Some of the most expensive lease provisions aren’t the ones that dominate the negotiation. They determine what the tenant pays, what it can change, what happens when the business changes, and what it owes when it leaves.
Originally published November 2012. Updated October 2026 to reflect current owner-side lease review and capital project considerations.
The rent is negotiated.
The term is settled.
The tenant improvement allowance is agreed.
Everyone feels like the major business issues are behind them.
That’s when I want to know what received less attention.
Commercial leases contain provisions that may look secondary during the transaction but become very important once the tenant occupies the space.
Some affect operating cost.
Some affect the capital project.
Some affect what the business can do five years from now.
And some don’t become expensive until the tenant is trying to leave.
I wouldn’t try to turn the project team into lease attorneys.
I would make sure the people responsible for the space understand the provisions that eventually become their problems to manage.
What Can the Landlord Pass Through?
Base rent may be one of the easiest occupancy costs to understand.
Operating expenses can be considerably more complicated.
Depending on the lease structure, the tenant may be responsible for some combination of common area maintenance, utilities, insurance, real estate taxes, management or administrative expenses and other building costs.
The question isn’t simply whether those costs can be passed through.
I want to understand how they are calculated and how they can change.
- What is included?
- What is excluded?
- Are there caps on certain increases?
- How are capital expenditures treated?
- What base year or expense stop applies?
- What administrative or management fees can be added?
- Does the tenant have the right to review or audit the landlord’s calculations?
Historical operating expenses and projections can also provide useful context. If the economics of the transaction depend on assumptions about future occupancy costs, those assumptions deserve scrutiny before the lease is executed.
The attorney determines whether the lease language appropriately addresses those issues.
From an owner’s perspective, I want to understand what those provisions could mean to the operating budget.
What Can You Change Without Asking Permission?
The lease may give the tenant possession of the space.
That doesn’t necessarily give the tenant unrestricted authority to change it.
Alteration provisions can affect everything from the initial build-out to modifications years later.
- What work requires landlord approval?
- Are there categories of work that don’t?
- Can the landlord require particular contractors?
- Are there building-standard materials or systems that must be used?
- What insurance, access and construction requirements apply?
- How long does the landlord have to review plans?
- Can approval be withheld, or must it be reasonable?
These provisions can become project constraints.
A construction schedule that assumes drawings can be issued immediately may not work if landlord approval is required first.
A budget based on competitively bidding the work may change if particular building contractors must be used.
A design decision made today may also create a restoration obligation years from now.
The alteration clause isn’t just legal language. It can become part of the project’s cost and schedule.
What Happens If the Business Changes?
A lease can outlive the business plan that justified it.
The company grows.
It contracts.
It acquires another business.
A department moves.
The organization decides it no longer needs the location.
That’s when provisions governing assignment, subletting and other occupancy rights become important.
- Can the tenant sublease unused space?
- What approvals are required?
- Can the lease be assigned as part of a corporate transaction?
- Are there restrictions on who can occupy the premises?
- Does the landlord have recapture or other rights if the tenant requests an assignment or sublease?
There may also be expansion, contraction, renewal or termination rights elsewhere in the transaction.
Nobody needs every possible option.
But leadership should understand how much flexibility it is buying—or giving up—when it signs a long-term commitment.
What Happens If the Building Changes Hands?
Tenants sometimes focus almost entirely on their relationship with the current landlord.
The building itself can have other financial interests attached to it.
That is why counsel may raise issues involving subordination, non-disturbance and attornment.
I wouldn’t expect the project team to interpret those provisions.
I would expect leadership to understand the business question behind them:
What happens to our occupancy rights if circumstances involving the building or its ownership change?
The specific protections and documents required are matters for the tenant’s attorney.
The important point for the business team is not to assume that a signed lease answers every question about continued occupancy under every circumstance.
How Much Space Are You Actually Paying For?
The lease may state a square footage.
That doesn’t necessarily mean the tenant independently occupies every one of those square feet.
Depending on the building and measurement methodology, rentable area can include an allocation of common areas in addition to the tenant’s usable space.
I’ve written separately about the problems that arise when the parties don’t have the same understanding of how leased area was measured.
The important question during lease review is simple:
What area are the economics based on, and how was it determined?
That affects more than the headline rent.
Costs expressed on a per-square-foot basis can also depend on the area established by the lease.
A relatively small difference in measurement can become meaningful when applied over a long lease term.
What Do You Have to Give Back?
This is one of the easiest issues to ignore when everyone is focused on moving in.
Eventually, somebody has to move out.
- What condition must the premises be in when the tenant surrenders them?
- Which alterations can remain?
- Which must be removed?
- What happens to cabling?
- Supplemental HVAC?
- Specialty electrical systems?
- Security equipment?
- Signage?
- Generators, UPS equipment or other tenant-installed infrastructure?
Does the landlord decide at the time alterations are approved whether they must eventually be removed, or can that decision come later?
A requirement that sounds remote during lease negotiation can become a significant capital expense at the end of the term.
If the tenant is installing something unusual, I would rather understand the eventual restoration obligation before approving the investment.
What Did the Project Team Assume?
This is where lease review becomes particularly important to a capital project.
The project team develops a budget and schedule based on assumptions.
The landlord will perform certain work.
The tenant can begin construction on a particular date.
A particular contractor can be used.
The existing HVAC can remain.
The allowance can pay for certain costs.
The tenant can install particular equipment.
The landlord will maintain certain building systems.
Those assumptions may sound reasonable.
The lease needs to support them.
If it doesn’t, the problem isn’t merely that somebody misunderstood a clause.
The project budget may be wrong.
The schedule may be wrong.
The scope may be wrong.
Or responsibility for an important piece of work may belong to someone other than the person the project team expected.
The Major Terms Aren’t the Whole Deal
Rent matters.
Term matters.
The tenant improvement allowance matters.
Those are appropriately major subjects of a commercial lease negotiation.
But they aren’t the only provisions that determine whether the transaction works for the business.
Before the lease is signed, I want the attorney, broker and project team looking at the transaction through their respective lenses.
The attorney determines whether the lease language adequately protects the tenant.
The broker understands the transaction and negotiated economics.
The project team understands what has to happen to turn the leased premises into an operating workplace.
My question is:
Does the team that will operate, modify and eventually surrender the space understand what the lease requires?
Because after the negotiation ends, those provisions stop being abstract language.
They become operating rules for the space.
About the Author: Richard Neuman advises organizations on capital planning, project governance, and complex capital programs. He has overseen more than $2 billion in capital investments across commercial real estate, healthcare, utilities, industrial, broadcast, and development projects.
He writes candidly from an owner-side perspective about the executive decisions and organizational dynamics that shape capital project outcomes.
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I agree with most of your comments except one and that is the non disturbance clause. I am now on the tenant side but was on the landlord side for 15 years. Landlords fight this when there is no debt because if there is a requirement for non disturbance in a lease, it can limit what options the landlord may have for when they want to finance. In addition, I am not sure of the value of NDA unless the tenant has made substantial capital improvements in the property because typically in a strong market, the landlord will have the capital to pay the debt and is most likely to fail to pay debt in a weak market and in that case the lender will keep anyone who is paying rent.
Jeff, in what circumstances would you see the landlord acquiesce on the non disturbance? Is it a make or break or something negotiable? Where do you see the parties reaching a mutual agreement?
The only type of language that can typically work for a landlord is that it can use “reasonable efforts but on the lenders form” and any cost of negotiating it are the tenants responsibility as it has no value to the landlord.