There are dozens and dozens of commercial lease clauses in the real estate world. To make things even more confusing, some are geographically-specific, or even dependent on other clauses. It’s enough to make your head spin. To help simplify things, I’ve written out a comprehensive list of common clauses found in commercial leases (retail, office, industrial) in the United States, grouped by category. The categories are broken up into these 5:
Financial Clauses
Most of this section includes clauses and lease types that you might be familiar with (CAM, for example). Most of them are financial, and some are primarily about the structure of the lease itself.
This is the fixed minimum rent due regularly (usually monthly) for the leased space, excluding additional charges. It’s the foundational rent amount the tenant must pay, often subject to escalation over time.
A clause mainly in retail leases where the tenant pays extra rent that’s based on a percentage of sales above a certain agreed-upon threshold. In practice, the tenant pays a base rent, and once their gross sales exceed an agreed “breakpoint,” a percentage of the excess sales is paid as additional rent.
A provision requiring the tenant to pay their proportionate share of costs to maintain and operate common areas (lobbies, parking, janitorial needs, elevators, etc.) in a multi-tenant property. CAM charges are billed in addition to base rent and cover expenses like cleaning, landscaping, and security for shared spaces.
A clause defining the tenant’s responsibility for property expenses beyond base rent. In a triple net (NNN) lease, the tenant pays all major operating expenses: property taxes, insurance, and maintenance-in addition to base rent.
A provision that specifies how and when rent will increase during the lease term. For example, the lease may stipulate a fixed annual percentage increase (e.g., 2% per year) or tie rent hikes to inflation via the Consumer Price Index (CPI). This protects the landlord against rising costs.
This lease clause is common in gross leases (especially for offices), and sets a “base year” for operating expenses. The landlord covers expenses for the first year (the base year), and the tenant pays any increase in operating costs above the base year amount in future years.
The TIA clause outlines the agreed upon sum that the landlord contributes toward the tenant’s build-out or interior improvements of the space. This lease clause typically gets a lot of attention in negotiations since it can make or break business models (think: restaurants, coffee shops, etc).
Basically self-explanatory. This outlines how late fees and interest treated if rent is paid late. It usually defines a grace period (e.g., 5 days) and then a flat fee or percentage charge on overdue (late charges like this might be classified as “additional rent” in the lease
This clause is often found in office leases, and it allows the landlord to “gross up” operating expenses to a stated occupancy level (e.g., 95% or 100%) if the building isn’t fully occupied. This prevents under-occupied buildings from understating expenses in the base year.
Use and Operations Clauses
These clauses define how the tenant can use the leased space and outline responsibilities for day-to-day operations. They help preserve property value, maintain tenant mix, and reduce conflicts between neighboring tenants.
This clause defines and limits the type of business or activities the tenant can conduct on the premises, plain and simple. Landlords use it to make sure the space is only used for specified purposes (nothing illegal or dangerous). This has the added benefit of protecting tenant mix in a center and avoid conflicts or violations.
This is very common in retail settings, as it grants the tenant an exclusive right to conduct a certain business at the property. The landlord agrees not to lease nearby space to a competitor offering the same primary products or services.
A radius clause prevents the tenant from opening a similar business within a certain geographic radius of the leased location. The reason is simple: avoid the tenant cannibalizing sales at the leased premises by diverting customers to another nearby location. Radius clauses are often tied to percentage rent leases, primarily to ensure that the landlord’s percentage rent isn’t diluted by a new store opened by the tenant nearby.
You may see this labeled as an “operating covenant” as well. It requires the tenant to operate its business in the premises continuously during agreed hours and days. It’s especially common to see in retail centers, as landlords want to make sure the property stays active and consistent to shoppers.
This is a retail lease clause that makes a tenant’s rent obligations conditional on certain other tenants or a percentage of the center being occupied. Think about a shoe store in a mall. The lease might say that if the anchor tenant at the mall leaves or if less than 70% of stores are open, then the clothing store can pay reduced rent or terminate early.
This assigns responsibility for maintenance of the premises between landlord and tenant. Typically, the tenant must maintain the interior of the leased space (e.g. fixtures, interior walls, etc) in good condition, while the landlord handles structural elements and common areas (roof, exterior walls, elevators, parking lot).
This clause controls if and how the tenant may make physical changes or improvements to the premises. It usually requires the landlord’s prior written consent for non-minor alterations (think: major construction or structural changes). Also, this clause usually states that the landlord can’t unreasonably withhold alterations that would generally fit within that scope.
