What to Look for in a Commercial Lease
A commercial lease is a major commitment for your business, and there’s a lot more to consider than the monthly rent. Lease length, additional expenses, maintenance responsibilities, renewal options, permitted uses, and other commercial lease terms can have a big impact on the actual cost of a property and how well it works for your business.
Before signing a lease for office, retail, warehouse, or other commercial space, it’s important to understand exactly what you’re agreeing to.
If you’re looking at commercial properties for rent in Bloomington-Normal, use this commercial lease checklist to help you know what to look for before signing.
Commercial Lease Checklist
Every commercial lease is different, but there are several things you should understand before you sign.
Your commercial lease checklist should include:
Monthly base rent
Lease length
Rent increases
Security deposit
Additional operating expenses
Utilities
Property taxes and insurance
Maintenance and repair responsibilities
Permitted use of the property
Improvements and modifications
Signage rights
Parking
Insurance requirements
Renewal options
Subleasing or assignment
Early termination terms
Personal guarantees
Some of these terms may not apply to every property or lease. The important thing is knowing which expenses and responsibilities belong to you and which belong to the property owner.
Understand the Total Cost of the Lease
The advertised monthly rent doesn't always tell you what you'll actually pay to occupy a commercial property.
Depending on the lease, your total costs could include:
Base rent
Common area maintenance (CAM) charges
Property taxes
Building insurance
Utilities
Trash removal
Landscaping or snow removal
Repairs and maintenance
Ask which expenses are included in your rent and which will be billed separately. This makes it much easier to compare commercial properties in Bloomington, IL and the surrounding area based on their actual cost rather than just the advertised rent.
Know the Different Types of Commercial Leases
One of the most important commercial lease terms to understand is how expenses are divided between the tenant and landlord.
Some common commercial lease structures include:
Gross lease: The tenant generally pays a set amount of rent while the landlord covers many of the property's operating expenses.
Modified gross lease: Expenses are divided between the tenant and landlord according to the terms of the lease.
Triple net (NNN) lease: The tenant generally pays base rent along with a share of property taxes, building insurance, and common area maintenance expenses.
The terminology is useful, but the actual lease language matters more than the name of the lease. Two leases described as “modified gross,” for example, may divide expenses differently.
Make sure you understand exactly what you're responsible for paying.
Look at the Lease Length and Renewal Options
Commercial leases are often longer than residential leases, so think about where your business is likely to be a few years from now.
A longer lease can give your business more stability, but it also means making a longer commitment to the property.
Before signing, look at:
The initial lease term
When the lease begins and ends
Renewal options
How much notice is required to renew
Whether rent changes during a renewal period
What happens when the original lease expires
If you're investing money into improving a commercial space in Bloomington-Normal, the ability to stay there long enough to benefit from those improvements may be especially important.
Pay Attention to Rent Increases
Your starting rent may not be what you pay throughout the entire lease.
Commercial leases can include scheduled rent increases, sometimes called rent escalations. These may happen annually or at another point during the lease.
Make sure you know:
When rent increases occur
How the increase is calculated
What your rent will be each year
Whether additional expenses can also increase
Looking at the entire lease term gives you a much better picture of what the property will actually cost your business.
Understand Maintenance and Repair Responsibilities
Don't assume the property owner is responsible for every repair.
Commercial leases can make tenants responsible for certain parts of the property, equipment, or building systems.
Before signing, find out who is responsible for things like:
HVAC maintenance and repairs
Plumbing
Electrical systems
Doors and windows
Roof repairs
Parking lots
Landscaping
Snow removal
Interior maintenance
Exterior maintenance
For businesses renting commercial space in Central Illinois, responsibilities such as snow removal, parking lot maintenance, and heating system repairs are worth understanding before the lease begins.
A repair that seems minor when you're reviewing a lease could become a significant expense later, so these responsibilities should be clear from the beginning.
Make Sure Your Business Is an Allowed Use
A commercial property may look perfect for your business, but that doesn't automatically mean you can use it for whatever you want.
The lease should clearly state the permitted use of the property. You should also make sure your intended use complies with local zoning and other requirements.
