A founder signed a five-year retail lease for a Jacksonville storefront based on the base rent number on the term sheet. Two years in, the CAM reconciliation arrived and added the equivalent of three months of base rent in unexpected charges. There was no cap. The lease defined CAM to include capital improvements amortized over their useful life, including a parking lot resurface the landlord was doing anyway. The number was correct. The structure was the problem, and the structure had been there from day one.
A commercial lease is the longest financial commitment most small businesses sign. It is also drafted by the landlord's lawyer, for the landlord, and the form arrives looking final. The tenant's job is to read the eight provisions that actually decide the economics and the exit, and to push back on the ones that do not match the deal.
1. Term, Renewal, and Options
The initial term is rarely the negotiation point. The renewal structure is. A lease with a five-year initial term and two five-year renewal options at fair market rent looks flexible until the renewal notice provision is read carefully. Most require written notice nine to twelve months before expiration, and most provide that a missed notice forfeits the option. A tenant that misses the notice window finds out the lease is over roughly six months before they had planned for that conversation. Calendar the notice deadline as soon as the lease is signed.
2. Base Rent and Escalations
Base rent is straightforward. Escalations are not. Annual fixed increases of two to three percent are common and defensible. CPI escalations look reasonable until inflation moves. A tenant that signed a CPI lease in early 2021 saw eight to nine percent annual increases for two consecutive years. The defense is a cap: CPI "not to exceed three percent in any year." That language is widely accepted in markets where tenants push for it.
3. CAM and Operating Expenses
CAM is where leases shift the most risk silently. In a triple-net or modified-gross structure, the tenant pays a pro-rata share of the landlord's operating expenses on top of base rent. Three specific items deserve scrutiny:
- Capital improvements. Some leases include amortized capital improvements in CAM. A new roof, a parking lot resurface, an HVAC replacement, all financed out of CAM over the useful life. The tenant defense is to exclude capital improvements from CAM entirely, or to limit them to those required by law that occur after the lease commences, or those that produce demonstrable expense savings.
- Management fees. Landlords often charge a property management fee of three to five percent of gross receipts as part of CAM. That is sometimes legitimate and sometimes a kickback to a related party. Cap it, and define it.
- Audit rights. A useful CAM clause includes a tenant audit right with a clear procedure and a recovery mechanism if the audit finds material overcharges. Without it, the tenant is paying whatever the landlord invoices.
A CAM cap, expressed as a percentage increase year over year on controllable expenses, is the cleanest single protection. Negotiating a five percent annual cap on controllables (with uncapped pass-through for taxes, insurance, and utilities) is achievable in most markets.
4. Personal Guarantee
The personal guarantee is the single line item that turns a business problem into a personal one. A blanket guarantee makes the individual personally liable for every dollar owed under the lease for the full term, including future rent and damages on default. There are three negotiated alternatives that change the risk profile dramatically:
- Capped guarantee. Personal liability capped at a defined dollar amount or a defined number of months of rent.
- Burn-off guarantee. The guarantee terminates after a defined period of on-time payments, often twenty-four to thirty-six months.
- Good guy guarantee. The guarantor is personally liable only for amounts accruing during the period the tenant actually occupies the space. The tenant surrenders the space and the personal exposure ends, even if the lease term has not.
The good guy guarantee is widely used in major markets and is available in Florida if the tenant asks for it. It is rarely offered without being asked for.
5. Use and Exclusive Use
The use clause defines what the tenant is permitted to do in the space. A narrow use clause ("use of the premises is limited to the operation of a specialty coffee shop") prevents evolution of the business and limits the ability to assign or sublease. A broader clause ("any lawful retail use") preserves optionality. Tenants should also ask about exclusivity: a clause preventing the landlord from leasing other space in the same property to a directly competing business. Exclusivity is common in shopping centers and is worth asking for.
6. Assignment and Subletting
A tenant that cannot assign or sublease cannot sell the business. Many leases say assignment requires landlord consent, not to be unreasonably withheld, but the consent process and the standards for refusal are often left vague. The defense is specificity: define what makes a transferee acceptable (creditworthiness standards, similar use, no prior default), set a deadline for the landlord to respond, and make silence equivalent to consent if the deadline passes. Assignment to an affiliate or in connection with a sale of substantially all of the tenant's assets should be permitted without consent.
7. Default, Cure, and Remedies
Default clauses are uniformly tough on tenants. Reasonable cure periods are the tenant defense: typically five business days after notice for monetary default and thirty days after notice for non-monetary default, with extension if the cure cannot reasonably be completed within thirty days but is being diligently pursued. Acceleration clauses, which let the landlord sue for the entire remaining rent as one lump sum on default, should be reviewed against the landlord's duty to mitigate damages under Florida law.
8. Exit and Surrender
The end of the lease deserves the same scrutiny as the beginning. Surrender clauses often require the tenant to restore the premises to original condition, which can include removing improvements the landlord required the tenant to install. That restoration cost can be material and is often forgotten until it arrives as a charge against the security deposit. Negotiate a clear list of items the tenant may leave in place, and a clear list of items that must be removed.
The Read-Through Habit
Read the lease in one sitting, with a highlighter on the eight items above. Most of the leases that produce disputes have the problematic language right in the document. The tenant who reads it carefully and asks for changes before signing usually gets most of them. The tenant who signs the form as presented finds the same language hard to renegotiate two years in. The related background on residential lease review appears in our note on why having a lawyer review a lease before signing is one of the highest-leverage decisions a tenant makes.