Signing a commercial lease is a major commitment, and negotiating favorable terms can save you money and prevent future disputes. Whether you’re leasing office space, a retail storefront, or an industrial warehouse, understanding key provisions and your rights under Tennessee law can help you secure a better deal.
Understand the lease structure
Before negotiating, determine whether the lease is a gross lease, net lease, or percentage lease. A gross lease means the landlord covers taxes, insurance, and maintenance, while a net lease shifts some or all of these costs to the tenant. In a percentage lease, tenants pay a base rent plus a percentage of their sales. Knowing the lease type ensures you’re not caught off guard by unexpected expenses.
Negotiate rent and escalation clauses
Rent isn’t just about the base price—you also need to watch for escalation clauses that increase costs over time. Landlords may propose annual rent increases based on a fixed percentage or the Consumer Price Index (CPI). Negotiating a cap on these increases or securing a rent-free period can make your lease more affordable.
Address repair and maintenance responsibilities
Commercial leases often include triple net (NNN) provisions, where tenants pay for property taxes, insurance, and maintenance. Clarify who handles repairs, especially for major systems like HVAC, plumbing, and roofing. In Tennessee, landlords are not legally required to maintain commercial properties unless the lease says otherwise, so negotiating clear terms is important.
Protect yourself with exit strategies
Early termination and subleasing rights provide flexibility if your business needs change. Some landlords impose strict penalties for breaking a lease, so try negotiating an early exit clause with minimal fees. If subleasing is allowed, you can find another tenant to take over the lease instead of paying hefty termination costs.
Don’t overlook zoning and use restrictions
Ensure the lease allows you to use the space for your intended business. Tennessee zoning laws vary by county and may restrict certain activities. If you plan to make renovations, confirm that the lease permits modifications and that local regulations don’t require additional approvals.
Securing favorable lease terms requires careful negotiation and a clear understanding of your rights. By focusing on these things, you can protect your business from unexpected costs and disputes.