Commercial Lease (First-Time Tenant)
Free commercial lease template for first-time commercial tenants. Covers base rent, CAM, tenant improvements, term, assignment, and the protective clauses small businesses miss when signing 5 to 10 year leases.
First-time commercial tenants signing 5 to 10 year leases for retail, office, restaurant, or medical/dental space. Covers the structural lease terms (base rent, CAM, tax, insurance pass-through) and the protective clauses that determine total occupancy cost and exit flexibility.
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A commercial lease is often the second-largest contract a small business signs after the SBA loan. On a 5 to 10 year lease, the difference between a tenant-favorable and a landlord-favorable structure can mean six figures in unexpected costs. CAM creep, holdover rent, and assignment restrictions are where first-time commercial tenants get hit hardest.
This template is built for first-time commercial tenants signing leases in the $20 to $80 per square foot range for retail, office, restaurant, or medical/dental space. It covers the structural terms and the protective clauses small businesses miss when they sign the landlord's standard form.
Key Clauses Explained
Premises and Term. Defines the leased space (rentable square feet, build-out condition) and the lease duration. 5 year initial term with renewal options is standard for first-time commercial tenants.
Base Rent. The fixed monthly rent amount, often expressed as $X per square foot per year. Includes any escalation schedule (typical: 2 to 3% annual increases or fixed steps every 5 years).
Common Area Maintenance (CAM). Pass-through cost for maintaining common areas (parking, landscaping, lobby, security). The largest hidden cost on commercial leases. Caps, exclusions, and audit rights determine whether CAM is reasonable.
Property Taxes. Pass-through of property tax increases above a base year. Should cap annual increases (typical: 5%) and include the right to challenge tax assessments.
Insurance. Tenant typically carries general liability and contents insurance. Landlord carries building insurance, often passed through to tenant.
Tenant Improvements. Build-out customization to suit the tenant's use. Landlord allowance ranges from $20 to $80 per square foot. Whether the allowance is amortized into rent (a loan) or outright contribution (a true incentive) matters significantly.
Use Clause. Defines what the tenant can use the premises for. Should be broad enough to allow business pivots and reasonable expansions without landlord consent.
Maintenance and Repair. Allocates responsibility for various maintenance tasks. Tenant typically responsible for interior maintenance and trade fixtures; landlord responsible for roof, structural, HVAC.
Assignment and Subletting. Controls whether tenant can transfer the lease to another business or sublet space. Critical if the business is sold (acquirer needs lease assignment). "Landlord consent shall not be unreasonably withheld" is the negotiated standard.
Default and Cure. Defines what triggers default and how long the tenant has to cure. Monetary defaults typically have a 5 to 10 day cure period; non-monetary defaults 30 days.
Holdover Rent. The rent rate that applies if the tenant remains after lease expiration without a renewal agreement. Often 150% to 200% of base rent. Negotiate down or carve out short transition periods.
Personal Guarantee. Landlord typically requires the business owner to personally guarantee lease obligations. Negotiate carve-outs (homestead, retirement accounts) and a step-down or burnoff provision (guarantee reduces or terminates after a defined period of on-time payments).
Termination Rights. Defines when either party can terminate early. Tenant typically does not have unilateral termination rights; negotiate at least one termination option at year 3 or 5 with a defined termination fee.
Where this template can still go wrong.
These are the risks that often show up after edits, negotiation, or one-sided additions.
Red Flags to Watch For
- Uncapped CAM increases. Push for 5% annual cap on controllable CAM.
- Capital improvements rolled into CAM. Landlord capital should be amortized over useful life, not passed through as operating expense.
- No tenant audit right on CAM and operating expenses. 3-year look-back is standard.
- Holdover rent at 200% with no transition window. Negotiate down to 150% with 60-day grace period.
- Personal guarantee with no burnoff or step-down. Negotiate guarantee reduction after 24 to 36 months of on-time payments.
