Legal Considerations When Leasing Commercial Property in California

Commercial real estate adds over $48.3 billion annually to California’s economy. These properties—from warehouses and offices to retail and industrial spaces—allow businesses to open, expand, and thrive.

For many, it all starts with a commercial lease.

But signing that lease isn’t a routine formality. It’s a legal agreement that can affect your expenses, responsibilities, and flexibility for years to come.

Most commercial leases are written to favor the landlord. Without a thorough legal review, tenants can end up locked into terms that are expensive, restrictive, or hard to manage down the line.

Leasing commercial property comes with legal and financial risks—protect your business by knowing what to look for before you sign.

Types of Commercial Lease Agreements

Commercial leases aren’t one-size-fits-all. When it comes to high-value real estate, most lease structures fall under:

Gross Lease

In a gross lease, the tenant pays one fixed amount each month. The landlord covers all or most operating expenses, including property taxes, insurance, and maintenance. This type is more predictable for budgeting but may come with a higher base rent.

Net Lease

Net leases increase tenant responsibilities on the financial side of the agreement. There are three common types:

• Single net lease. Tenant covers base rent and property taxes.
• Double net lease. In addition to rent, the tenant pays property taxes and insurance.
• Triple net lease (NNN). The tenant is responsible for rent, taxes, insurance, and maintenance costs.
  
  

Triple net leases are very common in retail and industrial spaces. They often look like low-rent agreements, but the added expenses can be substantial.

Modified Gross Lease

This type divides costs between the landlord and tenant. In addition to base rent, the tenant may cover certain expenses like utilities or janitorial services. It’s often used in multi-tenant office buildings and offers a middle ground between gross and net leases.

Always make sure you understand which lease structure you are agreeing to. It determines how much you pay each month, what costs you’re responsible for, and how you manage your business expenses.

Key Legal Clauses To Review

Once you decide which type of lease fits your goals, read through it carefully. Certain commercial lease clauses carry long-term financial or legal consequences.

Pay special attention to the following:

Even a few words in these clauses can change responsibility, drive up costs, or restrict your flexibility—so make sure you understand every detail before signing.

Tenant Rights and Landlord Responsibilities

California commercial lease laws offer fewer protections than residential agreements, but certain tenant rights and landlord responsibilities still apply.

Clarify how your agreement addresses the following:

• Disclosure requirements. Landlords must disclose and address known hazards, such as mold, and comply with local building codes. They may also need to share information about prior uses that pose health or safety risks.
• Access and habitability. While habitability laws apply mainly to residential units, commercial tenants still have the right to access and use the space as outlined in the lease. Locked doors, utility shutoffs, or unsafe conditions may constitute a breach.
• ADA compliance. Public-facing businesses must meet federal accessibility standards. Leases often assign responsibility for upgrades to the tenant, the landlord, or split between both—don’t finalize the contract until you know who covers what.
  
  

Never assume these terms are automatically included. Have a qualified commercial real estate attorney review your lease to ensure everything is clearly outlined—and that the terms protect your interests.

Zoning and Use Restrictions

When considering a commercial property, confirm that it’s legally approved for the business you plan to run. Zoning laws and lease restrictions can limit how you operate, and violating them can lead to costly delays or even eviction.

Check the following:

• Zoning compliance. Make sure the property is zoned for your business type. In LA County, for example, zones include Commercial (C), Manufacturing (M), and Residential (R).
• Lease restrictions. Some agreements include limits on business type, hours of operation, or services like food or alcohol—check for anything that could interfere with how you plan to run your business.
• CC&Rs. Ask for copies of any Covenants, Conditions, and Restrictions tied to the property. These are often found in shopping centers, business parks, or HOA-managed areas and can place further limits on signage, parking use, or the type of inventory you can sell.
  
  

Review the lease and check local zoning maps through the city or county planning department to confirm the space matches your intended use.

Negotiate Lease Terms That Work in Your Favor

Once you receive a lease draft, it’s time to negotiate. You don’t have to accept the initial version—most commercial leases are open to changes, and a few adjustments can change the agreement in your favor.

Consider these tips:

• Get a legal review early. Have a skilled lease negotiation attorney review the lease before you commit—even verbally. They can identify problem clauses and suggest better terms.
• Watch for one-sided terms. Repair, access, and penalty clauses are often written to benefit the landlord. Partner with your attorney to oppose anything that limits your control or adds unnecessary costs.
• Negotiate tenant improvements (TI). If you need to customize the space, clarify who pays, what’s allowed, and how the work must be done. Ask if the landlord offers a TI allowance.
  
  

Treat the initial lease offer as a starting point—clear terms now can prevent disputes and expenses later.

Avoid These Costly Lease Pitfalls

Even experienced business owners overlook important lease details. These are a few of the most common (and costly) errors:

• Misunderstanding CAM charges. Common area maintenance fees cover shared spaces like parking lots or lobbies. Without a cap, these fees can increase each year. Limits also don’t usually apply to uncontrolled expenses like taxes, insurance, or utilities, unless you negotiate otherwise. Ask for a full breakdown and limit how much they can rise.
• Not defining default and remedies. Landlords may charge penalties, restrict access, or begin eviction if the lease doesn’t explain what happens after a missed payment or rule violation. Clarify what the agreement says about grace periods, notice requirements, and time to fix issues.
• Overlooking local restrictions. Cities often have separate rules for outdoor seating, business licenses, or building use. Check with the local planning or building department to confirm your necessary approvals.
  
  

Legal support for real estate transactions can clarify your obligations, strengthen your negotiation position, and help you avoid expensive mistakes.

Work With a Real Estate Attorney To Protect Your Interests

Commercial leases leave little room for error. Early legal guidance can prevent future setbacks and unnecessary expenses if you’re negotiating terms, dealing with a disagreement, or planning an early exit.

Reviewing a lease with a commercial real estate attorney ensures you understand your options and can protect your interests before any issues arise.