Signing your first commercial lease is unlike signing a residential one — commercial leases are negotiable in ways most tenants don't realize, and the clauses that matter most aren't always the ones that get the most attention.
Understand what kind of lease you're signing
The single biggest driver of your real occupancy cost is the lease structure:
- Gross lease. You pay one flat rent, and the landlord covers property tax, insurance and common-area maintenance out of it. Simpler to budget, more common in older office buildings.
- Triple-net (NNN) lease. You pay a base rent plus your proportionate share of property tax, insurance and common-area maintenance (collectively, "additional rent" or "operating costs"). Common in retail and industrial space. Your total cost can vary year to year as those underlying costs change — ask for the last two to three years of actual operating costs, not just an estimate, before you sign.
- Modified gross / semi-gross. A middle ground where some costs are included in base rent and others are billed separately. Read the definitions carefully — "modified gross" isn't a standardized term and every landlord's version is a little different.
Confirm permitted use before you fall in love with a space
A lease's "permitted use" clause defines exactly what you're allowed to operate at that address — not just "retail" or "commercial" generally, but often a specific, narrow description. If you plan to expand your offering later (a café that wants to add a liquor licence, a retailer that wants to add a small workshop), make sure the permitted use clause is written broadly enough to cover it, or negotiate an amendment before you sign, not after you've built out the space.
Zoning is a separate check from the lease itself — confirm the municipality's zoning for that address actually allows your specific use, since a landlord can offer a lease for a use the zoning doesn't support.
Clauses that deserve real attention
- Term and renewal options. A five-year term with two five-year renewal options at a pre-set or formula-based rate gives you real security; a short term with no renewal right leaves you exposed to a rent reset or non-renewal right when you've just built up customer goodwill at that location.
- Tenant improvement allowance. Many landlords contribute toward build-out costs, especially for a longer term — this is negotiable, and worth asking for even if it isn't initially offered.
- Exclusivity and co-tenancy. In a multi-tenant retail centre, an exclusivity clause can prevent the landlord from leasing to a direct competitor in the same building; a co-tenancy clause can protect your rent if an anchor tenant leaves.
- Assignment and subletting. If your business changes or you need to exit early, your ability to assign or sublet the lease — and any conditions the landlord can impose — determines how much flexibility you actually have.
- Personal guarantees. Landlords often ask a small business owner to personally guarantee a corporate lease. This is negotiable, particularly for a longer term or larger security deposit — don't assume it's non-negotiable just because it's in the first draft.
Get the numbers in writing before you commit
Ask for a full cost summary — base rent, estimated additional rent (for NNN leases), and any other recurring charges — as an actual dollar figure per month, not just a rate per square foot. Square-footage math hides a lot of surprises until you see the real monthly number.
We represent tenants, not just landlords
Commercial leasing doesn't have to mean negotiating alone against a landlord's broker. Reach out before you sign anything, and we'll review the lease with you or represent you directly in the negotiation — our Commercial hub has the fuller picture of how we work with business owners.