Lease Agreement Risk Flags Checklist

A tool for founders, HR, finance, and compliance teams to systematically identify and track potential legal, financial, and operational risks in commercial or residential lease agreements. Everything runs in your browser—no data is sent online.

Informational only. Not legal advice.

Risk Flag Checklist

Review your lease agreement. Check all flags that apply. Each flag contributes to your overall risk score.

Financial & Rent Terms

Automatic Rent Escalation without Cap: Rent increases are tied to an index (e.g., CPI) but with no maximum annual percentage limit.

Uncapped Operating Expense (CAM) Pass-Throughs: Tenant is responsible for common area maintenance costs with little transparency or audit rights.

Personal Guarantee Required Indefinitely: Founders or principals must personally guarantee the lease for its entire term, even if the business is sold.

Operational & Control

Excessive Landlord Approval Rights: Landlord must approve minor alterations, subletting, or signage changes, with approval "not to be unreasonably withheld" language missing.

Continuous Operations Clause: Tenant must keep the premises open for business specific hours/days, limiting flexibility or remote work transitions.

Broad Indemnification: Tenant must indemnify landlord for claims arising from landlord's negligence or actions outside tenant's control.

Risk Assessment

Check flags and click "Calculate Risk Score"

Impact Weighting (Default: 1.0)

Low (0.5) High (2.0)

Adjusts the weight of each flagged item.

Risk Tracker

Flag	Status	Action
No tracked items yet

Why Lease Risk Review Matters

Lease agreements are long-term obligations that can cripple cash flow, limit operational flexibility, and expose your company to unexpected liabilities. Many founders and operators sign standard-form leases without realizing the financial and legal traps buried in the fine print.

Common Failure Modes

Runaway costs: Uncontrolled rent escalations and opaque operating expense reconciliations can double your occupancy costs within a few years.
Inability to pivot or sublet: Restrictive assignment clauses can prevent you from selling the business or downsizing your space during a downturn.
Personal liability: Unbounded personal guarantees can put founders' personal assets at risk long after they've left the company.
Compliance blind spots: Missing clauses for data privacy, security, or accessibility can create regulatory exposure.

Realistic Examples

Example 1: The Uncapped Escalation

A 5-year lease with annual CPI-based rent increases, no cap. Year 1 rent: $5,000/month. If CPI jumps 8% in year 2, then 7% in year 3, your year 3 rent becomes ~$5,800/month—a 16% cumulative increase. With a 5% annual cap, year 3 rent would be ~$5,512.

Example 2: The Overbroad Repair Obligation

Lease requires tenant to maintain and repair all systems, "including structural elements." A roof leak due to normal wear and tear could result in a $20,000 repair bill that should be the landlord's responsibility under a typical "walls-in" limit.

Typical Negotiation Ranges

Clause	High Risk	Moderate Risk	Low Risk / Market Standard
Rent Escalation Cap	No cap	5-7% annual cap	3-4% annual cap or fixed %
Personal Guarantee Term	Full lease term	2-3 years, then reduce/remove with good payment history	6-12 months, or corporate guarantee only
Subletting/Assignment Approval	Landlord's sole discretion	"Not to be unreasonably withheld" with specific criteria	"Not to be unreasonably withheld, conditioned, or delayed"

Common Mistakes Checklist

Not verifying square footage calculations (rentable vs. usable).

Assuming you can break the lease easily if business fails.

Not requiring landlord to provide annual CAM expense detail with audit rights.

Quick Risk Score Simulator

Adjust the likelihood and impact of a single hypothetical lease clause to see its individual risk score.

Likelihood (1=Very Unlikely, 5=Very Likely)

12345

Impact (1=Minor, 5=Severe)

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Single Clause Risk Score

Medium

Score = Likelihood × Impact
High risk: 16-25, Medium: 6-15, Low: 1-5

Frequently Asked Questions

How accurate is this risk scoring?

This tool provides a simplified, educational framework. Real lease risk depends on jurisdiction, specific wording, business context, and negotiation leverage. The scoring is a conversation starter, not a legal determination.

What's the difference between a "red flag" and a "negotiable item"?

A "red flag" is a clause that is unusually one-sided or exposes you to uncontrolled liability. Many items are negotiable—use this checklist to prioritize which terms to push back on. Landlords often expect negotiation on personal guarantees, repair limits, and subletting.

How should I document my lease review?

Create a simple tracker (like the one in this tool) with each flagged clause, your proposed alternative, owner, and deadline. Keep all email correspondence and marked-up drafts. This creates an audit trail and ensures nothing falls through the cracks.

When should I consult a lawyer?

For any lease binding your business, especially if it's long-term, high-value, or includes unusual terms. A qualified real estate attorney can help you negotiate, understand local laws, and avoid costly mistakes. Use this tool to prepare and focus your legal consultation.

Formulas & Assumptions

Risk Score Calculation: Overall Score = (Sum of Individual Flag Scores) × Impact Weighting. Individual Flag Score = Likelihood (1-5) × Impact (1-5). Likelihood and Impact are preset per flag but adjustable in advanced tools.
Impact Weighting: A global multiplier (0.5 to 2.0) to adjust for your risk appetite. Default is 1.0.
Risk Levels: Low (0-15), Medium (16-30), High (31+). These thresholds are illustrative.
Rounding: Scores are rounded to the nearest whole number for display.
Data Persistence: All data stays in your browser session. Refreshing the page will clear data unless you export/copy it.

Important Disclaimer

For informational and educational purposes only. This tool does not provide legal advice and does not guarantee compliance. Laws and requirements vary by jurisdiction, industry, and contract terms. Lease agreements are legally binding documents with significant financial consequences. Consult qualified legal counsel or compliance professionals for decisions that carry legal risk.

General concepts referenced:

General contract timeline and documentation best practices concepts
Commercial lease negotiation principles (non-jurisdictional)
Risk management frameworks (likelihood × impact)
Recordkeeping and audit readiness principles

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Lease Agreement Risk Flags Checklist

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