The Basics of Commercial Leases in Pennsylvania: What Business Owners Need to Know

Understanding Commercial Leases in Pennsylvania

Whether you’re starting a business, expanding to a new location, or relocating, signing a commercial lease is a pivotal step. In Pennsylvania, commercial leases are legally binding contracts between landlords and tenants for business property use — and they differ significantly from residential leases. This guide walks you through the basics, helping you navigate key provisions and avoid common pitfalls.

Types of Commercial Lease Agreements

1. Gross Lease

In a gross lease, the tenant pays a fixed monthly rent, and the landlord covers most (or all) operating expenses like property taxes, insurance, and maintenance. This type is predictable for tenants but usually comes with higher base rent.

2. Net Lease

A net lease shifts certain costs to the tenant. There are subtypes:

• Single Net Lease: Tenant pays rent and property taxes.

• Tenant pays rent, property taxes, and insurance.

• Tenant pays rent, property taxes, insurance, and maintenance. Common for retail spaces and long-term agreements.

3. Modified Gross Lease

This is a hybrid model where the landlord and tenant split operational expenses. It's more flexible and can be negotiated depending on the needs of both parties.

Key Components of a Commercial Lease

Lease Term

The lease term defines the start and end dates of the agreement. Commercial leases in Pennsylvania typically span 3 to 10 years. It’s crucial to determine whether the lease automatically renews and under what conditions.

Rent Structure

Understand how rent is calculated and whether it increases annually. Some leases include a base rent plus a percentage of sales (common in retail), while others apply escalation clauses tied to CPI (Consumer Price Index).

Security Deposit

Security deposits in commercial leases are negotiable. Make sure the lease outlines the amount, where it is held, when it is returned, and under what conditions deductions may occur.

Use Clause

This clause specifies how the property may be used (e.g., office, retail, industrial). A narrow use clause can limit your business operations or prevent future expansion. Ensure it aligns with your goals.

Maintenance and Repairs

Clearly identify responsibilities for property upkeep. In NNN leases, tenants usually maintain the interior, while landlords may handle structural components. Ambiguities here can lead to disputes and unexpected costs.

Improvements and Alterations

This section governs whether tenants can make changes to the space. Always clarify what types of alterations require landlord approval and who owns improvements once the lease ends.

Common Commercial Lease Terms and Clauses

Assignment and Subletting

These clauses define whether you can transfer the lease to another business or sublet the space. Without this right, you could be stuck with a lease you no longer need.

Personal Guarantee

Landlords often require business owners to personally guarantee lease obligations. This means you're personally liable if the business fails. Negotiate limited guarantees whenever possible.

Exclusive Use Provision

This clause prevents the landlord from renting other units in the same property to your direct competitors. It’s vital in retail leases to protect your market position.

Termination Clause

Termination rights should be spelled out, including early termination options, notice periods, penalties, and what happens if you default or the landlord sells the property.

Pennsylvania-Specific Considerations

Landlord-Tenant Laws

Unlike residential leases, commercial leases in Pennsylvania are governed primarily by contract law, not landlord-tenant statutes. This means the courts enforce the lease as written, with little statutory protection for tenants. That makes careful drafting and review even more critical.

Local Zoning and Permitting

Before signing, confirm that your intended use complies with zoning laws and that the property has the necessary permits or licenses. This is your responsibility as a tenant.

Tips for Negotiating a Commercial Lease

1. Don’t Use a Template Lease Without Review

Landlords often provide boilerplate leases that heavily favor them. Always have the document reviewed by a qualified attorney who can spot hidden risks and negotiate better terms.

2. Clarify “CAM” Charges

Common Area Maintenance (CAM) charges can include snow removal, landscaping, lighting, and more. Understand what’s included, how it's calculated, and if there are caps on increases.

3. Plan for Business Growth

Negotiate options to expand, relocate within the building, or terminate early if your business outgrows the space. Planning ahead can save thousands in relocation costs.

4. Document All Verbal Promises

If your landlord makes verbal assurances (e.g., promising to install signage or repair HVAC), ensure those terms are in writing. Courts will not enforce side agreements that aren’t documented.

Risks of Not Consulting an Attorney

Many business owners mistakenly assume that signing a lease is a formality. However, one-sided or vague lease terms can expose your business to major financial and legal risks. Common pitfalls include:

• Unexpected costs for repairs or maintenance

• Lease terms that prevent flexibility or business growth

• Personal liability for company debts

• Disputes over property condition or improvements

A skilled attorney can explain your rights, negotiate favorable terms, and ensure your lease protects your business long-term.

When to Involve a Lawyer

Before Signing the Lease

Always have an attorney review and explain the lease before you sign. This is especially important for first-time business owners or long-term commitments.

When Negotiating Terms

An attorney can help you negotiate more favorable terms regarding rent, liability, improvements, and more. This gives you greater control over your business space and costs.

If Disputes Arise

If a dispute emerges — over rent increases, property conditions, or lease enforcement — an attorney can represent you and protect your interests.

Call Ament Law Group

Navigating a commercial lease can be complex, and one misstep can cost your business thousands. Whether you're a startup or a seasoned entrepreneur, the attorneys at Ament Law Group, PC are here to ensure your lease is fair, compliant, and structured for success.

Contact us today at (724) 733-3500 to schedule a consultation with our experienced real estate and business attorneys.