Posted by Jennifer M. Settles, Esq.  |  July 27,  2026

The Commercial Lease Clauses That Cost Tenants the Most Money

A commercial lease is often one of the largest financial commitments a business makes, frequently second only to payroll, and it can lock you in for years. Yet many business owners sign one the way they’d sign a residential lease: skim it, assume it’s standard, and focus only on the base rent. That’s a costly mistake. The base rent is just the headline number. The real money is in the clauses, and some of them can determine whether your space is a manageable expense or a financial trap.

Here are the commercial lease provisions that cost tenants the most, and what to watch for before you sign.

The Rent Escalation Clause

Almost every commercial lease increases your rent over time, but how it does so matters enormously. Some leases use a fixed annual bump; others tie increases to an index like CPI, which can spike unpredictably. Over a multi-year term, the difference between a modest fixed increase and an open-ended index-based one can add up to a great deal of money. Always model what your rent will actually be in the final year of the lease, not just year one, and push for predictable, capped escalations where you can.

Triple Net (NNN) and Pass-Through Costs

This is the big one. In a triple net lease, the “rent” you negotiated is only the beginning.  You’re also responsible for your share of the property’s taxes, insurance, and common area maintenance (CAM). These pass-through costs can add substantially to your monthly obligation, and they can rise year over year, sometimes sharply. Tenants who focus only on the base rent are routinely shocked by the all-in number. Understand exactly which costs you’re responsible for, how they’re calculated, and whether you can negotiate caps on annual increases.

Vague CAM Definitions

Related to the above: the definition of common area maintenance is where a lot of money hides. A broadly or loosely worded CAM clause can let a landlord pass through costs you never anticipated, potentially including administrative fees, certain capital improvements, ADA upgrades, and even a share of expenses that arguably benefit the landlord more than you. Scrutinize what’s included, ask for the right to review the underlying expenses, and negotiate to exclude major capital items and cap controllable costs. Vague language here reliably favors the landlord.

The Personal Guaranty

Many commercial leases ask the business owner to personally guarantee the lease, meaning that if the business can’t pay, the landlord can come after you personally—your home, your savings, your other assets. For a multi-year lease, that’s potentially enormous personal exposure. If you must sign a guaranty, try to limit it: cap the dollar amount, limit it to a set number of months, or negotiate a “burn-off” that ends the guaranty after you’ve paid reliably for a period. An unlimited personal guaranty is one of the most dangerous things a tenant can sign.

Assignment and Subletting Restrictions

Your business may change.   For example, you might grow, relocate, sell, or simply need out. Assignment and subletting clauses govern whether you can transfer the lease or bring in another tenant, and many are written to give the landlord broad control or the ability to withhold consent. If you sell your business, a restrictive clause can complicate or even block the deal, since the buyer needs the space. Negotiate for reasonable transfer rights, so the lease doesn’t become an anchor later.

Maintenance and Repair Obligations

Who fixes the roof, the HVAC, the plumbing? Lease clauses allocating maintenance and repair responsibility can shift major costs onto you. Some leases make the tenant responsible for expensive systems like heating and air conditioning, which can mean a five-figure surprise when an aging unit fails. Know exactly what you’re on the hook for, push to limit responsibility for major building systems and capital repairs, and consider negotiating caps on what you can be required to spend.

Tenant Improvement (TI) Allowances

If your space needs build-out or modifications to work for your business, the tenant improvement allowance is one of the most valuable things you can negotiate. A TI allowance is money the landlord contributes toward improving the space, and the difference between a generous allowance and none at all can be substantial, sometimes tens of thousands of dollars or more. Don’t just negotiate the dollar amount; pin down the details that determine its real value: what the allowance can be spent on, who controls and oversees the work, the timeline and process for getting reimbursed, and what happens to any unused portion. Vague TI terms can leave you fronting costs you expected the landlord to cover, so getting the specifics in writing matters as much as the headline number.

Insurance Requirements

Commercial leases routinely dictate the insurance you must carry, and these requirements deserve a careful read because they carry real cost and risk. A lease may require specific types and amounts of coverage, name the landlord as an additional insured, and obligate you to insure not just your own property but in some cases aspects of the premises themselves. Requirements that are excessive or poorly matched to your business can mean paying for coverage you don’t need—or, worse, falling out of compliance and triggering a default. Carefully review the insurance provisions with the assistance of your insurance broker before signing and negotiate them as needed.

Default and Remedies Provisions

What happens if you slip up (i.e., miss a payment, or breach some other term)? Default clauses define how quickly a problem becomes a serious one and what the landlord can do about it. Watch for short or nonexistent cure periods (the time you get to fix a default), broad definitions of what counts as a default, and aggressive remedies. A tenant-friendly lease gives you reasonable notice and a fair chance to cure before drastic consequences kick in. These provisions rarely matter . . . until the day they matter a great deal.

Holdover Provisions

If you stay in the space after the lease ends – even briefly, while finalizing a move – holdover clauses can dramatically increase your rent, sometimes to 150% or 200% of the prior rate. Tenants who don’t plan their exit carefully can get hit with steep holdover charges for what they assumed would be a short overlap. Know what your rent becomes if you hold over, and build in enough runway to vacate on time or negotiate a defined extension.

Renewal and Option Terms

The right to renew, and on what terms, can be worth a lot, especially if your business depends on its location. A lease that’s silent or vague on renewal can leave you at the landlord’s mercy when the term ends, facing a large increase or an unwanted move. If staying put matters, negotiate clear renewal options with defined rent terms up front, so you’re not negotiating from a position of weakness years later when relocating would be painful.

Exclusivity and Use Clauses

Two related provisions are worth checking, particularly for retail and service businesses. A use clause defines what you’re permitted to do in the space.   Too narrow, and you’re boxed in if your business evolves. An exclusivity clause, by contrast, can protect you by preventing the landlord from leasing nearby space to a direct competitor. Getting the use clause broad enough and securing exclusivity where it matters can have a real effect on your business’s success in that location.

The Bottom Line

The base rent is only part of the story. The other clauses, including escalations, pass-through costs, personal guaranties, transfer restrictions, maintenance obligations, default terms, holdover and renewal provisions, are where a commercial lease quietly costs tenants real money or quietly protects them. Because these terms are negotiable, especially before you sign, the time to address them is during the lease negotiation, not after a surprise charge or a blocked sale. A careful review before signing is one of the highest-return investments a tenant can make.

If you’re negotiating a commercial lease or renewing an existing one, having it reviewed before you sign can save you from costly clauses you didn’t know were there. Schedule a free consultation to make sure your lease protects your business, not just your landlord.   Contact us as www.jsettleslaw.com or (602) 617-3938.

 

About the Author   Jennifer M. Settles makes business owners’ lives easier. As a fractional General Counsel with 25+ years structuring M&A deals, commercial contracts, corporate governance, and complex real estate transactions, including over two decades as lead in-house transactions counsel for major corporations, she brings big-firm firepower to the founders, dealmakers, and growing companies who need it most. Clients describe her as knowledgeable, refreshingly direct, and relentlessly focused on their best interests. Jennifer offers white-glove, direct-access service and transparent, predictable fees. Learn more or schedule a consultation.