Commercial Leases: Higher Stakes, Fewer Protections
Commercial tenants—businesses leasing office, retail, or industrial space—have significantly fewer statutory protections than residential renters. Most residential tenant protections (habitability standards, security deposit caps, eviction procedures) do not apply to commercial leases. The lease document itself defines almost all of your rights, which is why the negotiation and drafting phase is so critical. Once signed, a commercial tenant is generally bound by the lease terms, however unfavorable.
Common Commercial Lease Disputes
CAM (Common Area Maintenance) charges are a leading source of commercial tenant disputes. Landlords estimate CAM charges in advance and reconcile at year-end; tenants frequently find that actual charges far exceed estimates and that the reconciliation includes items that should not be charged to tenants under the lease. Tenants have a right to audit CAM charges in most commercial leases—exercise this right if charges seem excessive.
Other frequent disputes: landlord failure to maintain HVAC, roof, or structural systems; exclusivity clause violations (landlord leases space to a competing tenant); co-tenancy violations (major anchor tenant leaves and co-tenancy clause allows rent reduction); landlord interference with tenant's business; and disputes about lease renewal options and rent escalation formulas.
Early Lease Termination
Terminating a commercial lease early is expensive. Most commercial leases require the tenant to pay the remaining rent due through the lease term, mitigation by the landlord notwithstanding. Negotiate a termination clause (buyout provision) before signing whenever possible. If you must exit early without a termination clause, options include: subletting (assigning the space to another business); negotiating a mutual termination with the landlord; or proving constructive eviction (the premises became unusable through the landlord's failure to maintain them).
Force Majeure and Business Interruption
Commercial leases typically include a force majeure clause that may excuse performance when extraordinary events—natural disasters, government-ordered closures—make it impossible to operate. The scope of these clauses was heavily litigated during COVID-19. Courts generally read force majeure clauses narrowly; a clause that doesn't explicitly address inability to pay rent may not excuse rent even during a forced closure. Review your lease's force majeure clause with a commercial real estate attorney before invoking it.
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Frequently asked questions
My landlord is threatening to lock me out of my commercial space. Can they do that?
Commercial landlords in most states have the right to lock out commercial tenants after proper notice and lease default procedures, and the right of re-entry may be exercised more quickly than in residential evictions. However, even commercial tenants have due process rights, and lockouts without following the lease and statutory requirements can give rise to wrongful eviction claims. Review your lease and state commercial landlord-tenant law immediately.
What is a personal guarantee in a commercial lease and how do I limit it?
A personal guarantee makes you personally liable for the business's rent obligations if the business cannot pay—exposing your personal assets to commercial lease debt. Limiting personal guarantees is possible through: capping the guarantee to a fixed number of months' rent; burn-down provisions (guarantee reduces after each year of on-time payment); guaranteeing only a specific dollar amount; or structuring the business entity to limit your personal exposure. Negotiating these terms upfront is far easier than challenging a signed guarantee later.
My commercial landlord refuses to make HVAC repairs. What can I do?
Review your lease to determine whether HVAC maintenance is the landlord's or tenant's responsibility. Most commercial leases assign major HVAC system replacement to the landlord while routine maintenance falls to the tenant. If the failure is the landlord's responsibility and they won't act, you may be able to: make the repair and deduct from rent (only if your lease expressly permits); claim constructive eviction if the premises are uninhabitable; or sue for breach of lease. Documenting the failure, your notice to the landlord, and their non-response is essential.