and a lease is enforceable even if the city will not let you open. If the reply is that a previous tenant did something similar, that is not the same as a permitted use and needs checking with the planning office.
If the city requires accessibility, fire or code upgrades to permit my build-out, who pays for them?
Why ask it
Triggering a code review is common when you change the layout or the use, and the bill can dwarf the improvement budget. Silence in the lease on this point defaults to the tenant in most jurisdictions.
What signage am I allowed, and who has to approve it?
Why ask it
Retail and service businesses live on visibility, and sign rights are often controlled by both a landlord criteria document and a municipal ordinance. A landlord who says signage is flexible without showing you the criteria has not read them.
Can I sublease or assign the lease, and what happens if I sell the business?
Why ask it
An assignment clause requiring landlord consent at their sole discretion can block the sale of your company years from now. Ask for consent that cannot be unreasonably withheld, and check whether a change of ownership counts as an assignment.
Is there an exclusivity clause stopping you from leasing to a direct competitor in this property?
Why ask it
Without one, the landlord can put a similar business two doors down and you have no recourse. The answer also reveals what exclusivity existing tenants already hold, which may restrict what you are allowed to sell.
What hours is the building open and conditioned, and what does after-hours HVAC cost?
Why ask it
Standard building hours often end at six on weekdays with nothing at weekends, which is unworkable if your staff or customers come in evenings. After-hours charges are billed hourly and rarely mentioned during a tour.
How many parking spaces come with this suite, are they reserved, and what happens as the building fills up?
Why ask it
A parking ratio quoted for the whole property tells you nothing about what is free outside your door at noon. Visit at your own busiest hour before accepting the number.
What is the holdover rent if I stay past the end of the term while a new space is being finished?
Why ask it
Holdover rent is commonly one and a half to two times base rent, and construction delays on your next space are likely. Knowing the multiple now tells you how much schedule buffer to build into a future move.
Which tenants have left this property in the last two years, and why did they go?
Why ask it
This is the question that surfaces the problems a tour cannot: flooding, break-ins, an absent property manager, foot traffic that never materialized. A landlord who cannot name any departures, in a property with visible vacancy, is worth pressing.
Working through a commercial lease
Practical guidance for the conversation itself
How to run the conversation
Ask for the draft lease early, then ask questions against it
Leasing brokers answer verbally and the lease says something different. Request the landlord's standard form before you negotiate, read the maintenance, operating expense and default sections, and turn anything unclear into a written question.
Convert every answer into a monthly number
Base rent, operating charges, after-hours HVAC, utilities, insurance and your share of taxes together give total occupancy cost. Compare properties on that figure per usable square foot, never on the headline rent.
Get answers in writing before the letter of intent
The letter of intent is where allowances, free rent, renewal rates and repair duties get fixed. Anything agreed only in conversation tends to disappear when the lawyers draft, and reopening it later costs you leverage.
Bring in a broker who does not represent the landlord
Tenant representation is usually paid out of the landlord's commission, so the cost to you is small. A local broker also knows what concessions the property has given other tenants, which is information you cannot get from a tour.
Order to ask them in
First tour, before you get attached to the space
- 1Is this a gross lease, a modified gross lease, or triple net?
- 2What do the CAM or operating charges cover, and what were they per square foot in each of the last three years?
- 3Is my intended use permitted under the zoning and the building's certificate of occupancy?
- 4How many parking spaces come with this suite, are they reserved, and what happens as the building fills up?
Second conversation, once the space is a serious candidate
- 1Who is responsible for repairing the HVAC, the roof, the plumbing and the parking lot?
- 2How old is the HVAC equipment serving this suite, and when was it last serviced?
- 3What tenant improvement allowance comes with the space, and who hires and supervises the contractor?
- 4If the city requires accessibility, fire or code upgrades to permit my build-out, who pays for them?
Before signing, the questions about getting out
- 1Will you require a personal guaranty, and will it reduce or end after a period of on-time payments?
- 2Can I sublease or assign the lease, and what happens if I sell the business?
- 3How much is the security deposit, and what specifically has to be true for me to get it back?
- 4What is the holdover rent if I stay past the end of the term while a new space is being finished?
Where small tenants get caught
Comparing base rents across different lease types
A triple net rate and a gross rate are not comparable numbers. Two spaces quoted at the same rent can differ by a third in what you actually pay each month.
Treating restoration as a distant problem
Restoration clauses are agreed at signing and paid five or ten years later, when the money is tightest and you are also funding a move. Negotiate the required end condition now, while the landlord wants your signature.
Signing a term longer than your plan
A five year term on a business two years old is a bet on a forecast. If the landlord will not shorten the term, ask instead for an early termination right with a stated fee, which prices the risk rather than hiding it.
Accepting a use clause narrower than your business
A use clause that names one activity can stop you adding a service line later, and can also block a buyer whose plans differ slightly from yours. Ask for wording broad enough to cover where the business is heading.