Commercial Lease Terms That Carry the Money and the Risk

The letter of intent

The LOI is usually non-binding, but it frames everything that follows. A clear LOI covers: premises and square footage (and how it's measured), term and commencement, base rent and escalations, expense structure, tenant improvements and who builds them, free rent, renewal options, use and exclusives, guaranty, assignment, contingencies (permits, financing, zoning), and any landlord work.

Anything left out of the LOI gets drafted the landlord's way in the lease.

Base rent and escalations

• Fixed annual increases, often a percentage per year. Small percentages compound over a long term.
• Stepped rent at set dates.
• CPI-based increases, sometimes with a floor and a ceiling.

Model the full term. A 3% annual increase on $60,000 of base rent reaches about $78,300 in year ten.

Tenant improvements and who controls the build-out

A TI allowance is money the landlord contributes toward improvements, usually per square foot. Know what it covers (hard costs only, or design and permits too), when it's paid, and what happens to unused funds.

Who builds matters. Landlord-built "turnkey" space shifts construction risk to the landlord but limits control. Tenant-built space with an allowance gives control but puts overruns on the tenant. Tie rent commencement to substantial completion and permits.

Free rent and abatement

Free rent is common as a concession, especially with longer terms. Clarify whether it abates base rent only or base rent and expenses, and whether it's lost on default.

Term and renewal options

Renewal options give the tenant the right to extend. The key detail is option rent: a fixed increase, or "fair market value" with a process for setting it. Put notice deadlines on the calendar. Missing an option notice date can end the right.

Personal guaranty

Landlords often ask small-business tenants for a personal guaranty. It's negotiable:

• Cap the guaranty at a dollar amount or a number of months of rent.
• Burn-off the guaranty after a period of on-time payment.
• Good guy guaranty: liability ends if the tenant gives notice, pays through a move-out date, and leaves the space in good condition.

Assignment and sublease

If you might sell the business, assignment rights matter as much as rent. Look for consent "not to be unreasonably withheld," permitted transfers to affiliates or a buyer of the business without consent, and limits on recapture clauses that let the landlord take the space back. Find out whether you stay liable after an assignment.

Holdover

Staying past expiration without a new agreement usually triggers holdover rent, commonly a premium over the last rent, and can expose the tenant to damages. Negotiate a reasonable holdover rate and a short grace period, especially if a new space depends on construction schedules.

SNDA and estoppel certificates

An SNDA (subordination, non-disturbance, and attornment agreement) subordinates the lease to the landlord's loan, but the lender agrees not to disturb the tenant's possession if it forecloses, as long as the tenant isn't in default. For a tenant investing in improvements, the non-disturbance piece is the one that matters.

An estoppel certificate is a tenant's signed statement of the lease facts (rent, term, defaults, prepaid rent) for a buyer or lender. Answer accurately. You may be bound by what you sign.

CAM caps and audit rights

Define what operating expenses include and exclude. Negotiate a cap on increases in controllable expenses and the right to audit the landlord's annual reconciliation within a set window, with the landlord paying the audit cost if overcharges exceed a threshold.

Florida specifics worth knowing

• Nonresidential tenancies are governed by Part I of Chapter 83, Florida Statutes.
• Florida gives landlords a statutory lien for rent on the tenant's property usually kept on the premises (s. 83.08). Tenants financing equipment or inventory may need the landlord to subordinate or waive that lien for their lender.
• For nonpayment, the statute contemplates a written 3-day notice demanding rent or possession before removal proceedings (s. 83.20).
• Florida's sales tax on most commercial rent ended October 1, 2025. Older leases may still reference it.

What first-time tenants commonly miss

• How square footage is measured, and whether rent applies to a share of common areas.
• Whether zoning and permits allow the intended use before signing.
• Exclusive-use protection in retail centers.
• Signage rights and who pays for signs.
• Operating covenants that require staying open.
• Relocation clauses that let the landlord move you.
• Insurance requirements and their cost.
• Restoration obligations at move-out.

Have a Florida real estate attorney review the lease before you sign. I focus on the business terms and how they fit the operating plan.

Common questions

Is a letter of intent binding?

Usually not, except for specific provisions such as confidentiality or exclusivity if the LOI says so. It still sets expectations, and terms left out of the LOI are hard to win later.

Can I negotiate a personal guaranty?

Often. Common approaches are a dollar or months-of-rent cap, a burn-off after a period of on-time payments, or a good guy guaranty that ends liability if you leave on proper notice with rent paid.

What is an SNDA in a commercial lease?

A subordination, non-disturbance, and attornment agreement. The tenant subordinates its lease to the landlord's lender, and the lender agrees not to disturb the tenant's possession after a foreclosure if the tenant isn't in default.

What is an estoppel certificate?

A signed statement from the tenant confirming lease facts such as rent, term, deposits, and defaults. Buyers and lenders rely on it.