This can be particularly important for businesses that involve:
Retail customers
Food preparation
Manufacturing or production
Automotive work
Outdoor storage
Heavy equipment
High customer traffic
Specialized equipment
If you're searching for commercial space in Bloomington, IL or Normal, IL, make sure the property works for what your business actually does before committing to a lease.
Improvements and Modifications to the Property
You may need to make changes before moving into a commercial property.
That could include painting, adding walls, changing flooring, installing equipment, updating electrical service, adding signage, or making other improvements.
Before signing the lease, understand:
What changes you're allowed to make
Which improvements require approval
Who pays for the work
Whether the landlord provides a tenant improvement allowance
Who owns the improvements when the lease ends
Whether you're required to return the property to its original condition
If your business requires significant changes to the space, these terms can be a major part of the lease negotiation.
What Happens to Improvements When the Lease Ends?
Don't just think about what it costs to prepare the property when you move in. The lease may also require you to make changes when you move out.
Depending on the lease, you could be required to:
Remove equipment or fixtures you installed
Remove walls or other modifications
Repair damage caused by improvements
Restore flooring, walls, or ceilings
Return the property to its original layout or condition
If you're making significant improvements to a property, find out what will need to stay and what will need to be removed at the end of the lease. That can help you avoid an unexpected expense when it's time to move.
Check Parking, Access, and Signage
These details can be easy to overlook when you're focused on the building itself.
Consider how employees, customers, deliveries, and company vehicles will use the property every day.
Look at:
Number of available parking spaces
Dedicated vs. shared parking
Customer parking
Overnight vehicle parking
Loading areas
Building access
After-hours access
Exterior signage
Monument or roadside signage
For a business serving customers throughout Bloomington, Normal, and Central Illinois, convenient access and visibility may be just as important as what’s inside the building.
Review the Insurance Requirements
Commercial leases often require tenants to maintain certain types or amounts of insurance while occupying the property.
Before signing, find out:
What types of insurance are required
What coverage limits you need
Whether the property owner must be listed as an additional insured
When proof of insurance is required
Whether your current business insurance meets the lease requirements
The property owner's insurance generally isn't a substitute for coverage protecting your own business, inventory, equipment, or liability. Talk with your insurance provider if you're unsure whether your existing coverage meets the requirements in the lease.
Understand Personal Guarantees
Some commercial leases require the business owner to personally guarantee the lease.
A personal guarantee can make you personally responsible for certain lease obligations if the business is unable to meet them.
Because this can have significant financial implications, make sure you understand whether the lease includes a personal guarantee and exactly what it covers.
This is also one of the areas where having an attorney review the lease before you sign can be particularly helpful.
What Happens If You Need to Leave Early?
Businesses change. You may outgrow the space, need to downsize, sell the business, or move for another reason before the lease expires.
Before signing, understand what happens if you need to leave early.
Look for terms covering:
Early termination
Subleasing
Assigning the lease to another business
Remaining rent obligations
Fees or penalties
Notice requirements
You may never need to use these options, but it's much better to understand them before signing than after your plans change.
Questions to Ask Before Signing a Commercial Lease
Before you sign, make sure you can answer these questions:
What is my total monthly cost?
What expenses are included in the rent?
What additional expenses am I responsible for?
How and when can the rent increase?
Who is responsible for maintenance and repairs?
Is my intended business use allowed?
Can I make changes to the property?
What happens to those improvements when I leave?
What signage am I allowed to install?
How much parking is included?
What insurance am I required to carry?
Do I have an option to renew?
Does the lease include a personal guarantee?
Can I sublease or assign the lease?
What happens if I need to leave before the lease ends?
If you don't understand part of the lease, ask about it before signing. For more help with the overall property search, take a look at our guide on how to find commercial space for rent.
Finding Commercial Space in Bloomington-Normal
The right commercial property isn't just about finding the right amount of square footage. The lease terms need to work for your business too.
Hermes Properties owns and manages commercial properties for rent in Bloomington, with options for businesses looking for office, retail, warehouse, flex, storage, and other types of commercial space in Bloomington, IL, Normal, IL, and throughout Central Illinois.
Take the time to understand the property and the lease before making a decision. If you're interested in one of our available commercial properties in the Bloomington-Normal area, contact Hermes Properties to learn more about the space, lease terms, or scheduling a tour.
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