What a commercial lease agreement includes: the key terms, who pays building costs, the clauses to negotiate in Colorado and estoppel certificates.
A commercial lease agreement is the contract that gives a business the right to use a property for a set time in return for rent.
Its key terms are the parties, term, rent, deposit, renewal, use, maintenance, insurance, default and termination. The main lease structures are compared in commercial lease types in Colorado.
This guide walks through the document clause by clause: what each one says, why it matters and what tenants and landlords usually negotiate. It ends with a review checklist and common questions.
Lease or License: What Makes It a Lease
A lease gives the tenant exclusive possession of a defined space for a defined term, in return for regular payments. A license only gives permission to use a space, and the owner can usually end it at will.
The difference matters. Factors that point to a lease include a fixed term, exclusive possession of a defined area and recurring rent. A coworking membership or a short-term booth often reads more like a license.
Leases longer than one year generally must be in writing under the Statute of Frauds. In practice, every term a business relies on should be written into the lease, because commercial leases carry fewer built-in protections than residential ones.
Key Terms in Every Commercial Lease
A commercial lease names who, what, how long and how much.
| Term | What it sets |
|---|---|
| Parties | Who the landlord and tenant are |
| Premises | The space being leased |
| Term | The start date and length of the lease |
| Rent | The payment and its schedule |
| Security deposit | The deposit and how it is returned |
| Renewal | Whether and how the lease renews |
| Use | What the tenant may do in the space |
| Default and remedies | What happens if either side breaks the lease |
Beyond these basics, most commercial leases add clauses on operating expenses, maintenance, insurance, assignment, alterations, holdover and lender documents. The sections below cover each one.
How a Commercial Lease Is Organized
Most commercial leases follow a similar order, even when the forms differ.
- Basic lease information: a summary page with the parties, premises, term, rent, deposit and permitted use.
- Rent and additional rent: base rent, escalations and the tenant’s share of building costs.
- Use and operations: permitted use, hours, signage and compliance with laws.
- Condition and alterations: delivery condition, build-out and later changes.
- Repairs, maintenance and insurance: who fixes what and who insures what.
- Transfers: assignment and subleasing.
- Default and remedies: what counts as a breach and what follows.
- Lender and sale provisions: subordination, estoppel certificates and attornment.
- Exhibits: floor plan, work letter, rules and any guaranty.
Rent and Escalations
The rent clause sets the base rent, when it is due and how it rises over the term.
Increases can be written as fixed dollar steps, a fixed percentage each year or a link to an inflation index. Whatever the method, the lease should state the exact formula and the date each increase starts.
Many leases also define “additional rent.” That term covers the tenant’s share of operating costs, so missing those payments can count as a rent default.
Percentage rent in retail leases
Some retail leases add percentage rent, where the tenant pays a share of sales above a breakpoint. The natural breakpoint is annual base rent divided by the percentage rate. If the lease uses percentage rent, the definition of “gross sales” and the reporting duties matter as much as the rate.
Who Pays the Building Costs
The lease decides who pays the taxes, insurance, maintenance and shared area costs.
In a net lease, the tenant pays some or all of those costs on top of rent. Shared area costs are often billed as CAM; see CAM charges explained.
The operating expense clause
In office leases, this clause usually uses a base year or an expense stop. Under a base year, the tenant pays its share of increases over a chosen year’s costs. Under an expense stop, the tenant pays its share above a fixed amount per square foot.
The clause should also list exclusions, explain any gross-up for a partly empty building, and give the tenant a right to audit. Landlords typically bill estimates monthly and settle the year 90 to 120 days after year-end.
Use, Exclusives and Compliance
The use clause states what business the tenant may run in the space. A narrow use clause can block a future sale of the business or a change of concept.
Retail tenants may ask for an exclusive, a promise that the landlord will not lease nearby space to a direct competitor. The lease should also say who pays to bring the space up to building codes and zoning. The zoning side is covered in how commercial zoning limits a property’s use.
Repairs, Maintenance and Alterations
This clause splits repair duties between landlord and tenant. Some leases leave the roof and structure with the landlord and the interior with the tenant; others shift more to the tenant. Each building part should be named.
Alterations usually need the landlord’s written consent. The lease should also say whether the tenant must remove its improvements and restore the space when it leaves. Restoration can be an expensive surprise at the end of a term.
In Colorado mountain towns, maintenance clauses carry extra weight. Snow removal, roof snow and winter access should be assigned in writing, and RMCRE’s Durango outlook notes that mountain weather speeds up building wear.
Insurance and Indemnity
The insurance clause lists the coverage each side must carry and the limits. A lease may require the tenant to insure its own property and carry liability coverage naming the landlord.
The indemnity clause decides who pays when someone is hurt or property is damaged. The two sides may negotiate mutual indemnities and waivers of subrogation, so one side’s insurer does not pursue the other. Have an insurance agent review these terms against the actual policies.
Clauses to Negotiate
The clauses most worth negotiating are escalations, renewal options, assignment and subleasing, and the Colorado-specific duties.
- Rent escalations: how the rent rises over the term.
- Renewal options: the right to stay, and at what rent.
- Assignment and subleasing: a lease may allow or forbid them.
