Avoid costly mistakes by understanding the fine print of your lease agreement.
Signing a commercial lease in Texas is a major business decision, and one that can impact your bottom line for years to come. Unlike residential leases, commercial leases in Texas are largely unregulated and highly customizable, which means tenants must be vigilant.
At Saunders, Walsh & Beard, we regularly help business owners navigate complex lease agreements. Here are some of the most important issues every tenant should understand before committing:
- Lease Type Matters More Than You Think
Is it a gross lease, net lease, or triple net (NNN) lease? In NNN leases, which are common in Texas, tenants are often responsible for taxes, insurance, and property maintenance. Understanding the financial structure can help you avoid unexpected costs.
- Who’s Responsible for Repairs?
Many Texas leases shift the burden of HVAC, roof, and even structural repairs onto the tenant. Always clarify responsibilities and consider negotiating a cap on major repair costs.
- Renewals and Early Termination
Watch for automatic renewal clauses and rigid termination terms. If your business outgrows the space or operations stall, these clauses can trap you.
- Escalating Rent and CAM Charges
Leases often include annual rent increases and Common Area Maintenance (CAM) fees. Ask for historic
al expense reports and consider negotiating audit rights and limits on increases.
- Use Restrictions
A narrow use clause can prevent you from expanding services or subleasing. Request broader language that accommodates your current and future business operations.
- Assignment, Subleasing, and Exit Strategy
Without the right language, landlords can block a transfer or keep you liable after you exit. Protect yourself by negotiating assignment rights and liability releases.
- Lockouts and Landlord Remedies
Texas law permits commercial lockouts if rent isn’t paid. Ensure your lease includes notice and cure periods to avoid abrupt business interruptions.
- Personal Guaranties
If you’re signing on behalf of an LLC or corporation, the landlord may still ask for a personal guaranty. Limit its duration and scope whenever possible.
- Dispute Resolution and Venue
Arbitration clauses and far-away court venues can work against you. Aim for local venue provisions and consider requiring mediation before litigation.
- Improvements and Build-Outs
Know whether you’re allowed to modify the space, and whether you’ll need to remove improvements when you leave. Ask about tenant improvement (TI) allowances upfront.
- Insurance and Liability
Ensure your insurance obligations are reasonable and request a waiver of subrogation to protect against third-party claims.
- Force Majeure and Shutdowns
After COVID-19, many landlords now exclude pandemic-related rent relief. Negotiate protections for future business interruptions.
Final Word: Protect Yourself Before You Sign
Texas is a landlord-friendly state. That’s why it’s essential to have a knowledgeable attorney review (and if necessary, negotiate) your lease before signing. At Saunders, Walsh & Beard, we’re here to ensure your lease works for your business, not against it.
Need help with a lease? Contact us today to schedule a consultation with a commercial real estate attorney.