A Texas commercial lease agreement is shaped almost entirely by negotiation, not by statute, and Texas courts have a long record of enforcing whatever terms the parties sign — including provisions that push significant financial risk onto the tenant.1Justia. Gym-N-I Playgrounds Inc v Ron Snider Favorable clauses will protect you. Unfavorable ones you signed without reading are just as enforceable. What follows are the terms that actually decide how much a Texas commercial lease will cost you and what happens when something goes wrong.
Get It in Writing, with the Right Names and Legal Description
Under the Texas Business and Commerce Code, any lease longer than one year must be in writing to be enforceable. A handshake on a five-year retail space will not hold up if either side walks away. Even shorter deals belong in writing, because oral agreements leave both parties exposed to conflicting memories about rent, responsibilities, and termination rights.
The document has to name the parties correctly. If the tenant is an LLC or corporation, the name should match what’s on file with the Texas Secretary of State; a mismatch creates real problems if the landlord ever has to enforce against the entity. The premises need a legal description pulled from the deed or county tax appraisal records, not just a street address. That matters most when the space is a suite inside a larger building, because the description defines exactly what you are renting.
Beyond parties and property, the agreement should state the commencement date, expiration date, base monthly rent, security deposit, and late fees. Square footage deserves particular attention, because it usually drives operating expense pass-throughs, common area charges, and any tenant improvement allowance.
Expense Structure Decides Whether Your Rent Is Predictable
How operating costs are divided is the biggest financial variable in a commercial lease. The structure determines whether your monthly payment is fixed or moves with the building’s actual expenses.
- Gross lease: you pay a flat monthly amount, and the landlord covers property taxes, insurance, and maintenance out of that rent. Costs are predictable, but the landlord prices those expenses — plus a cushion — into the rent.
- Single net lease: base rent plus property taxes. The landlord handles insurance and maintenance.
- Double net lease: base rent plus property taxes and insurance.
- Triple net lease (NNN): base rent plus property taxes, insurance, and maintenance. This is the most common structure for standalone commercial buildings and retail space in Texas, and it moves nearly all operating risk to the tenant.
Common area maintenance charges cover shared expenses like landscaping, parking lot upkeep, and building utilities. They are usually calculated on a pro-rata basis: if you occupy 10% of the building’s leasable square footage, you pay 10% of CAM. Landlords estimate the charges at the start of the year and reconcile against actual expenses afterward. Tenants who never audit those reconciliations sometimes overpay for years. Most leases give you the right to inspect the landlord’s books, and using that right is worth the effort.
Insurance obligations sit alongside the expense structure. Texas commercial leases almost always require the tenant to carry general liability insurance (often a $1 million per-occurrence minimum) and property coverage on the tenant’s own fixtures and inventory. Business interruption coverage, which pays rent if a fire or disaster shuts you down, is frequently required as well, with policy periods commonly capped at 12 to 18 months.
The “As-Is” Clause and the Implied Warranty of Suitability
Texas recognizes an implied warranty of suitability for commercial premises. In Davidow v. Inwood North Professional Group, the Texas Supreme Court held that a landlord impliedly warrants leased space is suitable for its intended commercial purpose and that essential services will be provided.2Justia. Davidow v Inwood North Pro Group The catch is that most Texas commercial leases override it. In Gym-N-I Playgrounds v. Snider, the court confirmed that an express “as-is” clause and a written disclaimer of the warranty of suitability are enforceable and effectively eliminate the landlord’s obligation to deliver the space in any particular condition.1Justia. Gym-N-I Playgrounds Inc v Ron Snider
Once the warranty is disclaimed, the lease itself controls who fixes what. Tenants are typically responsible for interior maintenance, including plumbing fixtures, HVAC service, and cosmetic upkeep. Structural elements like the roof, exterior walls, and foundation usually stay with the landlord unless the lease says otherwise. Under a triple net lease, the tenant may end up responsible for virtually everything. Replacing a commercial HVAC unit runs $5,000 to $15,000, and you need to know before signing whose bill that is.
Because Texas does not impose a general environmental disclosure requirement on commercial landlords, and the federal lead-based paint disclosure applies only to residential property,3Office of the Law Revision Counsel. 42 USC 4852d – Disclosure of Information Concerning Lead Upon Transfer of Residential Property the due diligence burden falls on you. For older buildings, a Phase I environmental site assessment before signing can surface contamination or hazardous materials that would otherwise become your problem under an as-is clause.
Personal Guarantees Undo Your LLC’s Protection
This is where many business owners are caught off guard. If the tenant is an LLC or corporation, you may assume the entity shields your personal assets. Landlords know this and routinely require a personal guarantee, a separate agreement in which you, as an individual, promise to cover the lease if the business defaults. Signing one strips away the liability protection your entity was designed to provide.
Texas landlords use both unlimited and limited guarantees. An unlimited guarantee makes you personally responsible for every dollar owed under the lease for its entire term, including unpaid rent, damages, legal fees, and sometimes the landlord’s cost of re-leasing the space. A limited guarantee caps your exposure at a specific dollar amount, a number of months’ rent, or a defined time period. If the landlord insists on a guarantee, negotiating a limited form, or one that burns off after a few years of on-time payments, can meaningfully reduce your risk. Never sign one without accepting that your home, savings, and personal property are on the line.