As you might expect, this clause outlines the tenant’s right to install signage on the building or property. Most common with retail tenants, it may grant the tenant a certain size or placement of exterior signage or directory listing. Tenants often negotiate prominent signage visibility with the landlord, although they still have to adhere to local codes.
No surprise here, this defines the tenant’s parking rights, such as a specific number of parking spaces or a ratio (e.g., 4 spaces per 1,000 sq. ft. leased). In multi-tenant properties, it may designate reserved spots or simply allow non-exclusive use of a common parking lot. This particular clause has more significance for office real estate, since there will naturally be more parking needs and likely a finite amount of parking availability.
You might also see this labeled as “Right of Entry” or the like. It reserves the landlord’s right to enter the premises at reasonable times with prior notice to inspect, make repairs, or show the space to lenders/prospective. The clause should balance the landlord’s need for access with the tenant’s right to quiet use, which typically requires 24 hours’ notice for non-emergency entry.
This clause specifies the condition in which the tenant must return the premises at lease end. If you’ve read our post on the “broom clean” clause, you’ll be familiar with this. Leaving the space in broom clean condition means it’s left in good repair, ordinary wear and tear excepted, and personal property removed (and sometimes restore any alterations if required). If the tenant fails to deliver the space in the required condition, it can be considered a default and the landlord may use the security deposit or sue for damages.
Transfer and Assignment Clauses
These clauses basically regulate if and how a tenant can assign the lease or sublease the space to another party. They protect the landlord’s interest by ensuring any new occupant meets financial and operational standards.
This lease clause covers the tenant’s ability to transfer the lease to another party. Typically, the tenant cannot assign the lease to a new tenant without the landlord’s prior consent. There may be exceptions listed though, like assignments to an affiliate or as part of a business merger might be allowed without consent under a permitted transfer provision. The assignment clause protects the landlord from an new tenant that they may not want taking over the space.
Similar to the assignment clause above, the subletting clause governs the tenant’s right to sublease all or part of the premises to a subtenant. Landlord consent is usually required for any sublet. The original tenant remains directly liable to the landlord for the lease obligations, even if a subtenant is in place. The lease may stipulate conditions for approval, like the sublease rent cannot be lower than current rent, or that subtenant use must comply with the original permitted use.
A provision sometimes found in assignment/sublease clauses giving the landlord an option to “recapture” the space instead of approving a transfer. For example, if a tenant requests to assign the lease or sublet the entire premises, the landlord can choose to terminate the lease for that space and take it back (hence, “recapturing” it) rather than dealing with an unknown assignee. The clause typically spells out the procedure and notice period for recapture.
If the tenant does sublet with landlord’s consent, this clause might require the tenant to share any excess sublease rent with the landlord. For instance, if the subtenant pays more rent than the tenant pays under the prime lease, the clause might split that excess 50/50 between landlord and tenant (after the tenant recovers costs of subleasing). This prevents the tenant from profiting off the lease without the landlord benefiting as well. It’s often included to keep the arrangement fair if market rents have risen above the original lease rate.
Some leases include a carve-out allowing certain assignments without landlord consent, provided specific conditions are met. Common examples include: transfers to a corporate affiliate, to a successor entity after a merger or acquisition, or to a subsidiary of the tenant. This clause is an important concession for tenants, as it basically gives them the flexibility needed for corporate transactions. One important caveat to remember though: this usually still requires notice to the landlord even if consent isn’t needed.
Legal and Security Clauses
These clauses allocate legal risk and liability between the landlord and tenant while setting insurance and indemnity expectations. They also define each party’s rights in the event of disputes, property damage, or ownership changes.
This clause outlines the idea that one party will protect (indemnify) the other from certain claims or losses. In a lease, the tenant typically agrees to indemnify and hold harmless the landlord from lawsuits, damages, or liabilities arising out of the tenant’s use of the premises (for example, if a customer is injured in the tenant’s store). Often the landlord similarly indemnifies the tenant for claims due to the landlord’s negligence or common area issues.
This clause requires each party (especially the tenant) to carry specified insurance coverages. The tenant is usually obligated to maintain commercial general liability insurance, often with a minimum coverage like $1–5 million. The tenant may also have to carry property insurance on its fixtures/inventory and possibly business interruption insurance. The landlord typically carries building property insurance and liability for common areas.
This is a mutual clause where each party agrees to waive its insurer’s right of subrogation against the other party. In simple terms, if the landlord’s or tenant’s insurance pays out for a loss (like a fire or flood damage), the paying insurer cannot “step into the shoes” of its insured to sue the other party for compensation. Both landlord and tenant typically agree to have their insurance policies endorse this waiver.