- Snow removal: a duty often written into Colorado leases.
- Tenant improvements: see tenant improvement allowances.
Assignment and subleasing in detail
An assignment transfers the tenant’s remaining interest in the lease to someone else. A sublease rents some or all of the space to a subtenant. The original tenant stays liable to the landlord for the rent and every other term.
Many commercial leases require the tenant to share with the landlord any sublease rent above the original rent. Tenants may ask that consent “not be unreasonably withheld” and that a sale of the business count as a permitted transfer.
Renewal, expansion and purchase options
A renewal option gives the tenant the right to extend on set terms. The lease should state the notice deadline and how the renewal rent is set, such as a fixed increase or a market-rate review.
Tenants can also negotiate a right of first refusal. A right of first refusal on purchase lets the tenant make an offer before the owner sells to someone else.
Default, Remedies and Early Termination
The default clause defines a breach, the notice the tenant gets and any time to cure. It then lists the landlord’s remedies, which can include ending the lease and recovering unpaid rent.
Early exits come in a few forms: a break clause written into the lease, a negotiated surrender, or forfeiture after a default. A tenant that expects to grow or move should negotiate a break right at the start, when it has the most leverage. Colorado eviction rules set specific notice periods, so a landlord should use a Colorado attorney before serving any demand.
Holdover
Holdover happens when the tenant stays after the lease ends. A lease can set holdover rent above the last rent, which pushes the tenant to renew or leave. Without a clause, a commercial tenancy of more than a year can convert into a year-to-year tenancy under common law.
Estoppel Certificates
Many commercial leases require the tenant to sign an estoppel certificate when the landlord sells or refinances. The certificate confirms the rent, deposit and expiry date, and lets the tenant state any claims against the landlord.
The lease usually sets a deadline to return it. Failing to sign on time can itself be a default if the lease says so. Buyers and lenders read estoppels as part of reviewing leases in due diligence.
Subordination, Non-Disturbance and Attornment (SNDA)
A subordination clause puts the lease behind the landlord’s existing or future mortgages. Mortgage lenders usually want this, so their loan ranks first.
Commercial tenants usually agree to subordination only in exchange for non-disturbance. Non-disturbance means the lender will honor the lease if it forecloses. Attornment means the tenant will accept the new owner as landlord. The three promises are usually combined in one SNDA signed by the tenant, landlord and lender.
Colorado Points to Write Into the Lease
Colorado leases share the same core clauses as leases elsewhere, but a few local points deserve specific language.
- Snow and winter access: who plows the lot, clears walks and removes roof snow, and who pays.
- Property tax pass-throughs: how the tenant’s share is estimated and trued up. The 2026 assessment rate is 25% for most commercial buildings, down from 27% in 2025.
- Redevelopment risk: RMCRE’s Q2 2026 Basalt update reports a three-story office building becoming a hotel. Its tenants must find new space. Term length, renewal options and any landlord relocation or termination rights matter in tight markets.
- Seasonal businesses: resort-town retailers may want rent schedules or percentage rent that match the ski and summer seasons.
Lease Review Checklist
Before signing, check each of these against the draft.
- The premises description and floor plan match the space toured.
- The start date, rent start date and any free-rent period are clear.
- Every escalation is written as a formula with a date.
- The operating expense clause lists exclusions, any cap and audit rights.
- The use clause is broad enough for future changes to the business.
- Repair, snow removal and replacement duties are assigned.
- Assignment, subleasing and sale-of-business rules are acceptable.
- Renewal and termination notice deadlines are in the calendar.
- An SNDA protects the tenant if the landlord’s lender forecloses.
- A Colorado real estate attorney has reviewed the final draft.
Frequently Asked Questions
What should be included in a commercial lease agreement?
At minimum: the parties, premises, term, rent, deposit, renewal terms, permitted use, maintenance, insurance, default and termination. Most leases also cover operating expenses, assignment, alterations, holdover and lender documents.
Can a commercial lease be verbal in Colorado?
A lease longer than one year generally must be in writing under the Statute of Frauds. Even for shorter terms, a written lease avoids disputes. Ask a Colorado attorney about any specific arrangement.
Who is responsible for repairs in a commercial lease?
The lease decides. Under a triple net lease the tenant usually pays for most maintenance, while the landlord often keeps the structure. The repair clause should name each building part.
Can a landlord sell the building during my lease?
Yes. The lease normally stays in force, and the buyer becomes the new landlord. The tenant may be asked to sign an estoppel certificate, and an SNDA protects the lease if a lender forecloses.
What happens if I stay after my commercial lease ends?
That is a holdover. The lease may charge higher holdover rent, and the landlord can seek to remove the tenant. Agree on a renewal or extension in writing before the end date.
Do I need a lawyer to sign a commercial lease?
It is strongly advised. A broker helps with rents and business terms, while a real estate attorney reviews legal risk such as default, indemnity and guaranty terms.
Lease Help in Colorado
RMCRE brokers prepare leases and negotiate the terms that matter over the long run: escalations, renewal options and who pays for what. See RMCRE leasing and management.
Rocky Mountain Commercial Real Estate has linked partner brokers across Colorado mountain towns since 2010. We help tenants and landlords from Grand Junction to the Basalt and Willits area.
