How To Review A Commercial Lease Agreement

21 March 2022
 Categories: Law, Blog


If you intend to lease office or retail space, the property owner or manager will ask you to sign a commercial lease to ratify your agreement. Typically, the commercial lease details your property rights and how you can use the leased space. However, the contract can expose your business to losses and legal issues in the future. Therefore, it is prudent to understand the lease terms before signing the agreement. Below is an extract detailing what to look for in a commercial lease

Lease Term

The lease term is the number of months or years you will occupy the premises before it reverts to the property owner. Most leases will allow you to extend the lease if you wish. However, the property owner decides whether or not they will renew your lease. It is important to note that the new lease comes with different terms since the old contract is considered invalid. The lease should also have a break clause that allows you to terminate the lease. This clause is essential since it gives you the flexibility to move your business without paying rent for the remaining lease period. However, in most cases, you will be required to provide several months' notice to the property owner or manager. 


The lease must clarify the obligations of both parties. For instance, one of your concerns would be who takes responsibility for maintaining the shared property. Some leases will designate this responsibility to the current tenants. If this is the case, you pay a monthly, quarterly, or annual fee to maintain the shared property. As a rule, you should conduct due diligence to ensure other tenants have a similar lease agreement. It prevents you from solely maintaining the shared property. Moreover, you should check whether the property owner pays property insurance to cater to losses caused by fire, floods or theft.  

Rent Review 

A rent review clause is a vital element of the lease contract. Most tenants presume that the clause allows the landlord to increase rent before the end of the lease. However, the clause benefits both parties. For instance, if your business is not doing well, you could ask the landlord to reduce the monthly rent for several months. Moreover, you could use the clause to prevent your business from closing down due to uncontrollable events. For instance, if your business is closed due to the COVID-19 pandemic, the landlord could discount the rental charge until the business recovers. 

Property Use

The lease agreement should explicitly state how you can use the premises. For instance, to what extent are you allowed to redecorate or improve the premises? For example, the landlord could prohibit renovations that involve pulling down walls or interfering with structural features. In other cases, these improvements are allowed as long as you conduct repairs to return the property to its original condition at the end of the lease period.