For example, if a fire caused by faulty wiring damages the tenant’s inventory and the tenant’s insurer pays the claim, the waiver prevents that insurer from suing the landlord for reimbursement, even if the landlord was technically at fault. This helps preserve the landlord-tenant relationship and avoids finger-pointing when insurance is already covering the loss.
An implied or explicit lease covenant that guarantees the tenant’s right to peaceful use of the premises without interference. As long as the tenant isn’t in default, the landlord promises that the tenant shall peaceably and quietly enjoy the premises, free from interference or hindrance by the landlord. In real-world terms, this means the landlord won’t disturb the tenant’s possession, and will protect the tenant’s legal right to occupy, such as against any title claims.
A tri-party set of clauses dealing with the tenant’s relationship to the landlord’s lender or a new owner. Subordination: the tenant agrees its lease is subordinate to any current or future mortgage on the property (meaning the mortgage has priority over the lease). Non-Disturbance: in return, the lender agrees not to disturb the tenant’s lease if the tenant is not in default. In this case, even if the landlord is foreclosed on, the tenant can stay for the lease term. Attornment: the tenant agrees to recognize and accept a new owner or lender as the landlord after a foreclosure or sale, continuing the lease under the new owner.
Think of it like this: if you’re the tenant, and your landlord defaults on their loan and the bank takes over the building, an SNDA makes sure you don’t get booted out. You agree to keep paying rent to the new owner, and in return, they agree to honor your lease like nothing changed.
This obligates the tenant to confirm certain facts about the lease in writing (an estoppel certificate) upon request. The tenant’s statement typically verifies that the lease is in effect, the commencement and expiration dates, current rent, and that the landlord is not in default. Landlords or buyers use these certificates as a reliance document to get an accurate status of leases. (For example, if the building is being sold or refinanced, the landlord will ask the tenant to sign an estoppel cert stating these facts.
This requires a third party (guarantor) to guarantee the tenant’s lease obligations. Ever had a co-signer for anything? This is a similar concept. In many leases, especially when the tenant is a new entity like a start-up or smaller company, a personal or corporate guaranty is required. An individual/business or affiliate company promises to cover the rent and other obligations if the tenant fails to do. There can also be variations that include full guaranties covering the entire term or limited guaranties that might burn off after a period or cap at a certain amount.
This clause is very geo-specific, most commonly seen in New York City real estate leases. Under a traditional Good Guy Guaranty, the guarantor (often the business owner) is liable for the lease obligations only until the tenant vacates and surrenders the premises with proper notice. If the tenant acts as a “good guy” and leaves the space in good condition, paying all rent up to the move-out date, the guarantor is released from liability for future rent.
This clause is common in many types of contracts, not just commercial real estate leases. This clause excuses or delays performance of lease obligations due to extraordinary events beyond the parties’ control (typically looked at as “Acts of God”) or force majeure events. This typically covers events like natural disasters (fire, flood, hurricane), war or terrorism, government orders, labor strikes, etc. If such an event occurs, the affected party is not considered in default for failing to perform duties during that period.
For instance, a force majeure clause might extend the time for a landlord to complete repairs if a hurricane caused delays. Post-2020, many leases have clarified how pandemics or government shutdowns are treated under force majeure. One important this to note: many clauses do not excuse monetary payments like rent.
This clause puts restrictions and obligations on the tenant regarding use or storage of hazardous substances. It typically prohibits the tenant from bringing hazardous materials on-site except in compliance with law, and makes the tenant responsible for any environmental contamination they cause. The tenant might have to indemnify the landlord for any environmental cleanup resulting from the tenant’s activities. If the property has known environmental issues, the lease might also address responsibilities for remediation or compliance with environmental laws like OSHA or ADA in the premises.
Default, Termination, and Option Clauses
These clauses outline what happens if either party breaks the lease, wants to end it early, or plans to extend or expand the agreement. They define rights, consequences, and flexibility built into the lease for real-world business changes.
This clause defines what constitutes a lease default by the tenant (or landlord) and any applicable grace periods. For example, a failure to pay rent within [X] days of the due date (after written notice) is an event of default, just like failing to maintain insurance, or abandoning the premises. If you review the clause, you’ll see that it probably also gives a timeframe for the tenant to cure non-monetary defaults before the landlord can take action.
This clause defines what constitutes a lease default by the tenant (or landlord) and any applicable grace periods. For example, a failure to pay rent within [X] days of the due date (after written notice) is an event of default, just like failing to maintain insurance, or abandoning the premises. If you review the clause, you’ll see that it probably also gives a timeframe for the tenant to cure non-monetary defaults before the landlord can take action.
