Signing a commercial lease is a big step for any business. It locks in a space where you can operate, grow, and serve your customers. But leases aren’t always straightforward. They’re full of terms and conditions that can impact your rights, responsibilities, and, most importantly, your bottom line.
If you’re not careful, you could end up paying unexpected costs, facing restrictions on how you can use the property, or even struggling to get out of the lease when you need to. So, before you sign on the dotted line, let’s break down some of the most important terms and what they mean for your business.
What is Permitted Use, and Why Does It Matter?
One of the first things you should check in your lease is the permitted use clause. This is basically a rule that outlines what you’re allowed to do in the space. If your lease says you can only use the premises for “retail clothing sales” but you also want to offer tailoring services, you could be in breach of the lease. And that’s the last thing you want.
The best approach? Make sure the wording of the permitted use is broad enough to cover everything you do—or might want to do in the future. If you ever decide to sell your business or sublet the space, a flexible permitted use clause will also make things much easier. For example, if you run a warehouse, instead of just saying “storage facility,” you might want it to say “commercial office and warehouse use” to keep your options open.
How Rent and Outgoings Work
Rent is usually the biggest cost in a commercial lease, so it’s essential to understand exactly what you’ll be paying and when. Most leases require rent to be paid monthly, often on the first of the month, but this can vary. Some leases also include rent increases over time, so check whether you’re looking at fixed increases, market-based reviews, or increases tied to inflation.
Beyond rent, there’s the issue of outgoings—the additional costs you may be required to cover. These can include things like security, maintenance, utilities, insurance, or cleaning costs for common areas. Some leases are structured so that the landlord covers these expenses (a gross lease), while others pass the costs onto you (a net lease). It’s important to clarify this early, as outgoings can add a significant amount to your monthly costs.
Who’s Responsible for Repairs and Maintenance?
A commercial lease will typically spell out who is responsible for maintaining the premises. Some landlords take care of major structural repairs, while tenants are expected to handle day-to-day maintenance like cleaning, minor repairs, and keeping the place in good condition.
Where tenants sometimes get caught out is at the end of the lease. Many leases include a “make good” clause, which means you have to restore the premises to its original condition before handing it back. That could mean repainting, removing signage, or even undoing any modifications you made. If you’re not aware of these requirements upfront, you could be in for a nasty (and expensive) surprise when your lease ends.
Can You Sublet or Transfer the Lease?
Life happens, and businesses change. Maybe you need to move to a bigger space, relocate, or even shut down. In those cases, being able to sublet the property (rent it out to someone else) or assign the lease (transfer it to a new tenant) can be a lifesaver.
Most commercial leases allow this—but usually with conditions. You’ll likely need the landlord’s approval, and they may charge fees or impose strict requirements on any new tenant. Some leases even hold you responsible if the new tenant fails to pay rent. Before signing, check how flexible your lease is when it comes to subletting or assigning the space. You don’t want to be stuck paying for a property you no longer need.
What Happens When the Lease Ends?
At some point, your lease will either come to an end or need to be renewed. If you want to stay in the space, check if your lease includes a renewal option—and make sure you know the deadline for notifying your landlord. Miss it, and you could lose the space to another tenant.
If you’re leaving, be sure to understand what’s required in terms of notice periods and property condition. Some leases require written notice months in advance, and if you forget, you might end up having to pay rent for extra months you didn’t plan for.
Final Thoughts
A commercial lease is more than just a piece of paper—it’s a contract that can shape the future of your business. Take the time to read it carefully, negotiate terms where possible, and get advice if you need it. The last thing you want is to sign a lease that limits your options or costs you more than expected.
By understanding key terms like permitted use, rent, outgoings, maintenance obligations, and renewal options, you’ll be in a much stronger position to secure a lease that works for you—not just your landlord. And remember, leases are negotiable. Don’t be afraid to push for terms that make sense for your business and give you the flexibility you need to succeed.
