How to Negotiate a Commercial Lease

What is a triple net lease?

A triple net lease, written as NNN, is a lease where the tenant pays base rent plus three categories of building costs: property taxes, building insurance, and maintenance. The advertised rent number in a triple net lease understates the real monthly cost.

A space advertised at $24 per square foot triple net with $8 per square foot in pass-through costs actually costs $32 per square foot. Comparing spaces requires converting every quote to a true all-in number first. Tenants who negotiate only the base rent leave the larger, less predictable half of the equation untouched.

What are CAM charges?

CAM charges, short for common area maintenance charges, are the tenant's share of the cost to maintain shared spaces: parking lots, lobbies, landscaping, and building systems. CAM charges are billed on top of base rent and typically rise every year.

The negotiation is not whether CAM exists, it is what counts as CAM and how fast it grows. Tenants negotiate exclusions, such as capital improvements and the landlord's administrative overhead, along with an annual cap on increases, commonly 3 to 5 percent on controllable costs. Audit rights, meaning the right to inspect the landlord's CAM records, keep the billing honest.

Which lease terms should a tenant negotiate?

The highest-value terms for a tenant to negotiate are renewal options, the personal guaranty, assignment and subletting rights, maintenance and repair allocation, tenant improvement allowances, and exclusivity or use protections. These terms decide what the lease costs you when circumstances change.

• Renewal options with defined rent, so staying does not require renegotiating from zero
• A limited or burn-down personal guaranty that shrinks as you perform, instead of an unlimited one
• Assignment rights so you sell your business or restructure without landlord veto power
• Clear repair allocation, especially for the roof, structure, and HVAC replacement
• A tenant improvement allowance that matches your actual build-out budget
• A defined delivery date with remedies if the space is late

What should a landlord focus on in lease negotiation?

A landlord's lease priorities are tenant creditworthiness and guaranty strength, full and accurate expense recovery, control over assignment and alterations, clear default remedies, and drafting that holds up across a 5 or 10 year term without ambiguity.

A lease is the asset. Lenders and future buyers of the building underwrite the property based on the lease documents, so sloppy drafting costs a landlord real value at refinance or sale. Schneidman Law drafts landlord lease forms built to protect the asset while staying fair enough that good tenants sign them without a fight.

How long does commercial lease negotiation take?

Commercial lease negotiation takes 2 to 6 weeks for a typical small commercial space, measured from letter of intent to signed lease. Larger spaces, heavy build-outs, and multi-party approvals extend the timeline. Preparation on the letter of intent shortens it.

The letter of intent, the short non-binding summary of business terms signed before the lease is drafted, sets the negotiating baseline. Terms conceded in the letter of intent are difficult to recover in the lease. Involving an attorney at the letter of intent stage costs little and preserves leverage, which reflects how good counsel works: early, brief, and before positions harden.

Why review the lease before signing instead of after a dispute?

A commercial lease runs 5 to 10 years and often represents a business's second-largest expense after payroll. Every protection you will ever have under that lease gets written in before signature. Afterward, the document controls, whether you read it or not.

The efficient path is a single thorough negotiation up front. Schneidman Law's approach is to protect the tenant or the landlord without killing the deal: mark up what matters, concede what does not, and get the space open on schedule.