A business that leases real estate and improvements (buildings, etc.) in the form of space for offices, a warehouse, a restaurant, a nail or hair salon, a clothing store, a coffee shop, or other commercial (nonresidential) space will usually be required to sign a written contract known as a commercial lease agreement.

The tenant (the business occupying the space) who signs a commercial lease agreement is generally expected to be a more savvy, sophisticated, and informed tenant (also known as a lessee) than a tenant in a residential lease, and the law usually does not provide a commercial tenant with the same protections as residential tenant receives.

Because the law does not provide a commercial tenant with many protections, it is up to the commercial tenant to read, understand, and negotiate protections in a proposed lease agreement before signing it, as most every paragraph in a commercial lease agreement can have a significant impact on a business’s operations and financial stability.

Many commercial leases include a provision (paragraph or paragraphs) requiring the tenant to pay a security deposit to protect the landlord against damage to the property and to ensure the payment of at least some portion of the rent.

The security deposit provision should include the circumstances under which the landlord may be able to keep some or all of the security deposit following termination of the lease at the end of the lease term, or earlier termination, as provided by the agreement. The security deposit provision should also provide for the landlord’s obligation to return the security deposit to the tenant following termination of the lease when the landlord does not have the right to retain some or all of the security deposit.

In New Jersey, a commercial lease agreement is a binding contract between a landlord and a business tenant for the rental of nonresidential property, such as office space, warehouses, or retail locations. Unlike residential tenants, commercial tenants are presumed to have greater expertise and bargaining power, and thus they receive fewer legal protections under state law. It is crucial for a business tenant to thoroughly review, understand, and negotiate the terms of a commercial lease before signing. This includes provisions related to security deposits, which are commonly required to cover potential property damage and ensure rent payment. The lease should clearly outline the conditions under which the landlord can retain the security deposit and the obligations for its return upon lease termination. Since commercial lease agreements can significantly affect a business's operations and financial health, it is often advisable for a tenant to consult with an attorney to ensure their interests are adequately protected in the lease.