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Leasing commercial property is a practical and often necessary decision for many businesses, especially in urban and competitive markets like Los Angeles. However, commercial leases are significantly more complex than residential leases. Business owners must be prepared to understand and negotiate key legal provisions to ensure their rights and operations are protected. Failing to do so can result in long-term financial consequences and legal disputes.
Here’s what every business should know before signing a commercial lease.
Commercial leases come in different forms, and each type defines how expenses are divided between landlord and tenant:
Understanding which type of lease is being offered is critical to budgeting and avoiding surprise expenses.
Lease duration affects the flexibility and risk exposure of a business. Long-term leases can secure favorable rental rates but reduce flexibility, while short-term leases offer agility but may lead to frequent relocations.
Key points to review:
Ask whether renewal terms are automatic or require advance notice. Some leases include escalation clauses during renewal periods, which may increase rent based on market trends.
Base rent is only part of the cost. Escalation clauses allow landlords to raise rent over time. These increases may be structured as:
Request transparency and a clear formula for escalation. If the formula is vague, landlords can increase rent substantially with little recourse.
Commercial tenants are often responsible for more upkeep than residential renters. Depending on the lease structure, tenants may be expected to maintain key components of the property.
Discuss and define responsibility for:
Include language to ensure the landlord will maintain the property in good working condition before and during your tenancy. In the case of shared buildings, clearly define the areas under tenant control.
Most commercial leases restrict how the property can be used. This is referred to as the “permitted use” clause. It must align with your actual operations and any potential business expansions.
Also, confirm that the property complies with:
If the space does not meet compliance standards, negotiate whether the landlord or tenant is responsible for upgrades.
Your business needs may evolve. Whether you grow, downsize, or relocate, you may want the option to sublease the space or assign the lease to another entity.
Review the lease for:
Landlords often require approval and may charge fees or insist on maintaining original tenant obligations.
Landlords may require:
Try to negotiate caps or limitations on guarantees and request that personal liability be removed after a proven track record (e.g., after two years of timely payments).
Legal disputes can arise in any lease relationship. Including dispute resolution mechanisms in your lease can save time and costs in the event of a disagreement.
Common provisions include:
Consult an attorney to draft or review these terms to ensure fairness.
Before finalizing any lease agreement, perform a detailed walkthrough of the space. Note existing wear and tear, systems that require maintenance, or structural deficiencies. Document the condition with photos and written reports.
Negotiate a tenant improvement allowance (TIA) if upgrades are needed. This is a common concession where the landlord agrees to fund or contribute to improvements that adapt the space for your specific business.
A commercial lease is a binding contract that can last for years. It defines your rights, responsibilities, and financial obligations as a tenant. Having a real estate attorney review or negotiate your lease ensures you understand all terms and mitigates risk.
At JH Legal Helper, we specialize in helping business owners understand and manage the legal complexities of leasing commercial property. We tailor our guidance to your business model, industry, and long-term goals, ensuring you sign an agreement that supports your success—not undermines it.
Before signing a lease, make sure you’ve examined every clause and understand all obligations. From hidden fees to use restrictions and dispute mechanisms, a commercial lease is more than just paperwork—it’s a strategic legal document that shapes your business environment.
Don’t sign anything until you’ve had a legal expert review your lease. Book a consultation with JH Legal Helper today, and let us help you secure a lease that protects your business and supports your growth in the dynamic Los Angeles market.