How to Review a Lease Agreement: A Checklist for Tenants and Business Owners

A lease agreement is a multi-year financial commitment. A residential lease typically runs 12 months; a commercial lease often runs 3-10 years. The terms you agree to at signing determine your obligations, your rights, and your exposure for the entire duration.

Most tenants — both individuals and businesses — review leases by scanning for the rent amount, the term, and the security deposit. That misses the provisions that create the most unexpected liability: repair and maintenance obligations, default and cure periods, assignment and subletting restrictions, use clauses, and renewal option terms that must be exercised years in advance or are forfeited.

This guide walks through how to review a lease systematically, with separate sections for residential and commercial leases.

Residential Lease Review

Core Economic Terms

Before reviewing anything else, confirm the basics match your understanding of the deal:

• Rent amount: Is the stated monthly rent what you agreed to?
• Lease term: Start date, end date, and any hold-over provisions
• Security deposit: Amount, permitted uses by the landlord, return timeline after vacating
• Late fees: What constitutes late payment? What is the fee?
• Rent increases: Are rent increases during the term permitted? By how much?

Maintenance and Repair Obligations

The lease should specify who is responsible for maintaining and repairing the premises. Common residential provisions:

Tenant obligations: Minor repairs below a dollar threshold (often $50-$150), keeping premises clean, replacing light bulbs, maintaining HVAC filters

Landlord obligations: Major systems (plumbing, heating, electrical), structural elements, appliances (if provided)

What to verify:

• Is the landlord obligated to maintain heating and cooling systems in working order?
• What constitutes "normal wear and tear" vs. tenant damage (which you may be charged for at move-out)?
• What is the repair request procedure and response timeframe?
• What happens if the landlord fails to make required repairs?

Entry Rights

When can the landlord enter your unit? Most jurisdictions require 24-48 hours advance notice except for genuine emergencies. Verify:

• What notice period is required?
• Are the permitted purposes for entry specified (repairs, inspections, showing the unit)?
• Are there any notice-free entry provisions? (These are sometimes unenforceable under local law, but you should know they are there)

Subletting and Assignment

Can you sublet or transfer your lease? Relevant if your circumstances may change during the lease term.

• Is subletting permitted at all?
• Does it require landlord consent, and can the landlord withhold consent without reason?
• If you are permitted to sublet, do you remain liable if the subtenant does not pay?

Early Termination

What happens if you need to leave before the lease expires?

• Is there a buyout provision? At what cost?
• Are you liable for rent through the end of the term or only until the landlord re-leases (landlord's duty to mitigate)?
• Are there any permitted early termination events (job relocation, military deployment, domestic violence — many states require these)?

Pet Provisions

If you have or may acquire a pet:

• Are pets permitted?
• Is there a pet deposit (refundable or non-refundable)?
• Are there breed, size, or species restrictions?
• Are there monthly pet rent charges in addition to the deposit?

Renewal and Notice Requirements

Most leases require the tenant to give 30-60 days notice before vacating at the end of the term. Missing this notice requirement can result in automatic renewal at potentially higher rent or hold-over liability.

What to check:

• How much advance notice must you give to vacate at lease end?
• If you give late notice, does the lease auto-renew (for how long and at what rent)?
• What are the hold-over provisions if you stay past the lease end without renewal?

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Commercial Lease Review

Commercial leases are significantly more complex than residential leases and carry substantially higher financial exposure. A 5-year commercial lease for office space at $8,000/month is a $480,000 commitment — warranting the same level of review as any other half-million-dollar contract.

Core Commercial Lease Structure

Commercial leases come in several structural types that determine who pays which expenses:

Gross lease: Tenant pays a flat rent; landlord pays operating expenses (taxes, insurance, maintenance). Simpler for tenant budgeting.

Triple-net lease (NNN): Tenant pays base rent plus their proportionate share of property taxes, building insurance, and common area maintenance (CAM). Tenant bears more expense risk.

Modified gross / Full-service gross: Hybrid with various expense allocations between landlord and tenant. Read the specific provisions carefully — "modified gross" is not a standardized term.

What to verify in NNN leases:

• Exactly which expenses are "operating expenses" that are passed through?
• Are there expense caps or exclusions (e.g., capital improvements typically should not be passed to tenants)?
• Are management fees included, and at what percentage?
• What is your "pro rata share" and how is it calculated?

Rent Escalation and Abatement

Commercial leases typically include annual rent increases throughout the term:

• Fixed annual increases (e.g., 3% per year)
• CPI-indexed increases (tied to inflation)
• Periodic step-ups at specified anniversary dates

Also common: rent abatement periods at the start of the lease (the landlord gives you free or reduced rent while you build out the space). Verify:

• How long is the abatement period?
• Does the abatement apply to all charges or just base rent?
• Are there clawback provisions if you terminate early that require repayment of the abatement?

Use Clause

The use clause in a commercial lease defines what you can use the space for. Overly narrow use clauses can create problems:

• If you expand your business into adjacent activities, are they permitted under your lease?
• Are there restrictions that conflict with your business model?
• Can the landlord change what other tenants do in the building in ways that conflict with your operations?

