A lease is a short document with a lot of vocabulary. Most of the words describe one thing: who pays for what, for how long, and what happens when something changes. Here are the terms you’re most likely to meet in a small-office lease, what each one means, and the question to ask about it.
This is general information, not legal advice. If a lease is confusing or the stakes are high, have an attorney read it before you sign.
Rent
Base rent
The fixed amount you pay for the space each month, before anything else. Two offices with the same base rent can cost very different amounts once the other terms below are added.
Ask: Is this the whole monthly cost, or are there other charges on top?
Gross lease (also called full-service)
You pay one rent, and the landlord covers most or all of the building’s operating costs, such as utilities, property taxes, insurance, and upkeep of shared areas. It’s the simplest to budget for and is common for small offices.
Ask: Which costs, exactly, are included? Get the list in the lease.
Modified gross lease
A middle version. You pay a base rent that covers many costs, and you pay directly for some, often your own electricity, internet, or cleaning. The lease should say clearly which are which.
Ask: What do I pay for separately, and how is it billed?
Triple net (NNN) lease
You pay base rent plus your share of the building’s property taxes, insurance, and maintenance. It’s more common for larger commercial space than for one office in a small building, but you may see it. The monthly number can move from year to year.
Ask: What was last year’s total for those extra charges, and how much can they rise?
Common area maintenance (CAM)
Your share of the cost of keeping shared parts of the building running: hallways, entrances, restrooms, parking, and snow removal. In a gross lease it’s inside the rent. In a net lease it’s a separate line.
Ask: Is CAM included, and if not, how is my share calculated?
Money at signing
Security deposit
Money held against damage or unpaid rent. The lease should say how much, what it can be used for, and how quickly it comes back after you leave. Michigan’s security deposit law is written for homes and apartments, so for an office the lease itself sets the rules.
Ask: How much, when do I get it back, and what can be deducted?
First month’s rent
Most landlords ask for the first month with the deposit before handing over keys.
Time
Term
How long the lease lasts: month-to-month, one year, or longer. Our guide to month-to-month vs. annual leases covers how to choose.
Renewal option
A right to extend the lease for another set term, often at a rate you can predict. Without one, the landlord can offer new terms, or none, when the lease ends.
Ask: Do I have an option to renew, and how is the renewal rate set?
Holdover
What happens if you stay after the lease ends without a new agreement. Some leases charge a higher rent for the holdover period.
Ask: What is the holdover rate, and how much notice do I need to give?
Notice
How far ahead either side must say it’s ending the lease. This matters even on month-to-month leases.
Use and changes
Permitted use
The kind of business you’re allowed to run in the space. Make sure it covers your work, including anything unusual: evening clients, classes, or overnight equipment.
Tenant improvements (TI)
Changes to the space, from paint to built-in shelves. Some landlords do them before you move in, some offer an allowance, and some allow none. Ask who pays and who owns them when you leave.
Ask: May I paint, hang shelves, or mount a TV, and do I have to restore the room at the end?
Signage
Whether you may put your name on the door, in the directory, or outside. It’s often controlled by the landlord and sometimes by the village or township.
Risk
Personal guarantee
A promise by you, personally, to pay the lease if your business can’t. It’s common for small businesses, and it means the landlord can pursue your personal assets. Understand what you’re guaranteeing, for how long, and whether it falls away after a period of on-time payments.
Ask: Is a personal guarantee required, and can it be limited?
Insurance
Many leases require you to carry general liability insurance and to name the landlord as an additional insured. Your furniture, computers, and files usually need their own coverage.
Default and cure
What counts as breaking the lease, and how long you have to fix it. A short cure period on a late payment can turn a small mistake into a big problem.
Ask: How long do I have to correct a missed payment before it becomes a default?
Sublease and assignment
Whether you can hand the space to someone else if you leave early. Without that right, you may be paying for an empty office until the term ends.
Ask: If my plans change, can I sublease or assign the lease, and does the landlord have to approve?
A short reading list
Read the lease in this order for the fastest picture of what you’re signing:
- Rent, deposit, and what’s included
- Term, renewal, and notice
- Permitted use and changes
- Default, guarantee, and insurance
- Anything about ending the lease early
Then use the questions in what to ask before leasing an office and see how to negotiate anything that doesn’t work for you.
Next step
Once you know the terms you care about, request a tour and ask for the lease up front so you can read it at home.