A commercial space may look affordable based on the advertised rent, but that figure may not show everything your business will have to pay. In California, some commercial leases require tenants to cover property-related expenses in addition to base rent.
Before comparing locations or preparing your operating budget, review how the lease handles these five expenses:
1. Common area maintenance (CAM) charges
You may pay a share of costs for maintaining shared areas, such as parking lots, hallways, landscaping or elevators. Review how the landlord calculates these charges, which expenses are included and whether the agreement caps annual CAM increases.
2. Property taxes
Some leases require you to reimburse the landlord for part of the property taxes. The amount could depend on your space’s proportion of the overall property.
3. Insurance costs
Your lease can require you to pay a portion of the landlord’s property insurance in addition to your own business insurance. Review which policies, premiums and other insurance obligations become your responsibility.
4. Utilities
Check whether your space has its own meter for electricity, water or other utilities. If it does not, the landlord may allocate utility expenses among tenants according to a formula in the lease.
5. Repairs and maintenance
The agreement should identify who pays for interior repairs and major building systems, including heating, cooling and plumbing.
Know what you are agreeing to pay
The listed base rent does not reveal your full financial obligation over the term of a commercial lease. Before signing, understand which expenses are your responsibility, how the landlord calculates them and whether they may increase over time.
A business attorney can help you identify provisions that affect your total costs, explain financial obligations that may be unclear and review terms that could be open to negotiation. That information can help you compare lease options with a clearer understanding of what each space may actually cost your business.