By: Melanie V. De Marco
T. Keaton Turnipseed
Jacob Bedont
July 8, 2025
Signing a commercial lease is one of the most significant decisions a craft brewery will make, with far-reaching implications for operational continuity and financial health. A carefully negotiated lease can provide stability and support long-term growth, while overlooked provisions may create unexpected liabilities and operational constraints. Whether you are entering into a new lease or renegotiating an existing agreement, it is essential to approach the process with diligence and foresight. This article outlines some of the most important considerations to help breweries navigate commercial leases effectively and secure terms that are clear, flexible, and protective in a competitive market.
1. Understanding Lease Obligations
When signing a lease, it is essential for breweries to understand all obligations contained in the lease beyond rent and lease duration, which is most people’s primary focus. Other key terms often include notice periods for renewals, procedures for handling property damage, and the scope of the landlord’s responsibilities.
These terms are often not viewed as important—until they become an issue. For example, when you try to exercise your lease’s option to renew. Under California law, the terms of a renewal option must be strictly complied with, making the specifics of the option critical. Our firm litigated a case that centered around whether the option to renew had been exercised properly, and that client risked losing his business because of a term he didn’t consider important when the lease was first negotiated.
Many leases also impose restrictions on things such as signage or hours of operation, both of which can be critical for breweries that rely on taproom traffic or evening events. Insurance provisions also deserve careful review. Some landlords require coverage that may not align with your operations, such as auto policies or unusually high liability limits. These can often be negotiated to better reflect actual risks.
Permitted use clauses are especially important for brewers. Your lease should cover both your current operations and any anticipated expansion. If you think you might start serving food or conducting retail sales in the future, ensure the lease language is broad enough or specifically allows such activities.
Restrictions on assignments and subleasing should also be evaluated to preserve flexibility if your ownership structure or business model evolves. For example, many breweries start as sole proprietors and later incorporate. This can cause problems if the lease does not permit assignment to the new entity.
2. Avoiding Pitfalls and Liability Risks
Default conditions and their consequences deserve close attention. Commercial leases often define numerous scenarios as defaults beyond simply failing to pay rent—such as breaching operational requirements or failing to maintain equipment. Breweries should confirm whether the lease provides notice and an opportunity to cure defaults related to production activities, since compliance issues occasionally arise.
It is equally important to designate the correct tenant entity. Listing your LLC or corporation as the tenant, rather than an individual owner, helps protect against personal liability. If the landlord requires a personal guarantee, consider negotiating limits on its scope and duration to help maintain a clear separation between personal and business obligations.
3. Renegotiating with Confidence
As your lease term nears its end, you have a valuable opportunity to reassess both your short- and long-term needs. For breweries, this might include expanding square footage, securing additional production or cold storage space, requesting facility upgrades, or addressing long-standing maintenance issues. Clarify who will bear the cost of any improvements and confirm that responsibilities are clearly defined moving forward. It’s also important to ensure that the desired improvements are even allowed under the lease.
Understanding current market rates for comparable spaces can provide critical leverage, particularly when landlords attempt to justify above-market rent increases based on a tenant’s reluctance to relocate. A strong history of on-time payments and improvements to the property can support requests for more favorable terms, such as fixed-rate rent increases or rent abatements.
Tenants should also consider negotiating their next renewal option to secure additional stability. Begin these discussions well in advance—and we mean more in advance than you think—ideally six months or more before lease expiration. This can significantly strengthen your negotiating position and ensure you have time to relocate if necessary.
4. Structuring a Favorable Lease
While short, “simple” leases may appear convenient, they often lead to disputes because they fail to anticipate potential issues or outline clear procedures. A well-structured lease includes market-aligned rent with fixed-rate increases to support predictable budgeting. Renewal options offer long-term stability, and a clear use clause preserves operational flexibility as your brewery evolves.
5. Preparing for Today’s Market
Changing real estate prices, property taxes, and maintenance costs have made the rental market more challenging for all businesses—and brewers are no different. In many regions, landlords are more cautious about tenants with specialized uses. Careful market research is more important than ever, including understanding comparable rents and any zoning or licensing requirements that apply to your brewery.
Budgeting should account not only for base rent but also for common area maintenance (CAM) fees, utilities, and any anticipated improvements. If you are taking over a space previously occupied by another brewery or food business, inspect the infrastructure closely and understand why the prior tenant left.
Clear communication with the landlord from the outset can make a significant difference. Discuss your plans early to set expectations, secure tenant improvement allowances, or negotiate rent concessions—especially if your upgrades will enhance the property’s long-term value. Establishing a cooperative relationship can help resolve issues more efficiently and lay the groundwork for more favorable negotiations in the future.
6. Considering Intangible Factors
Beyond financial terms, intangible factors can also impact a brewery’s success. Visibility, foot traffic, and the character of the neighborhood are key to attracting loyal customers to your taproom. Research any planned development or zoning changes in the area to anticipate potential opportunities or challenges that could affect your business.
Conclusion
While commercial leases are not the sexiest part of owning a brewery, they are long-term commitments that require careful review and thoughtful negotiation—even for terms that may not appear important at first glance. Whether you are preparing to enter a new lease or planning to renew, understanding your legal obligations and planning for the future is key to protecting your investment.
The information presented in this article is not legal advice. Every brewery’s situation is unique. If you are preparing to sign a commercial lease or considering renegotiation, consult with qualified legal counsel to determine the best approach for your circumstances.
