For many small business owners, signing a commercial lease is a milestone. It means the business is growing and ready for permanent space. But it’s also one of the most common places where small businesses get stuck with long-term obligations that could limit their growth.
A commercial lease is a legal contract between a tenant and the owner of real property for the use and possession of space and improvements. Like all legal contracts, the terms are negotiable. Below are key lease provisions small business owners should pay special attention to and negotiate before committing.
Permitted Use of the Premises
The permitted use clause defines what you can do in the space. Many leases start with language that’s far more restrictive than it needs to be. For a small business, this can be a problem. Businesses change. You might add new services, expand your product line, or adjust your model in response to customer demand. If the permitted use is too narrow, even a small change could require landlord approval or a lease amendment. Negotiating broader permitted use language gives your business room to grow without needless roadblocks.
Tenant Improvement Allowance
Build-out costs add up quickly. Flooring, electrical work, plumbing, signage, and layout changes can easily cost thousands of dollars before you ever open the doors. A tenant improvement allowance shifts some of that cost to the landlord. For small businesses operating on tight startup budgets, this can make a real difference. The lease should clearly state the allowance amount, its use, and the timing of reimbursement.
Exclusivity
Exclusivity provisions prevent the landlord from leasing nearby space to a direct competitor. This provision is essential in shopping centers and mixed-use developments. For a small business, location and foot traffic matter. Opening next to a company offering the same services can dilute customers and revenue. An exclusivity clause helps protect the investment you’re making in that location.
Relocation Clause
Some leases allow the landlord to move a tenant to a different space within the property. While this may seem harmless, relocation may interrupt business operations, confuse customers, and damage branding. For a small business, even a short interruption can hurt cash flow. If a relocation clause can’t be removed, it should be narrowly tailored, require advance notice, and require the landlord to cover all costs associated with the move.
Kick-Out or Early Termination Rights
Long-term leases can be risky for small businesses, especially newer ones. Revenue projections don’t always match reality, and permitting or financing issues can cause delays. A kick-out or early termination clause provides an exit if certain conditions aren’t met. While landlords may resist these provisions, even a limited termination right can grant valuable protection and peace of mind.
Why Negotiation Matters
A lease that doesn’t account for growth, change, or unexpected challenges can become a burden rather than a foundation. Negotiating doesn’t need to be difficult. It means asking questions, understanding the terms, and making sure the lease supports your business instead of boxing it in.
How SER & Associates Can Help
At SER & Associates, we know how important a commercial lease is to the success and stability of your business. Our team helps clients review, negotiate, and secure lease agreements that protect their interests and minimize risk.
If you’re considering a new commercial lease or need help understanding one you’ve already signed, schedule a consultation with us today. For more insights on commercial leasing and business law, visit www.Ser-Associates.com and follow us on Instagram, Facebook, and LinkedIn!