Landlord Lockouts Without a Court Order
Texas gives commercial landlords a self-help remedy that surprises tenants used to residential rules. Under Section 93.002 of the Texas Property Code, a landlord may change the door locks on a commercial tenant who is delinquent in paying any portion of the rent, with no court order required. The landlord has to post written notice on the front door identifying who to contact for a new key, and that key only needs to be provided during your regular business hours and only after you pay the delinquent rent.4State of Texas. Texas Code Property Code 93-002 – Interruption of Utilities, Removal of Property, and Exclusion of Commercial Tenant
The same statute bars landlords from cutting off utilities the tenant pays directly to the utility company, unless the interruption is for legitimate repairs or an emergency. A landlord who violates these rules — shutting off electricity as a pressure tactic, for example — is liable for actual damages, one month’s rent or $500 (whichever is greater), plus reasonable attorney’s fees and court costs.4State of Texas. Texas Code Property Code 93-002 – Interruption of Utilities, Removal of Property, and Exclusion of Commercial Tenant
For defaults that go beyond missed rent — a use-clause violation, a lapsed insurance policy — most leases build in a cure period, commonly 30 days, during which the tenant can fix the problem after written notice. If the tenant doesn’t cure, the landlord can pursue eviction through the Texas forcible detainer process, filed in justice court in the county where the property sits.
Renewal Options and Holdover Penalties
A renewal option gives you the right, but not the obligation, to extend the lease for an additional term. Without one, you have no leverage when the term expires: the landlord can refuse to renew, raise the rent sharply, or lease the space to someone else.
Renewal options typically require written notice six to twelve months before expiration. Miss the deadline and the option evaporates no matter how reliable a tenant you have been. The lease should also spell out how rent adjusts for the renewal term, whether by a fixed percentage increase, adjustment to fair market value (sometimes by appraiser), or escalation tied to the Consumer Price Index.
Holdover clauses address what happens if you stay past expiration without a new agreement. Under Texas common law, a landlord can treat a holdover tenant as either a trespasser or as someone continuing under the original lease terms, and the landlord picks. Most commercial leases replace that ambiguity with a steep holdover rent, commonly 150% of the prior rate for the first month or two, rising to 200% or 300% if the tenant stays longer. Some clauses also make the tenant liable for consequential damages, like rent the landlord loses from a replacement tenant who cannot move in on time. The penalty structure is deliberate: landlords want you out on schedule.
Subleasing and Assignment
If your needs change and you want to downsize, relocate, or close, subleasing and assignment are different transactions with different consequences. In a sublease, you stay on the hook to the landlord for rent while collecting from your subtenant. In an assignment, the new tenant steps into your shoes and takes over the primary obligation, though many leases keep the original tenant secondarily liable if the assignee defaults.
Nearly every Texas commercial lease requires the landlord’s written consent before either move. Some go further with a recapture clause, which lets the landlord terminate your lease entirely when you ask for permission to sublease and re-lease the space directly, potentially at a higher rent. Recapture clauses are especially common in percentage leases, where base rent is supplemented by a share of your revenue.
Security Deposit Refunds
Chapter 93 of the Texas Property Code governs commercial security deposits. The landlord must return the deposit no later than 60 days after the tenant surrenders the premises and provides a forwarding address.5Texas Public Law. Texas Code Property Code 93.005 – Obligation to Refund Security Deposit If the landlord keeps any portion, they must provide a written description and itemized list of deductions. A landlord who fails to refund or itemize within the 60-day window is presumed to have acted in bad faith and faces liability for $100, three times the amount wrongfully withheld, and the tenant’s reasonable attorney’s fees.6State of Texas. Texas Code Property Code 93-011 – Liability of Landlord
The tenant’s claim to the deposit takes priority over the claims of any of the landlord’s creditors, including a bankruptcy trustee. That’s meaningful protection if your landlord runs into financial trouble during the lease.
Permitted Use and Exclusivity
The permitted use clause defines exactly what the tenant is allowed to do in the space — a dental practice, a restaurant, a specific retail concept — and prevents a pivot to an incompatible operation without the landlord’s consent. Exclusivity clauses work the other way, barring the landlord from leasing nearby space in the same development to a direct competitor. A coffee shop, for instance, might negotiate against another specialty coffee retailer in the center. Vague language about “similar businesses” invites disputes; specific language about product categories gives both sides a clear boundary. Leases sometimes include carve-outs allowing other tenants to sell overlapping products on an incidental basis, so read the fine print.
Signing, Recording, and Estoppel Certificates
The lease binds once authorized representatives of both parties sign. Texas recognizes electronic signatures as legally equivalent to ink signatures for commercial contracts.7State of Texas. Texas Code Business and Commerce Code 322-007 – Legal Recognition of Electronic Records, Electronic Signatures, and Electronic Contracts If a party is a business entity, confirm the signer has actual authority to bind the company; an unauthorized signature can make the whole agreement unenforceable.
Recording the full lease in public records is unusual because it exposes confidential financial terms. Parties typically file a Memorandum of Lease with the County Clerk in the county where the property sits. The memorandum includes the names of the parties, the legal description, and the lease duration, but not rent or other financials. Recording fees start at roughly $25 for the first page plus a per-page charge for additional pages. Filing gives public notice of your interest in the property, which matters if the landlord sells the building mid-lease.
When the landlord later sells or refinances, the buyer or lender will almost certainly ask each tenant to sign an estoppel certificate confirming the current status of the lease: whether rent is current, whether the tenant has any claims against the landlord, the security deposit amount, and whether the lease has been modified. Once you sign, you are locked into those statements and generally cannot later claim the landlord owed you money or that different terms applied. Review every estoppel against your actual lease, including amendments and side agreements, before signing.
One more piece worth flagging for any buildout: if renovations or new construction are involved, the Texas Accessibility Standards apply, and the Texas Department of Licensing and Regulation requires projects costing $50,000 or more to submit construction documents for review. Projects below that threshold still have to comply.8Texas Department of Licensing and Regulation. Architectural Barriers Frequently Asked Questions If the lease puts renovation responsibility on the tenant, the compliance burden and cost travel with it, along with any overlapping federal ADA requirements.