Texas Commercial Lease Agreement

Introduction

A Texas commercial lease agreement is a legally binding contract between a landlord and a tenant for the rental of commercial property for business use. Unlike residential leases, commercial leases in Texas are governed primarily by Texas Property Code Chapter 93 ^[1] and the principle of 'freedom of contract,' which allows both parties greater flexibility in negotiating terms.

Once signed by both parties, the lease agreement becomes legally binding. The agreement typically contains provisions on rent, subleasing, penalties for late payments, maintenance responsibilities, and the rights and obligations of both parties.

Required Disclosures

Texas law requires certain disclosures in commercial lease transactions:

1. Information About Brokerage Services Form

When a licensed real estate agent is involved in a commercial lease transaction, they must provide the tenant and landlord with written notice describing the licensee's duties and obligations in a brokerage relationship. This requirement is mandated by Texas Occupations Code Section 1101.558 ^[3]. The Texas Real Estate Commission (TREC) publishes the official Information About Brokerage Services Form ^[5] that licensees must use.

2. Nonsubmetered Utility Costs Disclosure

If nonsubmetered utility service costs are prorated among tenants in a multi-use commercial facility, the lease must contain: (a) a clear written description of how the prorated costs are calculated, and (b) a statement of the average monthly utility bill for all units for the previous calendar year. This requirement is established by Texas Water Code Section 13.5031 ^[4].

Types of Commercial Lease Expense Structures

Commercial leases typically fall into one of three expense structure categories, which determine how operating costs are allocated between landlord and tenant:

Triple Net Lease (NNN)

The tenant pays the base rent PLUS all operating expenses, including property taxes, property insurance, and common area maintenance (CAM). This structure places the maximum financial responsibility on the tenant and is common for single-tenant retail properties and industrial spaces.

Gross Lease (Full Service)

The landlord pays all operating expenses. The tenant pays one flat rental amount that includes all costs. This structure provides tenants with predictable monthly payments and is common for office spaces.

Modified Gross Lease

Common Operating Expenses Include:

Property taxes, insurance, common area maintenance (CAM), landscape maintenance, HVAC maintenance, janitorial services, utilities, security, and management fees.

Security Deposits

Texas Property Code Sections 93.005-93.007 ^[1] govern security deposits for commercial tenancies:

Key Security Deposit Rules:

• No statutory cap: Unlike some states, Texas does not limit the amount a landlord can require as a security deposit for commercial properties.- 60-day return deadline: Landlords must return the deposit within 60 days after the lease expires and the tenant surrenders the premises, provided the tenant provides a forwarding address.- Itemized deductions: If the landlord retains any portion of the deposit, they must provide the tenant with a written description and itemized list of all deductions.- Normal wear and tear: Landlords cannot deduct for normal wear and tear, defined as deterioration from intended use including breakage or malfunction due to age.- Bad faith presumption: A landlord who fails to return the deposit or provide an itemized statement within 60 days is presumed to have acted in bad faith.

Landlord Remedies for Tenant Default

Texas provides commercial landlords with specific remedies when tenants default:

1. Statutory Lockout (Section 93.002)

Texas is unique in allowing commercial landlords to change door locks without judicial process when a tenant is delinquent in paying rent ^[1]. Important requirements:- Only available for rent delinquency (not other lease violations)- Written notice must be posted on the door at time of lockout- Notice must include name, address, and telephone number for obtaining a new key- Tenant can regain access by paying delinquent rent during business hours- Pre-lockout notice is NOT required by statute

2. Forcible Detainer Action (Eviction)

Under Texas Property Code Chapter 24 ^[2], landlords can pursue formal eviction:- 3-day notice to vacate required (unless lease provides otherwise)- Suit filed in justice court- Hearing typically within 10-21 days- Court can award possession AND damages- Special expedited process for illegal activities on premises (Section 93.013)

3. Prohibited Self-Help Measures

Even when a tenant is in default, landlords CANNOT:- Interrupt or disconnect utilities- Remove doors or windows- Remove tenant's furniture, fixtures, or appliances

Tenant Rights and Protections

While commercial tenants have fewer statutory protections than residential tenants, Texas law still provides important rights:

Right to Quiet Enjoyment: Tenants have the right to use the rented space without interference from the landlord, as long as they comply with lease terms.

Landlord Liability: Under Section 93.011 ^[1], if a landlord fails to comply with the lease agreement, the landlord is liable to the tenant for resulting damages.

Charges Must Be in Lease: Under Section 93.012, landlords cannot assess charges (other than rent or physical damage) unless the amount or calculation method is stated in the lease.

Unlawful Lockout Remedies: If a landlord improperly locks out a tenant, the tenant may recover possession, terminate the lease, and pursue damages.

Ada and Accessibility Compliance

Commercial properties in Texas must comply with both federal Americans with Disabilities Act (ADA) requirements ^[8] and Texas Accessibility Standards (TAS) ^[7]:

Key Points:- Both landlord AND tenant share legal responsibility for ADA compliance- Buildings constructed or renovated after September 1, 1993 must comply with TAS- Plan submission to TDLR required for construction/renovation over $50,000- Penalties can reach $75,000 for first offense, $150,000 for subsequent violations- Commercial lease should clearly specify which party is responsible for accessibility modifications

Essential Commercial Lease Terms

A comprehensive Texas commercial lease agreement should include:

1. Parties and Premises: Full legal names of landlord and tenant; complete legal description of the property.2. Term: Start date, end date, and renewal options (leases over one year must be in writing).3. Rent: Base rent amount, payment due date, acceptable payment methods, and late fees.4. Expense Structure: Clear designation of NNN, Gross, or Modified Gross, with specific allocation of operating expenses.5. Security Deposit: Amount, conditions for return, and permitted deductions.6. Permitted Use: Specific description of allowed business activities.7. Maintenance Responsibilities: Clear allocation between landlord and tenant.8. Insurance Requirements: Types and amounts of coverage required for each party.9. Improvements and Alterations: Process for tenant modifications and ownership of improvements.10. Assignment and Subletting: Conditions under which the lease can be transferred.11. Default and Remedies: Events of default and consequences for each party.12. Termination: Conditions for early termination and required notice periods.