Also check for exclusivity: Do you have any exclusive right to operate a particular type of business in the building? This is particularly important for retail tenants — a restaurant tenant may want exclusivity that prevents the landlord from leasing another unit to a competing restaurant.

Tenant Improvement Allowance (TIA)

Landlords in commercial leases often provide a tenant improvement allowance — money to build out the space. Key TIA provisions:

• Dollar amount of the allowance (total or per square foot)
• What the allowance can be used for (hard construction costs only, or also soft costs like architecture and permits?)
• Approval process for construction plans
• Who controls the construction (landlord or tenant)?
• What happens if construction costs exceed the allowance?
• Is the space delivered in "as-is" condition or to a specified "vanilla box" standard?

Assignment and Subletting

For commercial tenants, assignment and subletting rights are critical for flexibility:

• Can you assign the lease to a buyer if you sell your business?
• Can the landlord withhold consent to assignment and under what conditions?
• If the landlord consents to assignment, are you released from the lease or do you remain liable as a guarantor?
• Subletting restrictions can prevent you from subleasing excess space if your space needs shrink

Corporate change-of-control: Many commercial leases define "assignment" to include not just a formal lease transfer but also changes in controlling ownership of the tenant entity. If you raise venture funding, get acquired, or restructure, these provisions may be triggered. Read carefully.

Holdover Provisions

What happens if you stay in the space after the lease expires without a renewal? Commercial holdover provisions are often punitive:

• Rent may automatically increase to 125-200% of the expiring lease rate during holdover
• The landlord may be able to pursue consequential damages (e.g., if they were planning to renovate and re-lease to another tenant)

Know your renewal option exercise deadlines and calendar them years in advance.

Renewal Options

Many commercial leases contain renewal options — the right (but not the obligation) to extend the lease at pre-agreed terms. Renewal options are only valuable if you exercise them properly:

• What is the exercise notice deadline? (Often 6-18 months before lease expiration — missing this forfeits the option)
• What will the rent be during the renewal term? (Fixed, fair market value, or CPI-indexed?)
• How is "fair market value" determined if there is a dispute?
• Are there any conditions on your right to exercise (no default, specific notice format)?

Termination and Default

Under what circumstances can either party terminate the lease early?

Tenant default: Failure to pay rent triggers landlord remedies. What notice and cure period does the tenant receive? Typically 3-10 days for monetary default, 30 days for non-monetary default. If the cure period is very short, a brief financial disruption can accelerate into a default before you can remedy it.

Landlord default: What are your rights if the landlord fails to maintain the building or otherwise breaches the lease? Most commercial leases provide limited tenant remedies. Negotiate for explicit landlord obligations and remedies (including the right to offset rent) for material landlord defaults.

Co-tenancy provisions (retail): Retail tenants may have the right to terminate or pay reduced rent if anchor tenants vacate the center. This is a significant protection for retail businesses whose traffic depends on neighboring stores.

Personal Guarantee

Commercial landlords frequently require a personal guarantee from founders or principals of business tenants, particularly for smaller businesses without extensive operating history. The personal guarantee makes you personally liable for the lease obligations if the business entity cannot pay.

Negotiate:

• Guaranty burn-down (the guarantee reduces over time as the tenant demonstrates performance)
• Limited personal guaranty capped at a specific dollar amount
• Guaranty release upon achieving certain financial metrics
• "Good guy" clause — your personal liability ends when you vacate the premises in the required condition, even if the lease has not expired

Using AI to Review Lease Agreements

The Lease Agreement Analyzer can extract all key lease provisions with page-level citations — rent and escalation terms, TIA amount, assignment restrictions, renewal option exercise deadlines, holdover provisions, and personal guarantee terms. For commercial tenants reviewing multiple lease options, uploading several proposals to a collection allows direct comparison: "How do the CAM expense caps compare across these three lease proposals?"

Lease Review Checklist

Core Terms:

• [ ] Rent amount and start date
• [ ] Lease term (start, end, renewal options)
• [ ] Security deposit amount and return conditions
• [ ] Annual rent escalation mechanism

For Commercial Leases:

• [ ] Lease structure (gross vs. NNN) and expense pass-throughs
• [ ] Operating expense caps and exclusions
• [ ] Tenant improvement allowance amount and conditions
• [ ] Use clause — broad enough for your business?
• [ ] Assignment and subletting rights (including change-of-control)
• [ ] Renewal option exercise deadline (calendar it)
• [ ] Holdover rent provision

Obligations:

• [ ] Maintenance and repair allocation
• [ ] Entry notice requirements
• [ ] Insurance requirements

Default:

• [ ] Cure period for monetary default
• [ ] Landlord remedies upon default
• [ ] Early termination rights and costs

Guarantee (Commercial):

• [ ] Is a personal guarantee required?
• [ ] Guarantee scope and any burn-down or cap provisions

Key Lease Terms to Know

• Force Majeure: Events that may excuse lease performance obligations
• Governing Law: Which state's law governs the lease interpretation and enforcement
• Indemnification: Landlord and tenant indemnification obligations in commercial leases

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Upload any lease agreement to the Lease Agreement Analyzer and ask questions in plain language — renewal option deadlines, rent escalation schedule, assignment restrictions — with citations to the exact lease provision.