Paul Leongas | How to Read a Commercial Lease If You Have Never Signed One

Paul Leongas

A commercial lease is not a residential lease with bigger numbers. It is a fundamentally different document with different assumptions, different risks, and different consequences for the person signing it. Paul Leongas has signed commercial leases across the Chicago area for over 25 years. He has also, more recently, written them. That puts him on both sides of a document most small business owners encounter for the first time when they are too excited about their new business to read the fine print.

Here is what the fine print actually says, and why it matters.

The Rent Number Is Not the Real Number

The listed rent on a commercial space is the starting point of the cost, not the total. Triple-net leases add property taxes, insurance, and common area maintenance charges on top of base rent. Those additions can increase the monthly obligation by 30 to 50 percent. A space listed at $20 per square foot can cost $28 per square foot after NNN charges. Paul Leongas learned this the first time he signed a lease in Schaumburg and received an additional invoice he was not expecting.

CAM charges deserve special attention. They cover parking lot maintenance, snow removal, landscaping, and shared building expenses. Some landlords cap annual CAM increases. Many do not. An uncapped CAM clause means the landlord can pass along any increase to the tenant at any time. Five years into a lease, that uncapped clause can add thousands to the annual cost.

Who Fixes What Determines Who Pays for What

The maintenance and repair section of a commercial lease is where most disputes start. In a gross lease, the landlord handles most repairs. In a triple-net lease, the tenant handles nearly everything except structural issues. In a modified gross lease, the split is somewhere in between. The problem is that the definitions of structural, mechanical, and cosmetic vary from lease to lease.

Paul Leongas operated The Curragh Irish Pub for roughly 12 years per location. Over that time, he learned that a rooftop HVAC unit can be classified as a landlord responsibility in one lease and a tenant responsibility in the next, depending on three sentences buried in section nine. The same unit. Different lease. Different bill.

The Renewal Clause Is Your Future Negotiating Power

A five-year lease without a renewal option means the tenant has no guaranteed right to stay after year five. The landlord can raise the rent to market rate, change the terms, or simply not renew. A tenant who has built a customer base in that location for five years has no bargaining power. Paul Leongas negotiated renewal options into every lease he could because he knew the cost of relocating a restaurant.

The option should specify the renewal rent or tie it to a defined formula. A renewal option that says rent will be negotiated at the time of renewal is barely an option at all.

Use Rights and Exclusivity Are Not Extras. They Are Protection.

A use clause defines what the tenant can do in the space. A narrow use clause can prevent a business from adjusting its model without landlord approval. An exclusivity clause prevents the landlord from leasing adjacent space to a direct competitor. Paul Leongas has seen restaurant leases without exclusivity clauses that allowed the landlord to put another restaurant two doors down.

Through Axis Development Group in Park Ridge, Illinois, Leongas now writes commercial leases as a landlord. He structures them with fair use rights and clear maintenance responsibilities because he spent 25 years on the side of the tenant. The Curragh earned the Guinness Gold Standard Award for the Perfect Pint in 2002 and recognition from Whisky Magazine. Those achievements happened inside leased commercial spaces, governed by lease terms Paul had to live with for over a decade.

A commercial lease is a business partnership disguised as a legal document. Read every clause. Understand every cost. Question every term that shifts risk to the tenant without giving something back. Paul Leongas would have benefited from that advice 25 years ago. It still applies now.