Negotiating a commercial lease is pivotal for any business. A commercial lease in New York City or Nassau County is more than paperwork; it’s terms can impact your operating costs, limit or expand your flexibility, and influence your long-term success. These agreements are often complex legal documents filled with technical language and obligations that can be easy to overlook. Before committing to years of rent and responsibility, it’s essential to ensure the lease aligns with your business goals.
Asking the right questions during negotiations can help you uncover hidden costs, avoid restrictive terms, and clarify your rights as a tenant. In this article, we outline key questions to discuss with the landlord and how different answers could impact your deal. While every commercial lease is unique, this framework will help you approach negotiations with some clarity, confidence, and a stronger position with respect to common elements.
What are some considerations before leasing a commercial property?
- Clearly define their business entity, such as an LLC or corporation, so the lease correctly reflects who bears legal responsibility.
- Establish a realistic budget and outline specific space requirements, factoring in size, location, and business operations.
- Have a broker or legal counsel assist in navigating market conditions, drafting or reviewing lease terms, and ensuring zoning compliance for the intended business use.
What are terms I should look out for in a commercial lease?
Key terms to scrutinize include:
- Rent structure and escalation: Clarify how rent is computed, timing of payments, and whether rent increases are fixed or tied to inflation.
- Lease duration and renewal options: Know the lease length and whether there are options to renew.
- Maintenance and repairs: Confirm which party is responsible for structural upkeep, HVAC, and repairs—ambiguities here often lead to costly disputes.
- Insurance requirements: Landlords often require commercial tenants to maintain insurance.
- Permitted use and zoning: Ensure the lease defines acceptable uses and that local zoning laws permit your planned operations.
How are commercial leases structured?
Commercial leases typically include the following core components:
- Lease term and renewal provisions, with any renewal rights specified.
- Payment framework: Covers base rent, additional rent (e.g., CAM charges, taxes, insurance), and schedule of payments.
- Use of the premises: Defines what business activities are allowed and ensures compliance with laws or zoning rules.
- Maintenance & repair clauses: Clarifies landlord vs. tenant responsibilities for upkeep and repairs.
- Default clauses and the landlord’s remedies: Define what would happen in the event the tenant (or landlord) does not comply with the terms of the lease.
Is the Lease assignable?
That depends on the contract itself. In New York:
- Most commercial leases include an assignment clause, often requiring landlord consent, and sometimes stipulating that such consent cannot be “unreasonably withheld.”
- If allowed, the lease may require the tenant seeking assignment to submit financials of the proposed assignee or meet other conditions.
What can my monthly costs include?
Your monthly payment typically includes base rent, calculated as annual rent per rentable square foot divided by 12. Depending on the lease structure (gross, modified-gross, or net) you may also pay for:
- Common Area Maintenance (CAM) fees: shared upkeep of lobbies, parking, landscaping, hallways, etc., prorated by your square footage.
- Property taxes (or increases in property taxes), insurance, utilities and other operating expenses.
- Potential broker fees, typically built into rent or recovered indirectly.
Will you need a personal guaranty?
Yes, in New York commercial leases—especially for new businesses—landlords routinely ask for a guaranty. This makes an individual or other another corporate entity personally liable for lease obligations.
How do I best protect my interests as a commercial tenant?
To safeguard yourself:
- Clarify all cost obligations: Require clarity on rent structure, CAM, taxes, insurance, and potential caps on increases.
- Negotiate flexibility on key clauses, such as those addressing default, assignment, termination, or the guaranty.
- Engage professionals: Use legal counsel and brokers for guidance, especially in competitive markets and if your business has specific or unique requirements.
What are red flags in a lease agreement?
Watch out for:
- Unclear or undefined costs (e.g., unspecified CAM, taxes, or maintenance responsibilities).
- Onerous personal guarantees.
- One-sided terms: For example, where tenant penalties are harsh but landlord obligations vague.
- Problematic clauses, such as forced relocation.
- Excessively long or rigid lease terms without meaningful exit options.
What is Common Area Maintenance (CAM)?
CAM (Common Area Maintenance) refers to fees that tenants pay, on top of base rent, to cover the costs of maintaining shared areas like lobbies, elevators, hallways, landscaping, parking lots, and common restrooms. The charges are typically pro-rated based on your square footage.
What if I need to terminate the commercial lease before it expires?
Most commercial leases in New York do not include early termination rights, however, you may negotiate for them in certain circumstances.
Keep in mind, however, that landlords are under no legal obligation to mitigate damages by re-leasing in your place. Therefore, depending on the terms of your lease, terminating your lease before it expires could obligate you to significant costs.
Do you have an opportunity to cure defaults?
It depends on the terms of your lease. Some, though not all, commercial leases include notice and cure provisions: if you default (e.g., miss rent or violate terms), the landlord must give you notice and time to fix the issue.
Who is responsible for the HVAC and other mechanical systems?
Responsibility varies by lease type:
- In buildings with central HVAC, the landlord may handle the maintenance and includes costs via CAM (Common Area Maintenance) charges.
- In leases where the tenant has and controls their own unit (e.g. rooftop or split systems), HVAC costs, including maintenance and possibly even system replacements, can fall on the tenant.
- Some leases use a hybrid: tenants cover routine upkeep, and landlords handle major repairs or replacements above that threshold.
Can you have an exclusivity clause?
Yes, you can negotiate for one. Especially in retail leases, you can negotiate an exclusivity clause that prevents the landlord from leasing nearby spaces to direct competitors, helping protect your customer base and foot traffic.
Restrictions on operations or marketing?
Leases often include permitted-use clauses, defining what activities are allowed—and can strictly limit everything from service types and hours of operation to signage or marketing practices. These controls are more common in malls or multi-tenant centers where maintaining tenant mix is important.
How can I protect my business from competitors?
- Exclusivity clause: blocks landlord from leasing nearby units to competitors.
- Limiting permitted uses: specifying that no other tenant can engage in your same business within the property.
Who can help me negotiate my commercial lease?
Securing a favorable commercial lease is one of the most important decisions you’ll make for your business. In New York City’s and Nassau County’s competitive market, a commercial lease can make or break your business. Don’t navigate it alone—have an experienced attorney like Sabrina Rabban, PLLC review and negotiate your lease to protect your interests and secure favorable terms. With the right legal guidance, you can avoid costly mistakes, focus on running your business, and set yourself up for long-term success. The contents of this article are for informational purposes only and do not constitute legal advice. This article does not cover every scenario or every term that may be found in a commercial lease. Commercial leases, generally, have more extensive and complex terms that should be reviewed with counsel and fully understood before agreed to.and ensures a successful closing.