Most commercial tenants who write to this office are not in a dispute. They have a renewal in front of them — a landlord’s letter, a one-page amendment, sometimes a whole new lease form — and a feeling that they should not simply sign it. That instinct is right. A commercial lease in California is not a regulated consumer contract the way a residential lease is. The law assumes both sides are businesses that can look after themselves, so almost everything that protects you is what you negotiated. And the renewal is usually the last moment you have real leverage to negotiate anything.
Why the renewal is the moment of leverage
Once you have built out a space, put your name on the door and told your customers where to find you, moving is expensive. Your landlord knows that. But a vacancy is expensive for the landlord too: months of lost rent, brokerage commissions, tenant-improvement allowances for whoever comes next. In the window before the current term ends, both sides have something to lose, which is exactly when terms move. Sign the landlord’s first draft and that window closes for another three, five or ten years.
First: check the notice window on your option
If your existing lease contains an option to extend, read the notice provision before you do anything else. Options almost always require written notice inside a defined window — commonly something like nine to twelve months before expiration, sometimes with a deadline after which the option simply lapses. Miss it and a right you already paid for turns into a negotiation you no longer control, at whatever rent the landlord now wants. This is the single most common avoidable mistake in a lease renewal, and it is the first date to put on the calendar.
What “NNN” is actually going to cost you
The base rent is rarely where the money is. Triple-net and common-area-maintenance provisions vary enormously in what the landlord may pass through: property taxes, insurance, repairs, management fees, and sometimes an administrative fee stacked on top of all of it. Four questions decide most of the argument later. What is excluded from operating expenses? Is there a cap on year-over-year increases in the controllable ones? Do you receive a reconciliation each year? And do you have the right to audit it? A renewal is the natural place to add a cap or an audit right that the original lease never had.
The personal guaranty you may have forgotten you signed
Many first leases were signed with a personal guaranty, because the business was new and the landlord wanted a real person behind the entity. If that guaranty is still in force, the liability protection of your LLC or corporation may not survive a default. Guaranties can be limited in time or in amount, or “burned off” against a clean payment history — but only if that is negotiated in. A tenant with five years of on-time rent has a strong argument for it. Nobody will offer it unasked.
Assignment and subletting: whether you can ever sell the business
This clause decides your exit. If the landlord’s consent to an assignment is not qualified by a reasonableness standard, the landlord effectively holds a veto over the sale of your business, or leverage to recapture the space and re-let it at a higher rent. Look for “consent not to be unreasonably withheld,” and look for a recapture clause that lets the landlord take the space back if you ask to assign.
Use, exclusivity and the duty to stay open
A narrow use clause limits what you can pivot to if the business changes. An exclusivity clause protects you from a direct competitor arriving in the same center, and it is worth asking for in retail. A continuous-operation covenant can make simply closing for a renovation, or reducing hours, a breach. Each of these reads as boilerplate and each one has ended up in litigation.
The accessibility disclosure most tenants skip
Under Civil Code section 1938, a commercial landlord must state in every lease executed on or after January 1, 2017 whether the premises have been inspected by a Certified Access Specialist, known as a CASp. If an inspection was done, the landlord must give you the report before you sign. If the report arrives less than 48 hours before execution, the statute gives you 72 hours after signing to rescind based on what it says.
The allocation of repair cost matters just as much. Under the same section, correcting accessibility violations noted in a CASp report is presumed to be the landlord’s responsibility unless the lease says otherwise. Many landlord forms quietly say otherwise. Because accessibility claims for a non-compliant entrance, restroom or parking stall generally land on the business operating the premises, this is one clause worth reading word by word before it becomes a demand letter.
Your security deposit is not governed by the residential rules
Commercial deposits fall under Civil Code section 1950.7, not the residential rules in section 1950.5 that most people have heard of. The landlord may apply the deposit only to unpaid rent, tenant-caused damage, or cleaning, and only where the deposit was taken for those purposes. Where the deposit is no more than one month’s rent plus a sum clearly identified as last month’s rent, and the landlord’s claim is for unpaid rent only, the balance is generally due back within 30 days of the landlord regaining possession. A renewal is a reasonable time to ask whether a deposit sized for a brand-new tenant still makes sense.
Holdover: the clock you do not want to run past
Holdover rent at 150 to 200 percent of the last month’s rate is common. If a renewal negotiation drags past the expiration date, that clause is what you are paying while you argue. Start the conversation early enough that the landlord cannot use the expiration date against you, and get a written extension of the current terms if the negotiation is going to run long.
How to approach the landlord
- Know the market before you answer. Comparable asking rents, current vacancy in your submarket, and what concessions new tenants are receiving. A renewal offer is a number in a vacuum until you have those.
- Ask for the full document, not the amendment. A one-page amendment that “extends the term” carries forward every clause of the original lease, including the ones that were never right for you.
- Put your asks in one letter. The cap on CAM increases, the guaranty burn-off, the assignment standard, the CASp allocation. Landlords negotiate a list; they resist a trickle.
- Get every agreed change into the signed document. An email from the property manager is not the lease.
How Jimmy can help
Jimmy Nguyen is a real estate attorney and a licensed California broker, and he represents tenants on commercial leases in both roles. Some clients want a review and a plain-English read on what they are about to sign. Others want him at the table negotiating the terms with the landlord or the landlord’s broker. For a tenant that is the bonus of hiring him: two professionals in one. The broker negotiating your renewal is the same attorney who reads the lease line by line and litigates it if the landlord does not perform.
His commercial real estate page covers lease review, buying a business, and what happens when a commercial deal goes wrong. Fees are quoted in writing for the specific work agreed on before anything begins.
Email jimmy@lawjn.com with the current lease and the renewal offer, or use the form below.