Signing a commercial lease is one of the biggest financial commitments a San Diego business will make. Whether you are opening a new restaurant in the Gaslamp Quarter, leasing office space in Sorrento Valley, or securing warehouse space in Otay Mesa, the terms of your commercial lease can make or break your business. Here are five common mistakes San Diego business owners make with commercial leases, and how a business law attorney can help you avoid them.
Mistake #1: Not Having the Lease Reviewed by an Attorney
Commercial leases are drafted by the landlord's attorney to protect the landlord's interests, not yours. Unlike residential leases, commercial leases in California are largely unregulated, meaning landlords have significant freedom to include terms that heavily favor them. Provisions related to personal guarantees, acceleration clauses, and assignment restrictions can create enormous financial exposure if you do not fully understand them before signing.
Mistake #2: Ignoring the CAM and Operating Expense Provisions
Common Area Maintenance (CAM) charges are one of the most disputed elements of commercial leases. Many tenants focus on the base rent without understanding that CAM charges, property taxes, insurance, and other operating expenses can add 30 to 50 percent to the total monthly cost. A San Diego business attorney can analyze these provisions, negotiate caps on annual increases, and ensure transparency in how charges are calculated.
Mistake #3: Overlooking the Personal Guarantee
Landlords frequently require business owners to sign a personal guarantee, which means that if the business cannot pay rent, the owner is personally liable for the remaining lease balance. For a five-year lease at $10,000 per month, that is a potential $600,000 personal obligation. Negotiating a limited or "burning" personal guarantee that decreases over time is one of the most valuable things a business attorney can do during lease negotiations.
Mistake #4: Failing to Negotiate Tenant Improvement Allowances
If your business requires build-out or customization of the leased space, the lease should clearly define who pays for tenant improvements, who owns them at lease end, and what happens if the lease terminates early. Ambiguity in these provisions is a leading cause of commercial lease disputes in San Diego. An experienced attorney ensures that tenant improvement clauses protect your investment.
Mistake #5: Not Planning for the Exit
Every commercial lease should address what happens at the end, or before the end. Termination clauses, early termination rights, renewal options, and assignment rights are critical for business flexibility. Many tenants do not realize until it is too late that their lease lacks any mechanism for early exit, leaving them on the hook for years of rent even if the business fails or relocates.
Protect Your Business Before You Sign
A commercial lease is a binding legal contract that will govern your business's largest recurring expense for years to come. The cost of having an attorney review and negotiate your lease before signing is a fraction of the cost of litigating a dispute after problems arise.
At Bayside Counsel, we review and negotiate commercial leases for San Diego businesses of all sizes. Whether you are a first-time tenant or an experienced operator, investing in legal review at the lease stage is one of the smartest moves a business owner can make. Contact us today to have your commercial lease reviewed before you sign.