A Commercial Real Estate Attorney Explains 3 Key Lease Risks

Commercial leases in New York impose far broader obligations than residential leases. Beyond base rent, you typically pay property taxes, insurance, common area maintenance (CAM) charges, and utilities, often without a cap. These pass-through costs can exceed your base rent over the lease term, yet many tenants discover this only after signing.

Lease language often contains renewal options that expire on strict deadlines, sometimes as short as 30 days before the renewal date. Missing that deadline can result in loss of the renewal right entirely. Similarly, many leases require tenant maintenance and repairs to the demised space, including structural elements, which can become expensive liabilities if the building ages or weather damage occurs.

Before you sign, review whether the lease requires you to maintain liability insurance, name the landlord as an additional insured, and post a security deposit. Confirm the exact amount of the security deposit, the conditions under which it may be withheld, and whether the landlord is required to pay interest on it. New York law does not mandate interest on commercial security deposits, so this protection exists only if the lease includes it.

Negotiation must occur before you sign. Once executed, a commercial lease is enforceable as written, and courts will not rewrite unfavorable terms on grounds that they are one-sided or harsh. This means any protective language you need must be inserted during the drafting phase, not after.

Common tenant-protective amendments include a cap on CAM charges, a clause allowing you to audit CAM billings and dispute overages, a renewal option with a longer notice period (60 or 90 days), and a clause permitting early termination if your business circumstances change materially. You may also negotiate a rent abatement clause if the landlord fails to maintain essential services, such as HVAC, electrical, or plumbing systems.

Timing matters significantly. If you are under time pressure to occupy space, the landlord knows this and will resist concessions. If you approach lease negotiation early, before the landlord has leased competing space nearby, you have more leverage. Experienced commercial real estate counsel can identify which lease terms are market-standard and which are landlord-favorable overreaches.

Several lease provisions warrant close attention during review:

• Permitted use clause: Ensure your intended business activities fall within the permitted use. A clause that is too narrow may prevent you from modifying your business or subletting to a different tenant type.
• Assignment and subletting restrictions: Many leases require landlord consent to assign the lease or sublet space. Some also require you to share profit if you sublet at a higher rate. Negotiate a profit-sharing cap or a clause permitting assignment to an affiliate without consent.
• Indemnification and hold-harmless language: Leases often require you to indemnify the landlord for injuries or property damage in your space, even if the landlord is partially at fault. Consider limiting indemnification to breaches within your control.
• Default and cure periods: Confirm the lease defines what constitutes default and allows you a reasonable cure period, typically 10 to 30 days for monetary defaults and longer for non-monetary breaches.
• Rent escalation: Understand how rent increases are calculated. Some leases tie increases to the Consumer Price Index, others to fixed percentages, and others to the landlord's property tax increases. A CPI-based clause may be more predictable than open-ended landlord discretion.

Many tenant disputes arise not from lease language but from what happens after signing. If the landlord fails to provide promised services or make repairs, your ability to withhold rent or terminate the lease depends on whether you documented the breach and gave the landlord notice and a cure opportunity in writing.

Create a practice of sending written notices for any landlord breach, even minor ones. Describe the issue, cite the lease provision, state when you expect a remedy, and preserve a copy. If the landlord does not cure within a reasonable timeframe, you have evidence of willful breach that may support a counterclaim or defense if the landlord sues for unpaid rent.

In New York, a tenant facing a holdover proceeding for nonpayment must raise any landlord breach as an affirmative defense in the answer. If you did not document the breach in writing before the holdover was filed, the court may find your defense weak or untimely. The procedural requirement to file an answer and raise defenses within the court's strict timeframe means you must preserve evidence and written communications long before litigation begins.

In New York, most commercial lease disputes are litigated in the Civil Court or Supreme Court, depending on the amount in controversy. If your lease dispute involves a holdover (eviction) for nonpayment of rent, the case is filed in Housing Court in many counties. The procedural timeline is compressed: you typically have only 3 to 5 days to file an answer after service of the petition, and the hearing may occur within 2 to 4 weeks.

This compressed timeline means you must be prepared to assert defenses immediately. If you plan to argue that the landlord breached the lease and that breach justifies rent withholding, you must have written documentation of the breach, proof that you notified the landlord in writing, and evidence that the landlord failed to cure. Courts are skeptical of oral testimony alone, especially when rent is unpaid.

A commercial real estate litigation attorney can help you understand your posture in a dispute and evaluate whether settlement, trial, or alternative dispute resolution is most practical for your circumstances.

Commercial leases typically run 3 to 10 years, and your business needs may change. Before signing, think about whether the lease term matches your business plan. A 10-year lease with limited termination rights can become a liability if your business shrinks, relocates, or closes. Conversely, a very short lease may expose you to rent spikes at renewal if the market rises.

Consult with a commercial real estate attorney during the lease drafting phase, not after you have signed. The cost of legal review before signing is far lower than the cost of litigation or lease modification after the fact. Your attorney can identify landlord overreaches, negotiate protective language, and ensure the lease aligns with your business model and financial projections.

A tenant should also understand the difference between commercial real estate finance terms, such as loan-to-value ratios and debt covenants that the landlord's lender may impose, and lease terms. If the landlord's lender has rights to approve lease modifications or assignments, that constraint may limit your flexibility later.

Before you sign a commercial lease, ensure you have reviewed the full document, negotiated any protective amendments, confirmed your understanding of rent and CAM obligations, and secured written confirmation of any oral promises the landlord made. Document your concerns in writing, preserve copies of all communications, and consult legal counsel if you are uncertain about any provision. The time invested in careful review before signing will protect your business interests and reduce the likelihood of costly disputes.