- Assignment requires landlord consent without "not unreasonably withheld" standard. Critical if you may sell the business.
- TI allowance amortized into rent at high interest rate (often 10%+). Negotiate outright contribution or lower interest rate.
The template gets you started. The signed version is what matters.
Once the other side edits this draft, the safest next step is to review the final version before anyone signs.
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Template Text
COMMERCIAL LEASE AGREEMENT
This Commercial Lease Agreement (this "Lease") is entered into as of [DATE] (the "Effective Date") between [LANDLORD NAME] ("Landlord") and [TENANT NAME] ("Tenant").
1. Premises and Term. Landlord leases to Tenant approximately [NUMBER] rentable square feet at [ADDRESS] (the "Premises") for a term of [60] months commencing on [COMMENCEMENT DATE] and ending on [EXPIRATION DATE] (the "Initial Term"), with [TWO] options to renew for additional [60-month] terms upon [180] days written notice.
2. Base Rent. Tenant shall pay Base Rent of $[AMOUNT] per year ($[AMOUNT/12] per month), payable in advance on the first day of each month. Base Rent shall increase by [3%] annually on each anniversary of the Commencement Date.
3. Common Area Maintenance (CAM). Tenant shall pay its proportionate share of CAM expenses. CAM is capped at [5%] annual increase for controllable expenses. Capital improvements shall be amortized over their useful life and not included in CAM. Tenant shall have an annual audit right with a [3]-year look-back period.
4. Property Taxes and Insurance. Tenant shall pay its proportionate share of property tax increases above the Base Year amount, capped at [5%] annual increase. Landlord shall maintain building insurance; Tenant shall carry general liability insurance with minimum limits of $[1,000,000] per occurrence.
5. Tenant Improvements. Landlord shall provide a tenant improvement allowance of $[AMOUNT] per rentable square foot as an outright contribution (not amortized into rent). Tenant shall complete build-out within [120] days of the Commencement Date.
6. Use Clause. The Premises shall be used for [USE DESCRIPTION] and any related lawful business purposes. Tenant may modify use upon [30] days written notice to Landlord, provided the new use does not violate applicable zoning or pose increased risk to the property.
7. Maintenance and Repair. Tenant shall maintain the interior of the Premises and trade fixtures. Landlord shall maintain the roof, foundation, structural elements, exterior, parking areas, and HVAC systems serving the Premises. Each party's maintenance obligations are at its own cost.
8. Assignment and Subletting. Tenant may assign this Lease or sublet the Premises with Landlord's prior written consent, which shall not be unreasonably withheld, conditioned, or delayed. Assignment in connection with the sale of substantially all of Tenant's business shall not require Landlord consent.
9. Default and Cure. Tenant shall be in default upon failure to pay Base Rent or other charges within [10] days after written notice. For non-monetary defaults, Tenant shall have [30] days to cure after written notice.
10. Holdover Rent. If Tenant remains in possession after expiration without a written renewal, Tenant shall pay holdover rent at [150%] of Base Rent for the first [60] days, then on a month-to-month basis subject to termination by either party on [30] days notice.
11. Personal Guarantee. [INCLUDE IF REQUIRED]. The owners of Tenant ("Guarantors") personally guarantee Tenant's obligations under this Lease. Guarantors' obligations are limited to [24] months of Base Rent and shall step down by [25%] after each [12] months of on-time payments. Guarantee carves out homestead property under applicable state law.
12. Termination Rights. Tenant shall have a one-time right to terminate this Lease effective at the end of month [36], upon (a) [180] days written notice and (b) payment of a termination fee equal to the unamortized portion of any tenant improvement allowance plus [3] months of Base Rent.
13. Governing Law. This Lease shall be governed by the laws of the State of [STATE].
[SIGNATURE BLOCKS]
Commercial lease terms vary dramatically by market and property type. Customize this template and upload to Inkvex for a fast risk check, or have a real estate attorney review before signing. Inkvex provides legal information, not legal advice.
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