Commercial Lease Clauses Worth Reviewing First

A rent escalation clause is a lease provision that provides a predetermined mechanism for increasing the base rent over the lease term.

An operating expense stop is a lease provision that sets a maximum dollar threshold for operating expenses included in the base rent — the landlord bears all operating costs up to the stop amount, and the tenant is responsible for any expenses above that threshold.

A base year clause establishes a reference year — typically the first full calendar year of the lease term — against which future operating expense increases are measured.

A gross-up provision requires the landlord to adjust the operating expense reconciliation to reflect what expenses would have been if the building were 95%–100% occupied, rather than the actual occupancy level during the measurement year.

A co-tenancy clause is a lease provision — almost exclusively found in retail leases — that gives a tenant the right to pay reduced rent or terminate the lease if certain anchor tenants or a minimum occupancy threshold in the shopping center falls below a specified level.

An exclusive use clause grants the tenant the sole right to operate a specific type of business or sell particular products within the shopping center or building.

A go-dark clause gives a tenant the contractual right to stop operating its business and cease all commercial activity at the leased premises while continuing to pay rent, without being in default of the lease.

A kick-out clause is a lease provision that grants the tenant the right to terminate the lease early if sales revenue fails to reach a specified threshold within a defined measurement period.

A force majeure clause excuses a party's performance obligations under the lease when extraordinary events beyond their control — including natural disasters, pandemics, wars, government orders, and utility failures — make performance impossible or commercially impracticable.

A personal guarantee clause is a provision by which an individual — typically the principal owner or officers of the tenant entity — unconditionally guarantees all obligations of the tenant under the lease.

A Good Guy Guarantee is a modified personal guarantee that limits the guarantor's liability to the period during which the tenant is actually in possession of the premises.