Residential tenants in Texas have a statutory safety net. Commercial tenants have almost none. The Property Code protections covering repairs, security deposits, and lockouts that residential renters rely on either do not apply to commercial space or apply in a much weaker form, and courts enforce commercial leases as written on the theory that both parties are sophisticated businesses.
That means a Texas commercial lease is exactly as protective of you as you negotiated it to be. Landlord-prepared forms in The Woodlands and along the Interstate 45 corridor are professionally drafted, and they are drafted for the landlord. Our business law attorneys in Conroe review these agreements for tenants regularly. These are the provisions that cost the most.
The Personal Guaranty
This is the clause with the largest downside and the least negotiation from most tenants. A personal guaranty makes you individually liable for the lease obligations, which means the LLC you formed to limit your exposure has been rendered irrelevant for the single largest obligation your business will carry.
On a five-year lease at $6,000 per month, a full guaranty puts $360,000 of personal exposure on the table, and acceleration clauses can make the whole amount due at once on default.
Landlords for small tenants almost always ask. What is negotiable is the shape.
- A burn-off provision terminates the guaranty after a defined period of timely payment, often 24 or 36 months.
- A capped guaranty limits liability to a fixed dollar amount or a number of months of rent.
- A good guy guaranty limits exposure to amounts owed through the date you actually vacate and surrender the space, rather than the full remaining term.
Any of these is dramatically better than an unlimited personal guaranty, and landlords grant them more often than tenants expect because tenants rarely ask.
Rent That Is Not the Rent
Most Texas commercial leases in this market are triple net or modified gross, meaning the quoted rate is only part of what you pay.
Under a triple net structure, you also pay a proportionate share of property taxes, insurance, and common area maintenance. That additional amount is frequently 25 to 40 percent above base rent, and it is the number tenants most often fail to budget.
Watch for these specifically:
Uncapped CAM. Common area maintenance charges can rise substantially year over year. Negotiate a cap on controllable CAM increases, commonly four to five percent annually, cumulative.
Capital expenses in CAM. Landlords sometimes pass through roof replacement, parking lot resurfacing, or HVAC replacement as operating expenses. These are capital items and should be excluded or amortized over their useful life with only the annual portion passed through.
Property tax escalation. Montgomery County valuations have moved significantly in recent years, and a tenant paying a proportionate share of taxes absorbs that. Ask whether the landlord is obligated to protest assessments, and whether you can require it.
Administrative fees on CAM. A management fee calculated as a percentage of an already-inflated expense pool compounds the problem.
Audit rights. You should have the right to inspect the landlord’s records supporting CAM charges, with a defined process and a provision shifting audit costs to the landlord if the overcharge exceeds a threshold.
Assignment and Subletting
This clause determines whether you can ever sell your business. A lease requiring landlord consent that may be withheld in the landlord’s sole and absolute discretion means the landlord holds a veto over your exit.
Negotiate for consent not to be unreasonably withheld, conditioned, or delayed, with a defined response period after which consent is deemed given. Carve out permitted transfers to an affiliate, to a successor by merger, or in connection with a sale of substantially all assets.
Also watch for recapture rights, which allow the landlord to terminate the lease and take the space back rather than approve your assignee. In a rising market that provision converts your lease from an asset into nothing.
If you are contemplating a future sale, this clause matters as much as anything in the purchase agreement you will eventually negotiate.
Relocation, Exclusivity, and Use
Relocation clauses permit the landlord to move you to comparable space within the property. For a destination business this may be tolerable. For a retail or restaurant tenant dependent on a specific location and visibility, it is potentially fatal. At minimum, require that the landlord pay all moving and buildout costs, that relocation occur only once, and that the substitute space be comparable in size, visibility, and configuration.
Exclusive use provisions prevent the landlord from leasing to a direct competitor in the same center. Without one, nothing stops a similar business from opening two doors down.
Permitted use clauses that are drawn narrowly can prevent you from adjusting your business model. A lease permitting “operation of a coffee shop” may not permit you to add lunch service.
Maintenance, Repair, and the HVAC Question
Commercial leases commonly assign the tenant responsibility for the heating and air conditioning system serving the premises. In a Texas summer, that is a meaningful risk, and a rooftop unit replacement can run into five figures.
