Commercial Lease Agreement: 10 Clauses to Check Before Signing

Before you sign a commercial lease, read ten clauses: who the landlord is and whether it can lease the space, the rent and every other charge, the term and renewal, the permitted use, repairs, alterations, assignment and subletting, break rights, default and cure periods, and what you must do when you leave. The lease is normally drafted by the landlord, and wherever it is silent, the law of the place where the property is usually decides. That law differs between countries, so the examples below name the jurisdiction they come from.

Which law applies to a commercial lease?

Usually the law of the country where the property is. Under the EU’s Rome I Regulation, a tenancy of immovable property is governed, absent a choice, by the law of the country where the property is situated (Art. 4(1)(c)). Taiwan presumes the same when a juridical act concerns immovable property (Act Governing the Choice of Law in Civil Matters Involving Foreign Elements, Art. 20(3)). Even if a foreign company signs, expect local tenancy rules to apply, and check them locally.

The 10-point commercial lease checklist

#	Clause	Question to answer before signing
1	Landlord and property	Is the landlord the owner, or authorised to lease? Is the property mortgaged? Is your use permitted there?
2	Rent and charges	What is the total monthly cost, including service or management charges, and how and when can it rise?
3	Term and renewal	How long, can you renew, and on what terms?
4	Permitted use	Does the use clause cover everything you will do, including registering your company at the address?
5	Repairs	Who repairs what, and what happens if the landlord does not?
6	Alterations and fit-out	What can you change, with whose consent, and who owns the improvements?
7	Assignment and subletting	Can you transfer the lease or sublet part of the space?
8	Break rights	Can you leave early, on what notice and at what cost?
9	Default and cure	What counts as default, how long do you have to fix it, and when can the landlord terminate?
10	Reinstatement and deposit	What condition must you return the space in, and when is the deposit repaid?

Who owns the property, and what happens if the landlord sells?

Check the land register for the owner and any mortgage, and ask for proof of authority if someone other than the owner signs. A sale can affect you. In Taiwan, a lease continues against a new owner once the tenant has possession, but not for a lease of real property longer than five years, or for an indefinite term, that was not notarised (Civil Code, Art. 425). A lease of real property for more than one year must also be in writing, or it is treated as a lease for an indefinite period (Art. 422).

What does the rent actually cover?

Ask for the total cost of occupation in writing: base rent, service or management charges, utilities, taxes the tenant pays, insurance, the deposit and the rent-review mechanism. Check how shared costs are calculated and whether you can see the accounts behind them. Late rent can end the lease: in Taiwan the landlord must set a reasonable deadline before terminating, and for a building, the lease cannot be terminated for arrears of less than two months’ rent (Civil Code Art. 440).

Who pays for repairs?

The lease decides, and the law only fills the gap. In Taiwan, unless the contract or custom says otherwise, the landlord makes all repairs (Civil Code Art. 429) and must keep the premises fit for the agreed use (Art. 423). If the landlord does not repair within a reasonable deadline, the tenant may terminate, or repair and deduct the cost from the rent (Art. 430). Many commercial leases shift repairs to the tenant, so read the repair clause with the inventory of what is handed over.

Can you sublet, assign or leave early?

Only as far as the lease and the local law allow. In Taiwan a tenant needs the landlord’s consent to sublet, except that a tenant of a building may sublet part of it unless the lease prohibits it; unauthorised subletting allows the landlord to terminate (Civil Code Art. 443). Leases often prohibit both, so negotiate:

• assignment or subletting with consent “not unreasonably withheld”, including to group companies;
• a break right on a fixed date or after a minimum period, with the notice period and any fee stated;
• what happens to the deposit and fit-out if you break.

Can the landlord refuse to renew?

It depends on the jurisdiction. In England and Wales, Part II of the Landlord and Tenant Act 1954 applies to tenancies of premises occupied for a business (s.23). Such a tenancy does not end unless terminated under the Act, and the tenant may apply to the court for a new tenancy (s.24). The parties can exclude this protection for a fixed-term lease, but only after the landlord serves the prescribed notice and the statutory requirements are met (s.38A). Many other countries give no automatic right to renew, so an option to renew must be written into the lease.

What do you owe when you move out?

Whatever the reinstatement clause says, which can be expensive. Many leases require the space to be returned to its original condition, removing your fit-out at your cost. In Taiwan the tenant must return the property at the end of the lease (Civil Code Art. 455); the condition and who keeps improvements are matters for the lease. Agree a photographic schedule of condition at the start, a cap or list for reinstatement works, and a deadline for returning the deposit.

Frequently asked questions

What is the difference between assigning and subletting a lease?

An assignment transfers the lease itself to a new tenant. A sublease creates a new tenancy under yours, and you usually stay liable to the landlord. Whether the outgoing tenant remains liable after an assignment depends on the lease and the local law.

Is a “standard” lease negotiable?

Yes. A standard form is the landlord’s starting position. Rent-free periods, caps on service charges, break rights and reinstatement limits are commonly negotiated before signing.

Should a foreign company sign the lease or a local subsidiary?

It depends on where you will register and operate. Landlords often ask for a local entity, a guarantor or a larger deposit. Decide which entity will sign before you negotiate, because that entity carries the liability, and have the lease checked against your plans through a contract review. For the clauses every contract needs, see the essential clauses every business contract needs.