A commercial lease in Alabama is not a consumer contract. There is no statutory scheme protecting a business tenant the way residential law protects a homeowner — you get the terms you negotiated.
Under Ala. Code § 8-9-2(5), a lease of land for a term longer than one year must be in writing. Anything past twelve months on a handshake is not something to build a business on.
The quoted rent is not the cost
The first question on any commercial lease is what kind it is, because the headline number means different things.
| Type | Who pays taxes, insurance and maintenance |
|---|---|
| Gross | Landlord. The rent is close to your actual cost |
| Modified gross | Split, defined in the lease. Read the definition, not the label |
| Triple net (NNN) | Tenant pays taxes, insurance and maintenance on top of base rent |
| Absolute net | Tenant pays essentially everything, including structure and roof |
A $12 per square foot triple net lease and a $18 gross lease can be the same deal, or wildly different ones. Get the landlord’s actual operating expense history before you compare.
The clauses that move money
- CAM — common area maintenance. Ask for a definition of what is included, a cap on annual increases, exclusion of capital items, and an audit right. Uncapped CAM in a multi-tenant building is an open-ended obligation.
- Escalations. Fixed percentage, CPI-linked, or reset to market. Model it across the full term, including options — a 3% annual escalation is roughly a 34% higher rent in year ten.
- Repair and replacement. Who replaces the roof and the HVAC. On an older building this single allocation is the difference between a good deal and a bad one. Push capital replacements to the landlord, or negotiate a cap and amortization over useful life.
- Personal guaranty. If you formed an entity to hold the business, a personal guaranty undoes much of that protection. Negotiate for a burn-off after a period of on-time payment, or a cap at a number of months of rent.
- Assignment and subletting. If you cannot assign, you cannot sell your business as a going concern. At minimum get consent “not to be unreasonably withheld, conditioned or delayed,” plus a permitted transfer to an affiliate or a buyer of substantially all assets.
- Renewal options. At what rent, and on what notice. “At then-market rate” with no valuation mechanism is a dispute waiting to happen. Missing the notice deadline is worse — diary it the day you sign.
- Exclusive use and co-tenancy. In retail, whether the landlord can lease to your direct competitor, and what happens if the anchor tenant leaves.
- Holdover. What you pay if you stay past the term. Rates of 150% or 200% of base rent are common and are rarely negotiated because nobody expects to hold over.
Send us the lease before you sign it
A commercial lease review is a defined, fixed piece of work and it is the cheapest point in the whole relationship to change something. Call the Athens office.
Things landlords are usually willing to move on
Tenants often assume a landlord’s form is fixed. In this market it usually is not, particularly outside the newest space.
- A cap on CAM increasesTypically the easiest concession to obtain, and one of the most valuable over a long term.
- HVAC replacement moved to the landlordOr capped, with anything over the cap amortized over useful life. On an older building, ask.
- A guaranty burn-offPersonal guaranty that reduces or terminates after 24 or 36 months of on-time payment.
- Assignment to an affiliate or asset buyer without consentProtects your exit without giving the landlord an unknown tenant.
- A defined renewal mechanismEven if the rent resets to market, agree now on how market is determined and who decides.
- Tenant improvement allowance and free rentUsually easier to get than a lower base rent, because it does not reset the landlord’s building valuation.
If you are the landlord
The same document from the other side. Priorities invert: a clear definition of the tenant’s obligations, a personal guaranty where the entity is thin, strict default and notice provisions, control over assignment, and an estoppel obligation so you can sell or refinance without chasing tenants.
One Alabama-specific note: if the property is held in an estate, a personal representative needs prior court approval to enter a lease for a term of more than one year (Ala. Code § 43-2-844). This catches families who inherit a commercial building and start leasing it before the estate is settled.
A long-term commercial lease is an interest in land. Where the term is significant, consider recording a short memorandum of lease with the probate judge of the county where the property sits. Under § 35-4-90 recording is what gives notice to later purchasers and mortgagees — an unrecorded interest can be defeated by a buyer without notice.
Ala. Code §§ 35-4-50, 35-4-90.What we do
We draft and review commercial leases, form the entities that sign them, handle the closings when a tenant decides to buy the building instead, and represent landlords in evictions when a tenant defaults. We do not represent tenants in residential landlord and tenant disputes.
Common commercial lease questions in Alabama
Does a commercial lease have to be in writing in Alabama?
A lease for a term longer than one year must be in writing under Ala. Code § 8-9-2(5), which excepts only leases for a term not longer than one year. Put any commercial arrangement in writing regardless — the statute is a floor, not a strategy.
Can a landlord raise CAM charges without limit?
If the lease permits it, yes. There is no statutory cap on common area maintenance in a commercial lease. Negotiate a definition of included costs, an annual cap, exclusion of capital expenditures, and an audit right before you sign.
Should I sign a personal guaranty on a commercial lease?
Sometimes it is unavoidable, particularly for a new business. It undercuts the liability protection of your entity, so negotiate limits — a burn-off after a period of on-time payment, or a cap at a set number of months of rent.
What happens if I miss my renewal option deadline?
Usually the option lapses and you are at the landlord’s mercy on both rent and whether you can stay at all. Renewal notice deadlines are strictly enforced. Calendar it with a reminder six months ahead the day you sign the lease.
Can I get out of a commercial lease early in Alabama?
Only as the lease permits, or by negotiating a termination with the landlord. There is no statutory right to break a commercial lease. Where a business is closing or moving, an early negotiated exit is usually cheaper than a default — start that conversation before you miss a payment.
Who pays for the HVAC in a commercial building?
Whoever the lease says. In a triple net lease it is commonly the tenant, including replacement. On an older building that is a significant exposure. Ask the age of the units during due diligence, and negotiate the allocation before signing.
A lease review is cheap. A bad lease is not.
We review and draft commercial leases for tenants and landlords across Limestone, Madison, Morgan and the surrounding counties.
Daniel Shawn Pickens
Attorney at Daniel S. Pickens Law in Athens, Alabama. The firm handles estate planning, probate, real estate closings and title work, deeds, business formation and contracts for families and businesses across Limestone, Madison, Morgan, Lauderdale, Colbert, Franklin and Lawrence Counties.
Questions about a real estate matter? Email closing@dsp.law or call 256-434-1678.
Daniel S. Pickens Law · 300 West Green Street, Athens, Alabama 35611
