What to check before you sign a commercial lease.

A commercial lease is not a residential lease with bigger numbers. There is no standard form protecting you, the landlord's document is drafted for the landlord, and nearly everything in it is negotiable at the letter of intent stage and nearly nothing is negotiable after. Here is what to work through before you sign.

1. The rent you will actually pay

Ask what the quoted rate includes. Most multi-tenant space here is quoted NNN, or triple net, which means base rent plus your proportionate share of property taxes, building insurance, and common area maintenance. A rate quoted "full service" or "modified gross" bundles some of that in. Comparing a NNN quote against a gross quote without adjusting is the most common way tenants misjudge two buildings.

So get three numbers for every space you are considering: base rate, current NNN estimate per square foot, and the escalation schedule. Add the first two, multiply by your square footage, and you have a monthly comparison that means something.

2. How the rent moves

Almost every lease escalates. What matters is the mechanism. A fixed annual percentage is predictable and easy to model. An index-linked escalation moves with inflation and can be uncomfortable in a year when the index runs hot, so if you agree to one, ask for a cap. Whatever the structure, run it out to the end of the term before you sign, not just year one.

3. CAM: the estimate, the reconciliation, and the audit right

Common area maintenance is billed as an estimate through the year and reconciled after year end. If the estimate was low, you get an invoice. Three things are worth asking for:

• The last two years of actual CAM charges for the building, so the estimate you are quoted has a track record behind it.
• A cap on controllable CAM increases year over year. Taxes and insurance are typically carved out of any cap, but management fees, landscaping and snow removal are often capped successfully.
• The right to audit the reconciliation, with a reasonable window to exercise it.

Ask specifically whether capital expenditures can be passed through. A roof replacement amortized into your CAM is a very different bill from routine maintenance.

4. Who pays for the build-out

The tenant improvement allowance is negotiated per square foot and is worth real money. Establish who manages the work, who holds the risk of overruns, when the allowance is disbursed, and what happens if construction runs past your intended opening date.

Related and frequently overlooked: rent commencement. If your rent starts before you can legally occupy and operate, you are paying for a space you cannot use. Tie commencement to substantial completion and receipt of a certificate of occupancy, not to a calendar date.

5. The restoration clause

This one costs tenants the most money per word. Some leases require you to return the premises to original condition at expiration, which can mean demolishing improvements you paid to install. The fix is simple and must happen at signing: attach an exhibit listing which improvements may remain in place at the end of the term. Doing this later is not a negotiation you will win.

6. The personal guaranty

For a small business tenant, expect the landlord to ask for one. Whether you can avoid it depends on your balance sheet and the market, but the shape is usually negotiable even when the existence is not:

• A burn-down guaranty that reduces or terminates after a period of on-time payments.
• A capped guaranty limited to a set number of months of rent rather than the full remaining term.
• A guaranty that terminates on assignment to a qualified successor if you sell the business.

7. Whether you can leave, grow, or sell

Three clauses determine how trapped you are:

• Assignment and subletting. If you sell the business, the buyer needs the lease. Language requiring landlord consent "not to be unreasonably withheld" is standard and worth insisting on.
• Expansion or right of first offer on adjacent space, if there is any chance you grow inside this building.
• Holdover. Check the penalty rate if you stay past expiration while a new space is being built out. Rates of 150 to 200 percent of base rent are common and they are painful.

8. Use, exclusivity and signage

Make sure the permitted use clause is drawn broadly enough to cover what your business may do in three years, not only what it does today. In retail, ask about exclusivity: whether the landlord can lease the neighboring suite to a direct competitor. And confirm signage rights against both the lease and the municipality's sign code, since Erie, Lafayette, Louisville, Longmont and Frederick do not all regulate signage the same way.

Why a tenant rep is usually free to the tenant

In most lease transactions the landlord pays the commission, and it is split between the landlord's broker and the tenant's broker. If you tour unrepresented, that does not typically reduce your rent; it usually means the listing broker keeps both halves while representing the other side of your deal. Having your own representation costs you nothing in the ordinary case and puts someone with current comps across the table from the person who set the asking rate.