The Remedies clause outlines the landlord’s preplanned options if the tenant defaults (and sometimes the tenant’s remedies for landlord default). Landlord remedies typically include the right to terminate the lease, evict the tenant, and/or recover damages. Many commercial leases allow rent acceleration – i.e., the landlord can declare the entire remaining rent for the term immediately due. Alternatively, the landlord may terminate the lease and sue for unpaid past rent plus the difference between future rent and the amount the landlord can recover by reletting the space. Regardless, those options are usually outlined here.
If you’ve read my post about Negotiating a Lease Renewal, you’ll be familiar with this. The renewal clause gives the tenant the right to extend the lease term for an additional period (or multiple periods) on predefined terms. For example, a 5-year lease might include an option to renew for one additional 5-year term. The clause will specify how and when the tenant must exercise the option (usually by written notice around the 6-18 month mark). It likely also sets the rent for the renewal term, which could be a fixed increase or “fair market rent” to be determined at that time.
This is a preferential right related to leasing additional space or purchasing the property. In a leasing context, a ROFR gives the tenant the chance to match an offer that the landlord receives from a third party for a certain adjacent or available space. The landlord must present the third party’s terms to the tenant, and the tenant can elect to lease the space on those same terms (beating the third party).
This is another expansion right, although somewhat tenant-friendlier to the landlord. A ROFO gives the tenant the first opportunity to lease a space before the landlord offers it to someone else. When the space becomes available, the landlord must first offer it to the tenant at a proposed rent and terms. The tenant then has a window (say 15 days) to accept or reject. If the tenant rejects, the landlord can go to market. However, there’s often with a condition that the landlord not accept a significantly better deal from someone else without re-offering to the tenant.
This clause gives the tenant a more defined right to expand into additional space at a future date. As an example, a tenant might negotiate an option to take over the adjacent suite when it becomes vacant or after a certain year, at a predetermined rent. Unlike ROFR/ROFO, an expansion option can be a firm right to lease the space (not contingent on third-party offers) if the tenant elects to.
This is a negotiated clause that allows one party (usually the tenant) to terminate the lease early under certain conditions. For example, a ten-year lease might permit the tenant to end the lease at year 5 by giving 9 months’ notice and paying a termination fee to the landlord. The clause will specify the notice timing, any fees or unamortized costs to be repaid, and any conditions like no default at time of exercise.
This is an early termination provision as well, but this one is tied to performance metrics. This is primarily a clause that ends up benefitting the tenant, more often than not. It allows the tenant to “kick out” of the lease (terminate early) if a certain sales or revenue target isn’t met by a certain date. For instance, a retail tenant might have the right to terminate after the second lease year if their gross sales are below a specified figure. The clause itself will detail the sales threshold and the procedure for termination.
The holdover clause specifies what happens if the tenant stays in possession after the lease term ends without a new lease (a holdover). This clause typically converts the tenancy to a month-to-month lease and imposes a rent increase during the holdover period, often 125% to 200% of the last rent as a penalty for staying on.
As you might imagine, this clause outlines the rights and obligations in case there’s fire damage or other casualty. Generally, the landlord must repair the damage within a reasonable time if the building can be restored. Meanwhile, rent is abated (reduced or forgiven) proportionally for the part of the premises unusable during repairs. If the damage is very substantial, either party may have the right to terminate the lease by written notice.
As you might imagine, this clause outlines the rights and obligations in case there’s fire damage or other casualty. Generally, the landlord must repair the damage within a reasonable time if the building can be restored. Meanwhile, rent is abated (reduced or forgiven) proportionally for the part of the premises unusable during repairs. If the damage is very substantial, either party may have the right to terminate the lease by written notice.
This clause explains what happens if all or part of the property is taken by the government under eminent domain. If the entire premises is taken for public use, the lease typically terminates as of the date of taking, and the tenant is not obligated to pay rent thereafter. If it’s a partial taking that does not render the premises unusable, the lease may continue with a proportionate rent reduction.
TL;DR: it pre-allocates rights to each party if the government takes over the property.
This clause lets the landlord move a tenant to a different space in the same building or complex. This is more common in multi-tenant offices or retail centers with smaller tenants. The new space has to be reasonably similar in size and function, and the landlord typically covers the cost of the move, including things like rebuilding interior improvements and updating signage. The lease will spell out how much notice the tenant gets (often 60 to 90 days), and it usually promises that the new space won’t be worse in layout or visibility.
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