Once you’ve negotiated terms, successfully managing your lease becomes an ongoing responsibility.
Understanding Your Ongoing Financial Obligations:
- CAM Reconciliations – At year-end, landlords calculate actual operating expenses and either bill for shortfalls or (rarely) issue refunds
- Tax and Insurance Increases – These pass-through costs typically rise yearly, sometimes significantly
- CPI Adjustments – Inflation-based rent increases that can vary substantially depending on economic conditions
Maintaining Compliance With Lease Requirements:
- Insurance Coverage – Your lease specifies required coverage types and amounts
- Maintenance Responsibilities – Know exactly what repairs are your obligation versus the landlord’s
- Use Restrictions – Operating outside your permitted use can trigger default
- Alterations and Improvements – Most changes require landlord approval, even if you’re paying for them
Planning for Lease Renewals or Exits:
- Notice Periods – Most leases require 6-12 months’ written notice to exercise renewal options
- Renewal Negotiations – Start discussions early, at least 9-12 months before expiration
- Restoration Requirements – Many leases require returning the space to its original condition
- Holdover Penalties – Staying beyond your term without a new agreement typically triggers premium rates (150-200% of your rent)
Documentation and Communication Best Practices:
- Keep detailed records of all maintenance requests and landlord communications
- Document the condition of your space when you move in (photos/video)
- Notify your landlord in writing of any building issues that affect your business
- Review annual expense reconciliations carefully – errors are common
Understanding these terms and landlord expectations puts you in a stronger position throughout the commercial leasing process. While landlords typically have more experience in lease negotiations, tenants who come prepared with knowledge of these concepts can level the playing field and secure more favorable terms for their businesses.
Leasing 101: Essential Terms
Leasing 102: The Pitch Deck
Leasing 103: Letters of Intent
Leasing 104: What To Expect From Landlords
Leasing 105: From Lease Signing to Renewal
