Unlike residential tenants, commercial tenants in Texas receive few statutory safety nets. Texas operates on a freedom-of-contract principle: if you sign a bad deal, the courts may enforce it as written. That is why, before signing a commercial lease in Texas, you should look out for these three costly contract provisions that can threaten your business’s bottom line.
Default clause
Under the Texas Property Code, landlords have the legal right to change the locks on commercial tenants who fall behind on rent, even without prior notice. However, after changing the lock, they must stick a notice on the tenant’s front door giving the name of the person or company holding the new key, along with that person’s address or telephone number. The landlord only has to provide the new key during the tenant’s regular business hours, and only after the tenant pays the delinquent rent.
In other words, a sudden lockout can shut your business down until you pay what is owed.In other words, a sudden lockout can shut your business down until you pay what is owed. The statute sets the minimum, but your lease can give you more protection. Before signing, check how the default clause is written. A lease that requires written default notices and fair cure periods before the landlord can exercise any remedy, including a lockout, is important for maintaining operational stability.
Personal guarantee requirements
While creating an LLC normally shields your personal assets, a personal guarantee clause in the commercial lease may undermine that protection. If you overlook the clause and sign it, you may become liable for rent, fees and damages if your company defaults.
Excessive holdover rent escalations
Staying in your space past the agreed-upon lease end date can trigger the financial penalties set out in the lease’s holdover clause. Texas courts usually enforce holdover provisions even when they dramatically increase your daily or monthly costs, leaving you with limited legal options to challenge the rates once the lease is signed. Some holdover clauses also make the tenant liable for the landlord’s other losses, such as a new tenant who cannot move in on time.
How an attorney can help protect your business
Commercial lease agreements in Texas are complex and heavily favor property owners who draft them. Tackling these legal pitfalls without guidance can lead to unexpected financial burdens down the road. A business attorney can review your lease terms, spot hidden risks and negotiate a contract that safeguards your commercial interests.
