Commercial Lease Checklist: What to Confirm in the Last Draft Before You Sign

Money: the figures a small business should match to the letter of intent

• Base rent per rentable square foot, the rentable square footage itself, and the date rent starts, which can differ from the date the lease starts.
• Escalations: the annual percentage, whether it compounds, and when the first increase lands.
• Electricity: a submeter or a fixed charge, and the rate. Expect roughly $2 to $4 per square foot per year.
• Operating expense and real estate tax increases: the base year, which should be the year you sign, and your percentage share.
• The deposit: the amount, cash or a letter of credit, when part of it steps down, and the deadline for its return after you leave.

Manhattan office leases are mostly gross leases with increases above a base year. If a draft, or a broker from another market, mentions CAM fees or a net lease, ask which of the lines above it means before you compare anything.

Rights: renewal, sublet and termination, as written

• Renewal: the notice window, with both of its dates, and how the renewal rent is set.
• Sublet and assignment: consent not to be unreasonably withheld, a deadline for the landlord's answer, and whether the landlord can take the space back instead. The assignment and sublet clause explains each piece.
• Termination: if you negotiated a right to leave early, the date, the notice and the fee. If you did not, the lease has no early exit, and a good guy guarantee is not one.
• Relocation: whether the landlord may move you to other space in the building during the term.

Building and exit: delivery, services, hours and restoration

• Delivery condition: what the landlord hands over, on what date, and what you receive if it is late.
• Services and hours: when heating and air conditioning run, and the hourly charge outside those hours, in writing.
• Cleaning, freight elevator access and any building rules that affect a move or a buildout.
• Restoration: the specific items you must remove when the term ends, named now.

Walk the floor once more this week, late in the afternoon. The office tour checklist lists what to look at.

The silent items: what the draft does not define

Read the draft a second time for absences. A lease written by the landlord's attorney spells out the landlord's protections and leaves the tenant's out until someone asks.

• Restoration to original condition, with no list of what that means.
• Consent to sublet, with no standard and no response time.
• A renewal at market rent, with no method for settling a disagreement.
• A base year that is never stated, or an operating expense definition with no right to audit it.
• Holdover: the rate if a move runs late, often 150 to 200 percent of the last rent.

Each takes a sentence to fix before signing. After signing, a fix is a favor. Lease red flags covers what to do when you find one.