Behind the Scenes of Signing on as a Commercial Tenant
Signing a lease as a commercial tenant has its share of legal considerations. For many businesses, renting space is a significant expense. A select few will blindly sign a commercial lease agreement. It’s important to understand the prospective consequences.
It’s an all too common scenario. Perhaps the commercial tenant is a start-up and worried about expenses. The landlord sounds convincing when presenting the lease for execution. After all, he uses the same commercial lease form for all of the building’s tenants. In fact, the boilerplate language came directly from a trusted internet site.
Although the idea of saving money might sound appealing, there’s something to remember. Even if the commercial landlord is an attorney or law firm, the language of the lease may not be to your benefit. Common sense dictates that the landlord’s interests are different than yours. Under no circumstances should a commercial tenant think otherwise.
Commercial Leases: A Tenant’s Perspective
In Texas, commercial tenancies have their own section of the Texas Property Code. That said, there are clear differences between leasing residential and commercial properties. Meanwhile, it is important to note that a lease agreement supersedes any conflicts between it and the cited law.
Want to see where you can run into some problems as a commercial tenant? For starters, there could be an issue concerning the landlord’s right to interrupt the tenant’s utilities. More often than not, the utilities are in the commercial tenant’s name. According to the law, “a landlord or a landlord’s agent may not interrupt or cause the interruption of utility service paid for directly to the utility company by a tenant unless the interruption results from bona fide repairs, construction, or an emergency.”
In some cases, a landlord may attempt to bypass the law and can do so legally by execution of a lease agreement. For example, the lease may cite specific instances when the landlord can make contact with the electric company and turn off the lights. No doubt this could be disastrous.
Indemnity and Insurance Issues for Commercial Tenants
As part of the commercial lease, the tenant may agree to some critical provisions concerning indemnity and insurance. Most commonly, the rental agreement may state that part of the rent will go to the property owner’s insurance costs.
In the meantime, the lessee should maintain their own policy for liability purposes. The lease agreement often contains language regarding indemnity and insurance. For example, what happens if the tenant’s negligence impacts the building? Does the landlord have a right to go after the tenant’s insurance? Are personal injury claims covered? Any type of negligence claim could present an issue.
These are just two examples of why commercial tenants should not sign lease agreements without attorney review. In some cases, the lease may allow the landlord to put a lien on the commercial tenant’s property. At Manfred Sternberg and Associates, our offices have substantial experience regarding commercial lease agreements. Contact us to see how we can help you!