Commercial Lease Negotiation Tips

A commercial lease can make a great business location feel profitable—or quietly drain cash for years through operating costs, repair obligations, and restrictive clauses. The goal of negotiation isn’t “winning.” It’s locking in predictable costs, operational flexibility, and clean exit options if the business pivots.

Use this page as a tenant-first checklist of what to negotiate, what to clarify in writing, and which clauses typically create the biggest surprises after you’ve moved in.

Ready to take the next step? (587)-719-5523 / Get in touch or visit MohitDhillon.com with us today to discuss your commercial real estate goals or schedule a personalized property tour.

Commercial Lease Snapshot

The fastest way to reduce risk before you sign

Key Highlights

  • Lock base rent rules (escalations, renewals)

  • Control operating costs (CAM/NNN/additional rent)

  • Get build-out terms in writing (TI, fixturing, permits)

  • Protect your exit (assignment, sublease, options)

  • Limit repair exposure (HVAC, structural vs non-structural)

Rent Terms

Your rent is more than a monthly number. Negotiate how increases work, what happens at renewal, whether percentage rent applies (retail), and how “market rent” is defined if the lease references it. The best lease is one where rent outcomes are predictable, not arguable.

Cost Control

Most tenant surprises come from “additional rent” (operating costs/CAM/NNN). Push for clear definitions, exclusions, and the right to review and audit annual reconciliations. If possible, negotiate caps on controllable costs and clarify management fees, capital items, and what the landlord can pass through.

Build-Out

If you’re improving the space, negotiate tenant improvement allowance (TI), fixturing period, who pulls permits, what happens if delays occur, and whether you must restore the unit to original condition at the end. The only safe build-out agreement is one that’s fully written into the lease and schedules—never “we’ll handle it later.”


Exit Rights

Plan your exit on day one. Negotiate assignment/sublease flexibility, landlord consent rules, and whether you remain liable after assignment. Watch for relocation or demolition clauses, and make renewal options clear so you’re not forced into a rent shock if the business is performing well.

Use Protection

A “permitted use” that’s too narrow can kill your ability to pivot or add revenue streams. Negotiate broad enough use language, signage rules, parking access, hours requirements, and exclusivity/competitor protections where it matters (especially retail and service businesses). Your lease should protect your model, not box it in.

Repair Risk

Repair clauses can shift expensive obligations onto tenants in “net” style leases. Clarify who pays for HVAC, plumbing, roof, structure, and major systems; define structural vs non-structural; and limit obligations tied to building-wide issues. Insurance, indemnities, and personal guarantees should be reviewed like a worst-case scenario—because that’s when they matter.

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Lease Strategy

How experienced tenants negotiate like investors

Most commercial leases start as landlord-friendly templates. Strong tenants reduce risk by forcing clarity: a clean definition of total occupancy cost, written build-out responsibilities, and an exit path that still works if the business changes direction. If you can’t explain your total monthly exposure (base rent + additional rent + likely repairs), you’re not ready to sign.

A simple tenant process is: compare market rents, identify the top “cost leak” clauses (operating costs, repairs, guarantees), negotiate them early, and only then finalize the deal. If you wait until the end, you’re negotiating from fatigue—and that’s when bad clauses slip through.

Lease negotiation is also about timing. Renewal discussions should start early enough that you have leverage and alternatives. If your lease has renewal options, make sure the rent-setting mechanism is clear and doesn’t become a blank cheque for future increases.

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MOHIT DHILLON

Calgary Commercial REAL ESTATE Advisor

Mohit Dhillon

Mohit Dhillon — Calgary Commercial Real Estate Advisor

Lease Strategy + Deal Structuring (Alberta)


I work with Alberta buyers and owner-operators on commercial space decisions with a tenant-first lens—cost clarity, lease risk, assignment flexibility, and negotiation strategy. The goal is to secure terms that protect cash flow and keep you flexible as your business grows.

FAQs

What should I negotiate first in a commercial lease?
Start with total occupancy cost: base rent, additional rent (operating costs), and repair obligations. Those three determine whether the space is affordable long-term.

What are CAM / operating costs / additional rent?
They’re pass-through costs tenants may pay on top of base rent for shared building expenses like taxes, insurance, maintenance, and management (definitions vary by lease).

How do I prevent operating cost surprises?
Insist on clear definitions, exclusions, annual reconciliation transparency, and the right to review backup. If possible, negotiate caps on controllable costs.

What is a tenant improvement allowance (TI)?
Money (or a contribution) a landlord may provide toward leasehold improvements—often tied to term length and negotiated as part of inducements.

Why is assignment and subleasing so important?
It protects your exit. If you need to sell the business or relocate, lease flexibility can determine whether you can transfer the space without crushing liability.

What is “permitted use” and why does it matter?
It defines what you’re allowed to do in the space. If it’s too narrow, it can block new services, revenue streams, or a pivot.

Should I accept a personal guarantee?
Treat it seriously. If a guarantee is required, negotiate scope, term, and conditions for release where possible, and make sure you understand worst-case liability.

When should I start negotiating a renewal?
Early—so you have leverage, time to compare alternatives, and room to negotiate inducements or improvements.

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