Commercial Leases: What Texas Business Owners Should Review Before Signing

Finding the right space for your business can be exciting.

You find the location. The rent fits the budget. The space looks right.

Then comes the lease.

Unlike simply comparing monthly rent, evaluating a commercial lease requires looking at the broader set of obligations the business may be accepting.

Texas law specifically distinguishes commercial rental property from residential tenancies, and Chapter 93 of the Texas Property Code applies to commercial landlord-tenant relationships.

Before signing, business owners should understand what their particular lease actually requires.

1. Rent Isn't Always the Entire Cost

The base rent is an obvious starting point, but it may not represent the business's total financial obligation.

Depending on the lease, a tenant may also be responsible for expenses associated with the property.

Review how the agreement addresses operating expenses, maintenance, insurance, taxes, utilities, and other charges.

The important question isn't simply:

“What's the rent?”

It's:

“What could this space actually cost my business under this agreement?”

2. Understand the Length of the Commitment

Commercial leases can create significant long-term obligations.

Review the initial lease term along with any renewal or extension options.

If renewal rights exist, understand when they must be exercised and how future rent will be determined.

3. Look at Repair and Maintenance Responsibilities

Who is responsible when something breaks?

Depending on the lease and property, responsibility for repairs and maintenance may be allocated between the landlord and tenant in different ways.

Understand those responsibilities before an expensive repair creates an unexpected business cost.

4. Make Sure Your Business Can Actually Use the Space

A desirable location isn't particularly useful if the lease or applicable restrictions don't allow the business to operate as intended.

Consider the permitted-use language in the agreement and other requirements that may affect operations.

5. Review Assignment and Subleasing Provisions

Your business may look very different several years from now.

You may sell the company.

Bring in new owners.

Move to a larger location.

Restructure.

Need to sublease.

Assignment and subleasing provisions can become important when circumstances change.

6. Pay Attention to Personal Guarantees

A business owner should understand whether a proposed lease includes a personal guarantee and what obligations that guarantee creates.

Forming an LLC and signing a personal guarantee are separate issues. A guarantee can create obligations for the individual signing it, depending on its terms.

This is an area worth understanding before the document is executed.

7. Understand Default and Termination

What happens if rent is late?

What constitutes a default?

Is there an opportunity to cure?

Can the lease be terminated early?

What happens if the landlord defaults?

Don't wait until something goes wrong to read these provisions for the first time.

Before You Commit to the Space

The location matters.

So does the agreement that determines your business's rights and responsibilities while occupying it.

The Law Office of Ian M. Angkiangco assists Texas businesses with commercial lease review and negotiation, lease amendments, assignments, and commercial real estate transactions.

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