When tenants review a lease proposal, their attention almost always goes to the same place first: the rent.
That’s understandable. Rent is easy to see, easy to compare and easy to negotiate. It feels like the most important number in the deal.
But after decades of representing commercial tenants, I can say this with confidence: The most expensive clause in your lease is rarely the rent.
In fact, I’ve seen tenants negotiate aggressively on rental rate, only to give back far more value through clauses they barely noticed, didn’t fully understand or assumed were “standard.”
Rent is obvious. The real cost of a lease is often hidden.
The clause you don’t notice until you need it
One of the most expensive clauses in a lease is the renewal option, or more specifically, how it’s written.
A renewal option that calls for rent to be set at “fair market value” sounds reasonable. Until you realize who determines that value, how disputes are resolved and how much leverage you actually have when the time comes.
I’ve seen tenants assume they had a strong renewal right, only to discover later that the landlord controlled the process or that the language was so vague it was nearly unenforceable. By the time they learned the truth, their leverage was gone.
Operating expenses
The silent escalator: Another clause that quietly becomes expensive over time involves operating expenses. You know, those pesky additional charges such as property taxes, insurance on the building and maintenance.
Tenants often focus on base rent and treat operating expenses as secondary. But over a five or ten year lease, uncontrolled expenses can easily exceed modest rent increases.
Common issues include:
— No caps on controllable expenses
— Poorly defined expense categories
— Administrative fees buried in the fine print
I’ve reviewed leases where tenants thought they secured a “great deal,” only to watch operating expenses rise faster than inflation, with no meaningful protections in place.
Assignment and sublease
Flexibility matters. Businesses change. Space needs change. Markets change.
Yet many leases severely restrict a tenant’s ability to assign or sublease, sometimes requiring landlord consent that can be withheld at the landlord’s sole discretion.
That clause may seem harmless on day one. Years later, it can become costly. I’ve seen tenants forced to carry unused space, sublease at a loss or pay to exit a lease that could have been transferred if the language allowed it.
The cost wasn’t in the rent. It was in the lack of flexibility.
Termination rights
Options have value: Early termination rights are another area tenants often overlook.
Yes, termination options usually come at a cost. But like insurance, the value isn’t in whether you use it, it’s in having the option. I’ve represented tenants who never exercised their termination rights but benefited from the leverage and protection those clauses provided.
Why this happens: Most tenants sign a lease every five to 10 years. Landlords do it every day. The imbalance isn’t intelligence, it’s repetition.
Tenants negotiate rent because it’s familiar. They overlook clauses because they assume the rest is boilerplate. It rarely is.
A final thought: Rent is easy to see. Clauses are easy to ignore.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.
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