Top Lease Clauses Tenants Must Know for 2025 in Commercial Real Estate

In the commercial real estate market, 2025 is set to be a year where vigilance isn’t just a choice—it’s a necessity. With debt from maturing loans expected to peak in 2027 at $1.26 trillion, banks are bracing for potential waves of defaults and tightening credit conditions.

The fallout from landlords struggling to secure financing or meet loan obligations has underscored the necessity for airtight tenant protections.

So, read on to learn how to reinforce your leasing agreements and navigate an evolving market with confidence. And remember, all of this information should be discussed with your qualified commercial real estate attorney. The top lease clauses to keep an eye on going into 2025 are:

• Self-Help Clause
• Tenant Improvement Allowance in Escrow
• Holdover
• SNDA

Self-Help Clause

This often overlooked provision can be the line between seamless business continuity and costly disruptions. Why is the self-help clause so essential? It puts power back into the tenant's hands.

If a landlord fails to perform essential maintenance or repairs in your leased space—whether due to financial constraints, mismanagement, or other issues—tenants with a well-negotiated self-help clause can legally take matters into their own hands.

This means they can commission repairs or address urgent property issues in their leased space themselves and deduct the cost from their rent or seek reimbursement.

Having this safety net ensures that operations are not held hostage by the shortcomings of property owners.

In this process, clear language is an absolute necessity. Ideally, it should outline the tenant’s right to:

• Undertake repairs promptly when the landlord defaults on obligations.
• Offset costs against future rent or receive direct reimbursements to minimize financial impact.
• Define the scope and process for invoking self-help to avoid disputes or delays.

Specifying a time window for self-help clauses is a must. For example, give the landlord a strict 5 to 30 business days to fix the issue after notice, and only then does the tenant step in.

This clear deadline protects the tenant from endless delays while giving the landlord a fair shot to resolve things. It creates a no-nonsense framework: the landlord has time to act, and the tenant can take decisive action if they don’t.

Tenant Improvement Allowance

Tenant Improvement (TI) allowances can be a powerful incentive in lease negotiations, offering tenants critical funding to customize their spaces.

However, the office market continues to present vulnerabilities, particularly in markets with high vacancy rates and economic uncertainty.

With landlords increasingly facing liquidity challenges, the risk of TI allowances going undisbursed is higher than ever.

Tenants are in a precarious position; if a landlord defaults before the TI allowance is disbursed, they may be left to cover costly construction expenses themselves or halt crucial build-out projects. Both scenarios can derail corporate real estate strategies, disrupt project timelines, and strain budget allocations.

One of the most effective ways to safeguard TI allowances is by negotiating for the funds to be held in an escrow account. This ensures the money is untouchable by the landlord and reserved exclusively for build-out costs.

By leveraging an escrow, tenants aren’t reliant on the landlord’s financial stability; instead, funds are secure and readily available when needed.

Escrow accounts act as neutral third-party holdings, releasing funds only when specific conditions are met. This setup gives tenants the confidence that their capital improvements won’t be compromised by a landlord’s financial troubles.

Setting Clear Terms

Lease clauses should outline clear, precise terms for the release of TI funds. This also goes for any aspect of commercial leasing.

When it comes to the TI allowance, this means minimizing the potential for dispute anywhere possible.

Instead of blanket reimbursement terms, negotiate for funds to be released in stages based on project milestones.

Avoiding a generic reimbursement approach should align the allowance with project cash flow needs and provides a built-in safety net—if the landlord fails to disburse funds on schedule, tenants have the flexibility to pivot before incurring further expenses.

Vague or ambiguous contract terms can lead to delays or disputes over TI disbursements, especially if a landlord faces financial strain.

Other tenants are going further to incorporate penalties into the lease for any delays in disbursing TI funds. These penalties should tie specific landlord obligations to the construction timeline, ensuring accountability and reducing the likelihood of funding hold-ups.

The Holdover Clause 

Speaking of delays- another vital strategy to keep your leases on track is by paying attention to the holdover clause when drafting them.

Because in the event of delays—whether due to TI-related issues in a new property or other unforeseen circumstances—tenants may find themselves in a situation where their lease extends beyond its original expiration date. This is where the importance of a well-negotiated holdover clause comes into play.

