A Texas commercial lease agreement is a type of contract. As with any contract, terms are generally negotiable between parties.
Many Texas commercial lease forms are essentially the same standard form with standard terms that apply to all the tenants that a landlord may oversee. That does not mean that you have to accept all the terms, and it does not mean that you cannot draft your own Texas commercial lease agreement.
Regardless of whether you are the tenant or the landlord, it is important to understand the essential components of a commercial lease.
What Is the Purpose of a Texas Commercial Lease Agreement?
A Texas commercial lease agreement is often a much longer document than a residential lease, because there is a lot of potential liability.
The agreement should serve the purpose of designating the rights and responsibilities of each party entering into the contract, so they are clearly understood.
A Texas commercial lease form should cover virtually all foreseeable issues and resolutions that could reasonably occur during the rental period.
Components of a Texas Commercial Lease Agreement
Commercial lease agreements are complex by nature, and attention to detail is important. The terms of your commercial lease can have a big impact on the decisions a business owner can make and how the space can be used. Some important components include:
- The names of the tenant and landlord;
- The name of the business operating in the space;
- A description of the property that includes the address and physical boundaries;
- The type of property that is being leased (e.g., industrial, office, retail);
- Square footage of the property;
- Base rent for the property and payment terms;
- Length of the tenancy;
- Whether the tenant has an option to renew the lease and the terms of the lease;
- Potential rent increases over the course of the tenancy;
- The amount of the security deposit and repayment;
- Provisions for subleasing the space;
- How the tenant may use the commercial property;
- Whether the landlord or tenant is responsible for improvements to the property;
- What fixtures the lease includes (e.g., lighting, sinks, shelfs, refrigerators, furniture, etc.);
- Which party is responsible for utilities and trash removal;
- What type of insurance is necessary for the type of business to operate in the location;
- Who should be contacted when repairs and maintenance are necessary;
- Provisions regarding parking lot spacing and maintenance; and
- Consequences of early lease termination.
Depending on the type of business being conducted, there may be special requirements for hazardous waste removal, deliveries, patron capacity, or licensing.
Though lease agreements do not all have to be written, it is a best practice to have them in writing. If a lease is set to last for twelve months or longer, it falls within the statute of frauds and must be in writing.
Clear Maintenance and Repair Obligations
One of the areas that has the most frequent cause for controversy is the deciphering of maintenance and repair obligations.
Depending on the type of property, it is important to clearly define which repairs should be conducted by which party. Generally, the landlord is responsible for structural repairs such as the:
- Building foundation,
- External walls,
- Structure of the building, and
Other things to consider may include HVAC, lighting fixtures, plumbing, paint, flooring, parking lot paving, landscaping, appliances, and more.
A Texas commercial lease agreement should clearly state which responsibilities belong to which party. Timing is important.
If a landlord is responsible for vital repairs and they are not completed within the expected timeframe, the tenant should have provisions for relief. This could include a reduction in rent, release from the contract, or other defined remedies.
If the tenant is responsible for repairs, the lease should state whether there is a specific contractor they are required to use and whether there is a penalty for using another contractor.
Types of Commercial Lease Agreements
There are multiple types of Texas commercial lease agreements. Each has its own purpose, and they are often industry specific.
A percentage lease agreement is a type of commercial lease that is most often used by restaurants and retailers. In this type of lease, the tenant pays a base rent (a minimum amount of rent) along with a percentage of the business’s gross income over a stated period of time.
A net lease is one of the most common types of commercial lease agreement. The tenant is responsible for the base rent payment along with all utilities, maintenance, insurance, and other expenses. There are multiple types of net lease agreements, which involve different sets of obligations.
There are two types of gross leases. A “full-service” gross lease is fairly simple. The tenant pays a fixed rent payment every month. The landlord covers all other costs associated with operation and maintenance of the property.
A “modified” gross lease is similar except that the tenant is responsible for covering any incremental increase in the operation and maintenance costs. These are costs that exceed the initial calculation and may include things like the city increasing property taxes.
Making Changes to a Texas Commercial Lease Agreement
Even if you are using a pre-existing Texas commercial lease agreement pdf, you can still make adjustments. You can make changes directly to the lease form by adding in or striking out language that should be changed. Both parties must initial next to the changes to make them legally binding in the contract.
Hiring a Texas Commercial Lease Attorney
There are a lot of detailed components that make up a well-drafted Texas commercial lease agreement. With so much information to include and review, you may be best served by contacting an experienced attorney to assist you in the process.
The Curley Law Firm understands the importance of transparency and clarity in commercial lease formation. Let our team guide you through the process and help you develop agreement terms that meet your needs. Contact us for an evaluation.