How to review a lease agreement before signing

Reviewing a commercial lease before you sign is the best way to avoid surprises after you open your doors. You do not need to be a lawyer to spot the most common traps. You need a clear order to work through the document and a list of what to ask the landlord to change. Use this guide to review a lease agreement step by step.

Key takeaways

• Read the full lease and mark every clause that costs money, limits your freedom, or shifts risk to you.
• Check base rent, CAM charges, security deposit, and how rent increases over time.
• Ask for a capped personal guarantee, a fair break clause, and a schedule of condition before you move in.
• Get a lawyer if you sign a personal guarantee, the rent is material to your business, or the term is five years or more.

What to check first in a lease agreement

Start with the parties section to confirm who is signing. If your LLC is the tenant, make sure the lease names the LLC, not you personally, unless you are prepared to give a personal guarantee. Check the property description so it covers the exact space you expect, including storage, parking, and any shared areas.

Look at the term. A five-year lease locks you in longer than a two-year lease, which matters if your business grows or needs to move. Check the start date and whether the landlord promises the space will be ready by then. If the space is not ready, ask for a rent abatement clause plus an outside date after which you can terminate if the space is not ready.

How do rent and CAM charges work?

Base rent is only part of your cost. Read how rent increases over time. A fixed increase of three percent per year is easier to budget for than an upward-only market review tied to local rents. If the lease allows a market review, ask for a cap or a collar so the rent cannot rise above a set amount. A collar sets both a floor and a ceiling.

CAM charges, or operating expenses, can add a large amount to your monthly bill. The lease may say you pay your proportionate share of common area maintenance, insurance, and real estate taxes. Ask for a list of what is included and what is excluded. You should not pay for the landlord's capital improvements, advertising, or costs to lease other spaces. Ask for an annual reconciliation statement and the right to audit the charges if they look wrong.

What about the security deposit and personal guarantee?

The security deposit section tells you how much you pay upfront and when you get it back. Check whether the landlord can use the deposit for unpaid rent, repairs, or both. Ask for a deadline to return the deposit after you leave, minus an itemized list of deductions. Check your state's rules on deposit return timelines and interest, or ask a local attorney.

A personal guarantee makes you personally liable if the business cannot pay. Never sign an unlimited one without talking to a lawyer. Ask for a cap, such as six to twelve months of rent, an end date after which the guarantee drops away, or a larger deposit instead. If your business is new or the rent is large, have a lawyer review the guarantee before you sign.

How do use, exclusivity, and signage clauses work?

The use clause defines what you can do in the space. Make sure it covers your actual business and any reasonable expansion. If you run a cafe, the clause should allow food preparation and seating, not just retail sales. If you plan to sell online and ship from the back room, say so.

An exclusivity clause stops the landlord from leasing nearby space to a direct competitor. If you are the only gym in a shopping center, ask for that in writing. Check signage rules too. The landlord may restrict the size, color, or placement of your sign. Get approval for your planned sign before signing.

What should repair and make good clauses say?

The repair clause decides who fixes what. In many commercial leases, the tenant is responsible for everything inside the walls, while the landlord handles the structure and roof. Push to exclude structural elements and major systems (roof, foundation, HVAC) from your repair duty. Ask for a schedule of condition or photos taken before you move in so you are not liable for damage that already existed. Limit your repair obligation to the condition at the start of the lease and exclude fair wear and tear.

A make good clause can require you to strip the space back to bare concrete when you leave. That can cost thousands. Ask to return the space in broom-clean condition or to leave your fixtures in place. If you must make good, ask for a cap on the cost or a credit for improvements you installed.

How do assignment and subletting work?

If you sell your business or need to leave early, assignment and subletting let you transfer the lease. Many leases require the landlord's consent, which they cannot unreasonably withhold. Ask for a clause that says consent will not be unreasonably withheld and that a change in your own ownership does not count as an assignment. If you are a franchisee, check whether transferring the franchise triggers a default.

How does a break clause work?

A break clause lets you end the lease early. Read the conditions carefully. A break should depend only on giving proper notice and paying rent. Push back on conditions like full compliance with all covenants, which a landlord can use to block your exit. Ask for a fixed break date and a clear notice period, such as six months in writing.

If there is no break clause, ask for one. If the landlord refuses, ask for a subletting or assignment right so you can find someone to take over the space. Know what happens if you leave early without a break clause. You may owe the remaining rent for the whole term.

What about auto-renewal and holdover terms?

Many leases renew automatically if you do not give notice by a deadline. Mark that date in your calendar. Lease auto-renewal notice periods are typically longer than vendor terms, often 90 to 180 days. Negotiate the shortest feasible window with a written reminder before it opens. If you stay past the end of the lease without a new agreement, you become a holdover tenant. The lease may charge double rent or convert you to a month-to-month tenant. Know the cost before it happens.

What should insurance and indemnity clauses say?

The insurance section lists what coverage you must carry, such as general liability and property insurance. Check whether you must name the landlord as an additional insured. Get quotes before signing so you know the cost.

An indemnity clause can make you pay for claims related to the space. Push for a mutual indemnity limited to claims caused by each party's own negligence or breach. Check for mutual indemnity and carve-outs for landlord negligence. Avoid language that makes you responsible for any and all claims arising from your use of the premises.

What to ask the landlord to change

For every risky clause, send a written counter-proposal. Here are examples of real lease language and what to ask for instead.

If the lease says the tenant pays all operating expenses, ask for a list of excluded items and a cap on annual increases.

If the lease says the tenant guarantees all obligations under the lease, ask for a personal guarantee capped at six to twelve months of rent, or offer a larger security deposit instead.

If the lease says the tenant must return the premises in original condition, ask for a schedule of condition and an exclusion for fair wear and tear.

If the lease says the landlord may withhold consent to assign for any reason, ask for consent not to be unreasonably withheld.

If the lease renews automatically with 90 days notice, ask for a shorter notice window and a written reminder.

When to get a lawyer

Reviewing a lease yourself helps you spot the obvious risks, but some situations need legal advice. Get a lawyer if you are signing a personal guarantee, the rent is material to your business, the term is five years or more, or the landlord insists on negotiating lawyer to lawyer. AxiomRisk can help you read your lease and flag the risky sentences before you book that appointment.

Do not sign a lease because you are afraid the space will be taken. Take the time to review the document, list your questions, and send a counter-proposal. The landlord expects negotiation, and the clauses you fix now can save you thousands later.

Next step

Ready to check your lease? Upload your contract at check your contract free and get the risky sentences quoted word for word from your file, why each one matters, and what to ask the other side.