Negotiate a cap on tenant responsibility for HVAC repairs, an obligation for the landlord to deliver the system in good working order at commencement with a warranty period, and landlord responsibility for replacement as opposed to repair.
Confirm who is responsible for the roof, the foundation, the structural elements, and the parking area. Those should be landlord obligations in nearly every case.
Default, Remedies, and Notice
Texas commercial landlords have powerful remedies, including a statutory landlord’s lien on tenant property under Property Code Chapter 54 and the ability to change locks under Section 93.002 in specified circumstances.
Two protections are worth negotiating. First, a notice and cure period for monetary default, commonly five to ten days after written notice, and a longer cure period for nonmonetary defaults with an extension where the cure cannot reasonably be completed in that time. Many landlord forms provide notice for the first default only, or none at all.
Second, a waiver or limitation of the landlord’s lien, particularly if your equipment is financed. A lender will often require it.
Options, Renewals, and Holdover
Three timing provisions cause disproportionate trouble.
Renewal option notice windows. Most options must be exercised within a defined window, often between nine and twelve months before expiration. Miss it and the option evaporates, leaving you negotiating from a position of having nowhere to go. Calendar the date the day you sign, and calendar a reminder six months before it.
Renewal rent mechanisms. An option to renew at “then prevailing market rate” without a defined determination process is barely an option at all. Negotiate either a fixed rate, a defined escalation, or an appraisal process with a mechanism for resolving disagreement.
Holdover penalties. If you remain in the space after expiration, many leases impose holdover rent at 150 to 200 percent of the prior rate, sometimes with consequential damages. Buildout delays on a new space are common, so negotiate a short transition period at a reasonable rate.
Montgomery County Specifics
Several local factors deserve attention. Much of the commercial space in this county sits within municipal utility districts or other special districts, and those assessments flow through to tenants under a triple net structure. Ask what districts apply and what the current rates are.
The Woodlands operates under covenants and design standards administered by the township and applicable property associations, which affect signage, exterior modifications, and permitted alterations. A lease may permit a sign that the covenants do not.
Flood exposure is a genuine consideration across portions of Montgomery County. Confirm the flood zone, review the casualty and business interruption provisions, and understand what happens to the lease if the premises are damaged. Many forms give the landlord a termination right after casualty without giving the tenant one.
Frequently Asked Questions
Do Texas commercial tenants have the same protections as residential tenants?
No. The Property Code protections covering repairs, deposits, and lockouts that apply to residential tenancies either do not extend to commercial leases or apply in a substantially weaker form. Commercial leases are enforced as written.
Can I avoid signing a personal guaranty?
Sometimes, particularly with a strong balance sheet or a larger security deposit. More often the realistic goal is limiting it through a burn-off, a cap, or a good guy structure.
What is a reasonable CAM cap?
A cap of four to five percent annually on controllable expenses, cumulative and compounding, is a common negotiated outcome. Taxes and insurance are typically excluded from the cap as uncontrollable.
Can my landlord lock me out in Texas?
Commercial landlords have lockout rights under Property Code Section 93.002 in defined circumstances, subject to notice requirements. The lease can modify these rights, and tenants should negotiate notice and cure protections.
What happens to my lease if I sell my business?
It depends entirely on the assignment clause. If consent may be withheld at the landlord’s sole discretion, the landlord effectively controls whether your sale can close.
How long should I negotiate for?
Shorter initial terms with renewal options generally serve small tenants better than long initial terms. Negotiate the renewal rent mechanism carefully, because “market rate” without a defined process invites disputes.
Your Next Step
A commercial lease is usually the largest financial commitment a small business makes, and it is negotiated once. The review is a fraction of a single month’s rent and it is the only opportunity you get.
Griffin & Cain, Attorneys at Law reviews and negotiates commercial leases for tenants throughout Montgomery and Walker Counties. Schedule your consultation with business and real estate attorney Robert S. Griffin before you sign. Contact our Conroe office today. We represent businesses in Conroe, The Woodlands, Montgomery, Magnolia, and Huntsville, and handle related commercial real estate matters.
