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A lease is a written agreement under which a property owner (the lessor) allows another (the lessee) use the property for a specified period of time. A commercial lease agreement, on the other hand, is a legally enforceable contract between a lessor and a lessee for the rental of a non-residential property, such as office spaces, retail stores, industrial facilities, or warehouses, for business/commercial purposes.[1] The agreement outlines the rights, duties, responsibilities, and expectations of both the lessor and lessee. The primary purpose of a commercial lease agreement is to establish a clear, enforceable understanding between the lessor and the lessee.[2]
The main ingredients of a valid commercial lease are rent payable for the demised premises, parties, property, length of term, and date of commencement.[3] Negotiating key clauses in the commercial lease agreement upfront can help prevent costly disputes and ensure that the interests of the lessor and lessee are effectively aligned.
Below are some of the most important clauses that lessors and lessees should focus on during negotiations.
1. LEASE TERM AND RENEWAL OPTIONS
The lease term defines the duration of occupancy. Lessees should negotiate renewal options with clear terms on rent during renewal. The rent upon renewal could be fixed to reflect “fair market value” or with a capped increase to provide long-term stability for the lessee.
On the other hand, lessors should negotiate a longer initial term to ensure predictable income and may resist automatic renewals. Lessors may include a market-rate adjustment of the rent upon renewal to benefit from rising rents in the property area.
2. RENT STRUCTURE, ESCALATION CLAUSES, AND ADDITIONAL RENT
Another key clause is the rent clause, which may be divided into base rent and additional rent. Base rent is the core payment for the commercial lease, which may include an escalation clause for annual increases.
Additional rent covers pass-through expenses like ground rent to state governments, property taxes, insurance, electricity bills, and service charges for common areas (e.g., generators, security). It is recommended that the lease agreement state which party is liable for what obligation.
3. PERMITTED USE
The permitted use clause specifies allowed business activities and highlights prohibited use of the premises. It defines how the lessee can use the property, ensuring it is used for appropriate and agreed business activities.[4]
This clause is critical in shopping centers or mixed-use development agreements.
4. MAINTENANCE AND REPAIRS
Parties to the commercial lease agreement should explicitly allocate duties for routine maintenance (e.g., janitorial, landscaping, pest control), repairs (interior vs. exterior), and capital improvements (e.g., roof replacement, major HVAC overhauls, or structural repairs).
A lessee should negotiate for the lessor to retain responsibility for structural elements, major building systems such as central HVAC, elevators, fire suppression, and roof, with clear timelines for repairs and remedies for delays.
5. ASSIGNMENT AND SUBLETTING RIGHTS
These clauses govern the lessee’s ability to transfer the lease (reassignment) or to allow another party occupy part or all of the space (subletting). Usually, the lessor utilizes this clause to prohibit the assignment or subletting of the commercial lease without his written consent being first sought and obtained. Lessees should negotiate for “consent not to be unreasonably withheld, conditioned, or delayed”. A balanced provision allows lessee flexibility without undermining lessor interests.
6. INSURANCE, INDEMNIFICATION, AND LIMITATION OF LIABILITY
Insurance and liability clauses allocate risk for property damage, personal injury, business interruption, and third-party claims. It is essential to specify insurance requirements, including liability, property, and business interruption coverage, and limit liability for damages or claims.
7. DEFAULT, REMEDIES, AND TERMINATION RIGHTS
Default provisions outline what would amount to a breach of the lease agreement, such as non-payment or non-use, and specify the period to remedy the breach. Lessees should seek notice and reasonable cure periods, typically 10-30 days. Whereas, lessors may push for quick remedies like forfeiture and re-entry.
8. OTHER NOTABLE CLAUSES
Other essential clauses include force majeure or pandemic clauses, which address rent relief for unforeseen events. Another is signage and parking clauses, which are vital for retail lessees where visibility, customer access, and brand prominence directly affect commercial viability.
CONCLUSION
Commercial lease negotiations balance the lessor’s need for stable income and property protection with the lessee’s need for operational flexibility and cost predictability.
It is advisable to engage legal advisers to support in drafting and reviewing your commercial lease agreements to minimize risks and support business success for years to come.
[1] DocuSign, “Commercial Lease Agreement” https://www.docusign.com/templates/commercial-lease-agreement assessed on February 20, 2026
[2] Juro, “Commercial Lease Agreements” https://juro.com/contract-templates/commercial-lease-agreement assessed on February 21, 2026
[3] Folarin v. Agusto (2023) LPELR-59945 (SC)
[4] Juro, Commercial Lease Agreements” https://juro.com/contract-templates/commercial-lease-agreement assessed on February 21, 2026
Written by Adeife Omolumo for The Trusted Advisors
Email us: info@trustedadvisorslaw.com
Telephone Number: +234 810 159 9159