🎯 In 30 seconds: A commercial lease is negotiated, not filled in, and almost everything in it has a price: who pays taxes and maintenance, how fast rent rises, whether you can sell the business with the lease, and how much you personally guarantee. On the customer side, a short written agreement with a deposit, clear payment terms and a late fee prevents most collection problems.
The three lease types
| Type | You pay | Landlord pays |
|---|---|---|
| Gross (full service) | One rent figure | Property taxes, insurance, maintenance, often some utilities |
| Modified gross | Base rent plus some costs (often your utilities, janitorial or increases over a base year) | The rest, as listed |
| Triple net (NNN) | Base rent plus your share of property taxes, building insurance and common area maintenance | Usually structural items, if the lease says so |
CAM (common area maintenance) covers parking lot, landscaping, snow, shared lighting and the like. It is billed as an estimate and reconciled after the year ends, so you can get a bill. Ask for the last two or three years of actual CAM, a cap on yearly increases of controllable costs, and the right to audit.
Clauses that matter most
- Personal guarantee. Makes you personally liable for the rent, past the LLC wall. Negotiate a cap (for example 12 months of rent), a burn-off after on-time years, or a “good guy” clause that ends your liability if you give notice, pay through move-out and leave the space clean.
- Escalations. Fixed steps (for example 3% a year) or tied to an inflation index. Know the year-five rent before you sign.
- Exclusive use. Stops the landlord from leasing to a direct competitor in the same center. Retail and food tenants usually ask for it.
- Assignment and subletting. If you ever sell the business, the buyer needs the lease. Ask that landlord consent “not be unreasonably withheld.”
- Build-out (tenant improvement) allowance. Money from the landlord toward fitting out the space, sometimes paired with free rent months during construction.
- Renewal options. The right, not the duty, to extend at stated terms. Businesses that can’t move easily (laundromats, restaurants) depend on these.
- Use clause and zoning. Make sure your exact use is allowed by the lease and by local zoning before signing.
Worked example: what the lease really costs
Hypothetical: 1,500 square feet, five years, base rent $20 per square foot per year, NNN charges estimated at $6, base rent rising 3% a year.
| Year 1 total | ($20 + $6) × 1,500 = $39,000, about $3,250 a month |
| Year 5 base rent | $20 × 1.03⁴ ≈ $22.51 per sq ft |
| Five-year base rent | About $159,000, before NNN |
| Five-year total with NNN at $6 | About $204,000 |
That last number is the real size of the commitment, and with a full personal guarantee most of it is yours if the business closes in year two. Compare it with expected revenue: the existing Main Street guide’s rule of thumb keeps occupancy near 10% of revenue for retail and food.
Customer contracts and terms
For service work, a one- or two-page agreement covers most disputes. Include:
- Scope: what is included and, just as important, what isn’t.
- Price, deposit and payment schedule.
- Change orders: extra work is priced and approved in writing before it starts.
- Cancellation and rescheduling rules, with any fees.
- Warranty or satisfaction terms, and a limit on your liability where your state allows it.
- For websites or online booking: terms of service and a privacy notice that match what you actually do with data.
Getting paid
- Deposits for materials or booked dates (commonly a third to a half on custom work). Some states regulate contractor deposits, so check with your licensing board.
- Net terms (“net 30” means the full amount is due 30 days after the invoice). Offer them to businesses that have earned it, not to every new customer.
- Late fees must be written into the agreement before the work, and states limit how much interest you can charge. Ask a lawyer or your SBDC what is allowed where you are.
- Card on file for recurring work, with written authorization.