Having a lawyer review a California commercial lease before you sign gives you a chance to understand obligations and raise potential problems while there may still be room to negotiate.
It can take months to find the right space for your business. After you settle on the location, rent, and move-in date, you might feel like the lease is just the last bit of paperwork before you get the keys.
However, a commercial lease is a contract, and the terms you agree to can impact your business long after you move in.
If a commercial lease review lawyer is able to review the agreement before you sign, this offers you a chance to understand those obligations and raise potential problems while there may still be room to negotiate.
Why should I have a lawyer review a commercial lease before signing?
The monthly rent and lease term may be the first things you look at, but they are only part of the agreement.
A lease can also determine who pays for repairs, taxes, insurance, maintenance, operating expenses, and improvements. It can set out what happens if the business needs to move, if you want to assign the lease, or if either party fails to meet its obligations.
That’s why we see commercial lease review as part of the bigger contract review and negotiation process. Our attorneys review the entire agreement, explain what the terms mean for your business, and point out any parts you may want to discuss before signing.
Timing is important. Before you sign the lease, you can still clarify details, ask questions, or negotiate certain terms. After the agreement is signed, your options are more limited, and you have to work with the contract as it is.
What risks should I look for in a commercial lease?
There is no single commercial lease that works for every tenant. The importance of each provision depends on your business, the property, the lease term, and what you expect to happen over the next several years.
Could a personal guarantee make me responsible for the lease?
Using an LLC or corporation does not always protect your personal assets from every lease obligation.
A landlord may require the business owner, or another individual, to sign a personal guarantee. Under California Civil Code § 2787, a guarantor is someone who promises to answer for another party’s debt, default, or other obligation.
This means the landlord could make a claim against the guarantor if the business does not meet the obligations covered by the guarantee.
A guarantee might cover rent and other lease obligations, and its scope and length can vary a lot. California commercial lease disputes show that guarantees can include things like rent, property taxes, and common-area expenses if the agreement says so.
Before you sign, ask a lawyer to explain what the guarantee covers and whether there are terms you should try to negotiate.
How much will I pay on top of the monthly rent?
The rent shown in the lease may not be the full cost of using the property.
Commercial tenants may also have to pay for common area maintenance (CAM charges), as well as taxes, insurance, repairs, utilities, or other property-related costs, depending on the lease.
Pay close attention to CAM provisions, since the agreement decides which expenses are included and how your share is calculated. California commercial lease disputes have included disagreements about property taxes, insurance, and common-area maintenance costs
Before you sign the lease, ask yourself questions like:
- What costs can the landlord pass on to you?
- How is your share calculated?
- Are any expenses excluded?
- Can particular charges increase without a cap?
- Do you have a right to review the calculations?
If your business is planning its budget for several years, these details can be just as important as the base rent.
Can I transfer or sublet my commercial lease if my plans change?
You might plan to stay in the space for the whole lease term, but your business needs could change.
You might outgrow the property, need less space, move, restructure your company, or sell your business. If that happens, being able to assign the lease or sublet the space can be very important.
Do not assume you will always have that option.
California Civil Code § 1995.230 expressly provides that a lease may contain a restriction that completely prohibits the transfer of a tenant’s interest.
This is why you should review the assignment and subletting terms before signing a long lease. A lawyer can tell you if transfers are allowed, if you need the landlord’s consent, and what conditions apply to an assignment or sublease.
If you are thinking about selling or expanding your business in the future, these restrictions could affect more than just how you use the property.
What happens if I need to leave the property before the lease ends?
The fact that you sign a five-year lease does not mean that it then becomes a one- or two-year obligation since the property ceases to be suitable for your business.
What happens if you leave early depends on your lease and your situation.
California Civil Code § 1951.4, for example, allows a landlord in certain circumstances to keep a lease in effect after a tenant breaches the agreement and abandons the property and to recover rent as it becomes due. Importantly, that remedy applies only when the statutory requirements are met and the lease provides for it.
The main takeaway is this: before you sign, make sure you understand what the lease says about default, ending the lease, assignment, and your financial responsibilities if you cannot use the space as planned.
Can you negotiate the terms of a commercial lease?
A landlord may present a lease as a standard agreement, but that does not mean every term is fixed. Depending on the property and the circumstances, there may be room to negotiate terms such as:
- personal guarantees;
- CAM and operating expenses;
- renewal options;
- assignment and subletting rights;
- repair and maintenance obligations; and
- default or termination provisions.
What does a commercial lease attorney look for?
A good lease review should answer the questions that matter to your business, not just explain the legal language.
For example:
- What will this space really cost over the full lease term?
- Could you be personally liable if the business cannot meet its obligations?
- Who pays for repairs, maintenance, taxes, insurance, and other property costs?
- Can you assign the lease or sublet the space if your plans change?
- What could put you in default?
- What happens if you need to leave early?
- Are there terms you should try to negotiate before signing?
Because commercial leases involve both contract and real estate issues, our real estate attorneys can look at the agreement from both angles.
The point is to come away knowing what you are signing, what could cause problems later, and whether there is anything worth raising with the landlord before you commit.
Have Gallagher Krich, APC Review Your Commercial Lease
If you’re preparing to sign a commercial lease, our attorneys can review the agreement before you commit and advise you on any terms that may need closer attention or negotiation.
Gallagher Krich, APC brings together experience in both contract law and commercial real estate, giving business owners practical legal guidance on the agreements that shape their operations.
Call (858) 926-5797 or fill out our online contact form to schedule a free consultation with one of our San Diego commercial lease attorneys.
This article is provided for general informational purposes only and does not constitute legal advice.
Thomas F. Gallagher, Esq. is a founding partner of Gallagher Krich, APC, a San Diego law firm focused on business law, civil litigation, and contract disputes. With over 30 years of legal experience, Tom provides strategic counsel to business owners, entrepreneurs, and professionals navigating complex legal challenges across California.
His practice includes drafting and negotiating commercial contracts, resolving business disputes, and advising clients on corporate governance, regulatory compliance, and risk management. Read more »
