The commercial lease: what to check before you buy

Many small companies rent the space they work from. When you buy the company, you usually take on its lease too. A good business in a building it can't stay in, or at a rent that's about to jump, is a different business from the one you thought you were buying.

So read the lease early, before you spend serious money on attorneys and accountants. It's one of the few documents that can change a deal on its own.

Get the whole lease

Ask the seller for the complete lease and everything attached to it: amendments, renewal letters, side agreements and any notices from the landlord. Leases often get changed over the years, and the original may no longer tell the whole story.

Also ask who the landlord is. If the seller or a relative owns the building, that affects several of the points below.

How much time is left

Start with two dates: when the current term ends, and how long any renewal options could extend it.

For each renewal option, check:

• Who can use it. An option that belongs only to the tenant is worth far more than one that needs the landlord's agreement.
• How and when to use it. Many options require written notice by a deadline, months before the term ends. Miss it and the option can be lost.
• What the rent will be. A fixed increase is easy to plan for. "Fair market rent," decided when the time comes, is not.

How much time you need depends on the business. A hypothetical machine shop with heavy equipment bolted to the floor and special wiring would be very expensive to move, so a short lease is a serious risk. A janitorial company that works at its customers' sites and uses its office mostly for storage could move far more easily.

Your lender will care too, and some SBA loans come with a rule about it. The rule applies when a large share of the loan pays for improvements to rented space, or a large share of the collateral is improvements or equipment attached to it. In those cases, the SBA's lending rules say the lease should run at least as long as the loan, counting only renewal options the borrower alone can exercise. Whether or not that applies to your deal, ask your lender early how much lease term it wants to see. Our post on talking to lenders early covers why those conversations help.

Can the lease pass to you?

This is often the biggest question, and the answer is in the assignment clause.

• If you buy the company's assets, your new company becomes the tenant. That's an assignment of the lease, and many commercial leases require the landlord's written consent for it.
• If you buy the company itself, the tenant doesn't change on paper. But many leases treat a change in who owns the tenant as an assignment, which still needs consent.

A landlord asked for consent may want your financial statements, a personal guarantee, a larger deposit or new terms. Some leases say consent can't be unreasonably withheld. Others give the landlord more room. Ask your attorney what yours says.

Plan for it: ask for consent early, and make it a condition of closing, so you aren't committed to buying a company that can't stay where it is. Keep in mind that the seller may stay liable under the lease after an assignment unless the landlord releases them, so the seller has a reason to help.

What the space really costs

Compare the rent in the lease to the rent on the company's profit and loss statement. They should match. Then look at what's coming:

• Scheduled increases. Fixed steps each year, increases tied to an inflation index, or a jump at renewal.
• Charges on top of rent. Many commercial leases pass on a share of the building's property taxes, insurance and upkeep of shared areas. These are often called "net" leases. Ask for the last few years of actual charges, not just the estimate, because property insurance costs can change a lot from one renewal to the next.
• Repairs. Who pays to fix the roof, the parking lot or the air conditioning? Replacing a large air conditioning unit is a real expense, and some leases put it on the tenant.

One Florida change helps tenants. The state's sales tax on commercial rent was repealed for rental periods beginning on or after October 1, 2025, according to the Florida Department of Revenue. If you compare rent across several years of the seller's records, older years may include that tax.

When the seller owns the building, look closely at the rent. Owners sometimes charge their own company less than a fair rent, or more. Either way, expect to pay a fair rent after closing, probably under a new lease, so adjust your estimate of owner earnings (profit plus what the owner pays themselves, before loan payments and taxes) to match. A new lease also gives you a chance to set a longer term and renewal options from the start.

Personal guarantees on the lease

Landlords often ask the owner of a small company to personally guarantee the lease. That can mean you'd owe the remaining rent yourself if the company couldn't pay.

You can ask to limit it:

• A cap, such as a set number of months of rent rather than the whole remaining term.
• An end date, such as the guarantee dropping away after a few years of on-time payment.
• A release if you leave properly, meaning your liability ends if you give proper notice, pay rent through the move-out date and hand back the space in good condition.

Our post on personal guarantees and collateral explains what a guarantee means for you and your household.

Other clauses worth reading

• Use. Does the lease allow everything the company does today, and anything you plan to add?
• Exclusivity. In a shopping center, does the landlord promise not to rent to a direct competitor?
• Relocation or early termination. Can the landlord move you to another space, or end the lease to redevelop?
• Damage and storms. If the building is damaged, does rent stop, who rebuilds and how fast, and can either side end the lease?
• Restoration. When you leave, do you have to remove equipment and return the space to its original condition?
• The landlord's claim on your property. Florida law gives a landlord a lien for unpaid rent on a tenant's property usually kept on the premises (section 83.08 of the Florida Statutes). Your lender may ask the landlord to sign a waiver so the lender's claim on the equipment comes first. Ask early, because landlords can be slow to sign.

Ask the landlord to confirm the facts

Before closing, ask the landlord to sign a short statement, often called an estoppel certificate. It confirms the term and renewal options, that the lease and its amendments are complete, that the rent is paid and that neither side is in default. It protects you from learning about a dispute or an unpaid charge after you own the company.

What to do this week

• Ask the seller for the full lease, every amendment and any landlord notices.
• Write a one-page summary: term left, renewal options and their deadlines, rent schedule, extra charges, assignment clause, guarantee, use, repairs and damage.
• Visit the space and look at the roof, the air conditioning, the parking and anything the business has outgrown.
• Ask your lender what lease term and landlord documents it will need.
• Have a real estate attorney read the lease before you sign a purchase agreement.