A holdover clause outlines the terms under which a tenant may remain in the leased premises after the lease term ends.

Without clearly defined holdover provisions, tenants may be subjected to excessive penalties or significant rent hikes that could strain their financial resources. And when we say excessive, we mean it… How about 150% or even 300% of the cost of your last month’s rent?

In this context, tenants need to leverage their negotiation power to lock in protections that prevent landlords from taking advantage of lease expirations. Here’s what needs to be front and center in those discussions:

1. Reasonable Rent Rates: Don’t let landlords use holdover periods as a financial sledgehammer. Some landlords will push for punitive holdover rates that skyrocket to 150% or even 300% of your original rent. Your strategy should be to negotiate these rates down to reasonable figures that reflect market norms, ensuring any temporary extension doesn’t sink your bottom line.
2. Clear Duration Terms: Ambiguity is your enemy. Vague holdover clauses can lead to indefinite extensions with no escape in sight, creating a state of operational limbo. CFOs need to push for lease language that sets strict timelines for how long a holdover can last before action is required. Whether it’s negotiating a short-term renewal or preparing for a smooth transition to a new space, having a defined duration helps your team maintain control and avoid drawn-out periods of uncertainty.
3. Defined Conditions: Don’t leave room for last-minute surprises. Make sure your lease outlines every condition under which the holdover period can be activated. Does it require landlord consent? What are the notice requirements? Again ambiguous conditions open the door to disputes and potentially costly delays. Having crystal-clear terms lets you dictate the terms of your tenancy rather than leaving it up to interpretation—or worse, your landlord’s whim.
4. Proactive Negotiation Is Non-Negotiable: Don’t wait until you’re a holdover tenant to consider the implications. A well-crafted lease strategy accounts for the unexpected. If you assume holdover clauses are just standard boilerplate that won’t affect you, think again. Proactive negotiation before the lease expires gives you leverage to secure favorable terms, saving you from the mercy of your landlord when time runs out.
   
   

The Subordination, Non-Disturbance, and Attornment Agreement (SNDA) 

Securing an SNDA clause in lease negotiations not only strengthens a tenant’s position but also ensures that business operations remain undisturbed regardless of ownership changes. It’s a proactive measure that directors of real estate and CFOs should prioritize to safeguard their company’s long-term interests.

They protect against operational disruptions that could occur if a landlord faces financial distress or if a property is sold as part of a foreclosure process. For large-scale tenants and corporations with extensive real estate portfolios, the absence of an SNDA clause could mean unexpected relocation costs, disrupted operations, or a forced renegotiation of lease terms that are less favorable.

Breaking Down the SNDA Clause

An SNDA clause comprises three core components:

1. Subordination: This part of the clause clarifies that the tenant’s lease is secondary to the property’s mortgage. If the landlord defaults on their mortgage, the lease could potentially be overridden by the lender. However, the next part of the SNDA ensures that the tenant’s interests are protected.
2. Non-Disturbance: This is the tenant’s safety net. The non-disturbance agreement guarantees that the tenant can continue occupying the leased premises under the original lease terms, even if the lender forecloses and takes over the property or sells it to a new owner. This protection is crucial for preventing disruptions that could lead to costly relocations or the need to renegotiate lease terms under unfavorable conditions.
3. Attornment: This part commits the tenant to recognize any new property owner as their landlord after a foreclosure or change in ownership. In exchange for the non-disturbance assurance, the tenant agrees to maintain their lease obligations and recognize the new property owner as their landlord, ensuring business continuity.

Securing holdover terms upfront prevents panic-driven decisions that can wreak havoc on your budget and operational timelines.

Takeaways for Tenants

Going into 2025, corporate tenants must move beyond seeing lease provisions as mere contract details.

They need to treat these clauses as strategic tools that can mean the difference between seamless operations and operational chaos.

To mitigate risk and preserve business continuity, proactive negotiations, comprehensive lease terms, and clear, enforceable conditions are key. Don’t wait for an emergency to test the strength of your lease—fortify it now to stay ahead in an uncertain market.

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