⚠️ Common Commercial Lease Traps for Small Businesses
Signing a commercial lease can feel like a win—but if you don’t know what to watch out for, that lease can quickly turn into a legal and financial trap.
Unlike residential leases, commercial leases in Arizona offer very little protection to tenants. The terms are negotiable, but that also means the burden is on you to catch the fine print.
Here are six of the most common commercial lease traps for small business owners—and how to avoid them before it’s too late.
1. Undefined or Uncapped CAM Charges
Common Area Maintenance (CAM) charges can be a sneaky way for landlords to pass along surprise costs—like landscaping, security, or even capital improvements.
What’s the trap?
Vague CAM language allows landlords to increase costs at will
No annual cap = no predictability in monthly rent
📌 Tip: Ask for an itemized list of CAM inclusions and negotiate a cap on annual increases (e.g., 3–5%).
2. “As-Is” Language Without Clarity on Repairs
Many commercial leases include “as-is” provisions, meaning you accept the space in its current condition—including any hidden problems.
What’s the trap?
You could be stuck paying for roof, HVAC, or plumbing repairs down the road
Leases often make you, not the landlord, responsible for maintenance
📌 Tip: Negotiate a property condition walk-through and clarify who’s responsible for specific systems in the lease.
3. No Exit Strategy or Early Termination Clause
Business conditions change. If your lease doesn’t offer early termination options, you could be stuck paying rent even if you outgrow the space—or need to shut down.
What’s the trap?
No ability to terminate or sublease without landlord approval
You remain on the hook for the entire lease term
📌 Tip: Ask for:
Termination rights with notice and a fee
Assignment or sublease clauses that aren’t overly restrictive
4. Rent Escalation Clauses with No Limit
Most leases include annual rent increases, but how they’re structured makes a huge difference.
What’s the trap?
CPI-based increases can fluctuate dramatically
"At landlord’s discretion" = unpredictable and unfair hikes
📌 Tip: Try to negotiate fixed increases (e.g., 2–3% per year) or cap any variable increases.
5. Personal Guarantee Clauses
Even if you’re leasing under an LLC or corporation, many landlords will require a personal guarantee—making you personally liable if your business defaults.
What’s the trap?
If the business fails, your personal assets could be at risk
Some guarantees are unlimited and last beyond the lease term
📌 Tip: Negotiate for:
A time-limited guarantee (e.g., first 12–24 months)
A maximum dollar cap
Removal of the guarantee after a solid payment history
6. Build-Out Assumptions Without a Clear TI Agreement
If your space needs customization (e.g., dental operatories, medical exam rooms, new walls), don’t assume the landlord will cover it.
What’s the trap?
Vague promises of “build-out assistance” turn into unexpected costs or delays
No control over contractor choice, timeline, or scope
📌 Tip: Secure a written tenant improvement (TI) allowance with specifics on:
Dollar amount
Who manages the build-out
What happens to unused funds
🧠 Final Thoughts
A commercial lease is one of the most high-stakes contracts a small business will sign. And in Arizona, the burden is on you to read the fine print, ask questions, and negotiate protections.
Before you sign anything, get a lease review by an attorney who knows the risks—and how to reduce them.
Hurley Law Group
Commercial Leasing Counsel for Arizona Small Businesses and Healthcare Practices
📞 308-383-1867
🌐 hurleylawgroup.com
✉️ eric@hurleylawgroup.com