Leasing · Reference Card
Commercial Lease Clauses Decoder
Commercial leases are won and lost in the clauses. This card decodes the terms that actually shift dollars and risk between landlord and tenant — rent and recoveries, options and exits, and the protective language buyers and lenders scrutinize. Use it to read a lease fast, to know which side a clause favors, and to flag the ones that change what a deal is worth.
Pro Tip
When you abstract a lease, note who each clause favors, not just what it says. A stack of tenant-favorable clauses — co-tenancy, kick-outs, broad exclusives, a weak guaranty — quietly converts a "credit" income stream into a fragile one, and it should widen the cap rate you pay.
1. Rent & Escalations
Base Rent
Confirm NNN vs. gross basis before comparing two rents.The fixed periodic rent, usually quoted in $/SF/year.
Escalations (Bumps)
2–3%/yr fixed is common; flat rent for 10–20 yrs erodes real yield.fixed % / $ step, or CPI
Scheduled rent increases over the term.
Percentage Rent
Mall/anchor retail; verify the natural-breakpoint math.% of sales above a breakpoint
Retail tenant pays base rent plus a cut of sales over a threshold.
Free Rent / Abatement
Favors tenant; amortize it into effective rent before comparing deals.Rent-free months given as a concession.
Rent Commencement
The gap between possession and rent commencement is a landlord cost.When rent actually starts — often after possession and TI buildout.
2. Expenses & Recoveries
Triple Net (NNN)
Confirm whether roof/structure are also tenant's (true NNN vs. NN).Tenant pays taxes, insurance, and CAM on top of base rent.
CAM
Pro-rata by SF; always audit the reconciliation.Common Area Maintenance
Tenant's pro-rata share of shared-area operating costs.
Base Year (Gross)
Office gross leases; a high base year favors the tenant.Landlord covers year-one expenses; tenant pays increases over that base.
Expense Cap
Favors tenant; watch carve-outs for taxes and insurance.Limits how much controllable expenses can rise each year.
Gross-Up
Fair and standard; protects the landlord in a half-empty building.Variable expenses adjusted as if the building were ~95% occupied.
Audit Rights
Favors tenant; common in larger and national-tenant leases.Tenant's right to inspect the landlord's expense books.
3. Term, Options & Exit
Renewal Option
Fixed renewals favor the tenant; FMV renewals favor the landlord.Tenant's right to extend, at a set rent or at “fair market.”
ROFR / ROFO
A purchase ROFR can chill a future sale — flag it for buyers.Right of First Refusal / Offer
Tenant gets first crack at adjacent space or at a sale.
Early Termination
Fee should cover unamortized TI + leasing commissions.Tenant's right to end the lease early, usually for a fee.
Kick-Out Clause
Favors tenant; real income risk for the landlord/buyer.terminate if sales < threshold
Retail tenant can leave if its sales underperform.
Go-Dark
A dark anchor can trigger other tenants' co-tenancy rights.Tenant can stop operating but keep paying rent.
Holdover
Often 150–200% of rent; protects the landlord.What happens if the tenant stays past expiration.
4. Use, Risk & Protections
Exclusive Use
Favors tenant; map every exclusive before you lease nearby space.Landlord can't lease to a competing use in the center.
Permitted Use
A narrow use limits re-leasing if the tenant leaves.What the tenant is allowed to operate as.
Co-Tenancy
Lender red flag; a deal-killer if the anchors are shaky.Tenant's rent/obligations tied to anchor presence or occupancy levels.
Assignment & Subletting
“Consent not unreasonably withheld” is the negotiated middle ground.Tenant's right to transfer the lease to another party.
SNDA
Lenders require it; it protects the tenant's leasehold.Subordination, Non-Disturbance & Attornment
Keeps the tenant in place if the landlord's lender forecloses.
Estoppel Certificate
Buyers/lenders require these in DD — mismatches vs. the rent roll are red flags.Tenant's signed confirmation of the lease terms and status.
TI Allowance
Amortized into the deal; unamortized TI matters on early termination.$/SF toward tenant buildout
Landlord money put toward the tenant's improvements.
Personal Guaranty
Watch for caps and burn-down provisions that weaken it over time.An individual stands behind the tenant entity's obligations.
Go deeper — free course
This resource is distilled from the MaxLife Academy CRE curriculum. The full lesson walks through every point with examples and the reasoning behind it.
Course 13 — Reading a NNN Lease: The Clauses That Matter→Pair it with a tool
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