Personal Guarantee Red Flags
A personal guarantee in a commercial lease is one of the most consequential provisions you'll encounter. Red flags include: a full lease term guarantee with no burn-down (your personal liability doesn't decrease as you make payments), no "good guy" provision (your liability doesn't end when you vacate), joint and several liability with other business owners (each person is liable for everything), and a guarantee that survives business sale or assignment. The risk: on a 5-year lease at $10,000/month, a full personal guarantee can create $600,000 of personal liability. Always negotiate the most limited guarantee possible.
What to Negotiate Instead
Propose a "good guy" guarantee that ends when you vacate in good condition. Add a burn-down provision reducing liability over time. Cap total guarantee liability at a specific dollar amount or 6–12 months of rent. Split guarantee obligations proportionately among co-signers. Request a financial performance threshold that limits when the guarantee can be called.
CAM and Operating Expense Red Flags
CAM charges are among the least transparent costs in commercial real estate. Red flags include: no annual cap on controllable expense increases, capital expenditures included in CAM without amortization over useful life, no tenant audit rights, management fee with no cap or market rate requirement, gross-up to full occupancy on operating expenses, and base year manipulation (deliberately low base year to maximize future escalations). In the worst cases, CAM and operating expenses can exceed base rent — making true occupancy cost dramatically higher than what you budgeted.
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A use clause defines what your business can do in the space. Red flags include: a use clause so narrow it requires landlord consent for routine business changes, no exclusivity provision allowing direct competitors in the same building, radius restrictions that limit where else you can operate, mandatory operating hours that don't match your business model, and continuous operation requirements that prevent you from closing temporarily. For retail tenants, also watch for marketing fund contributions with no transparency or accountability.
Assignment and Exit Red Flags
Flexibility to exit or transfer your lease is critical for business survival. Red flags include: no assignment right or an absolute prohibition on assignment, change of control treated as assignment (relevant for any corporate transaction), landlord recapture right upon assignment request, profit participation on sublease or assignment, and no early termination or break option rights. These provisions can significantly reduce the value of your business and trap you in a lease even when circumstances change dramatically.
Landlord Power and Control Red Flags
Some commercial leases give landlords extraordinary unilateral power. Red flags include: landlord termination rights for redevelopment or anchor tenant departure, relocation rights allowing the landlord to move your business to another space with minimal notice, unilateral rule change authority with no tenant consent required, and broad force majeure clauses that excuse the landlord from providing essential services. These provisions can disrupt your business and may be unacceptable for operations that depend on a specific location or consistent service levels.
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SaferLease provides AI-powered informational analysis and is not a law firm and does not provide legal advice.