Because a commercial lease is a long-term commitment that a business entity will make with you, it is important that you pay careful attention when creating it after accepting a rental application. The truth is that knowing what to include in this legally binding document can be confusing. There are certain mandatory inclusions and disclosures, as well as optional clauses that you can add when detailing the terms of your contract.
If you need a little help drawing up your first Texas commercial lease agreement, you can use this guide to create a professional contract that will safeguard your revenue and set the tone of your relationship with your tenant.
Before delving into the details of what to include, it may be helpful to first discuss what a lease agreement is. In general, a rental contract is a binding legal document between a lessor and lessee for the lease of a property.
When it comes to a commercial property lease, this agreement is drawn up to define the terms and conditions of renting a commercial space, such as a warehouse, office block, or retail building.
It protects both the landlord and the tenant and can be used when taking legal action against the other party. Texas law stipulates the conditions for leasing commercial property, which you must be mindful of when creating your commercial lease.
Although many sections of a Texas commercial lease agreement will be the same in most states, landlord-tenant laws stipulate that certain details must be included. In the section below, we'll walk you through the information you must have in your contract and some of the optional extras you may need to add.
1. Personal and Property Details
Your commercial lease begins with a list of all parties involved. This includes the name and forwarding address of the commercial landlord, tenant or business owner, and anyone authorized to act on behalf of either party. You will also need to include the name of the business, the property address, and, if relevant, the unit number.
Identify the precise room or area your tenant will have exclusive access to in buildings with several occupants.
Another vital thing to include is specific zoning regulations for your commercial property. Add a few sentences outlining the zone restrictions and another phrase stating that your tenant must abide by them.
2. The Lease Term
Include a clear statement of the start and end dates of the lease. Explain in the commercial lease agreement what will happen if the lessee stays on after the lease expires or closes their business. You can also mention whether the tenant has a right to sublease the property here.
Additionally, you must provide information about lease termination in this section. Clearly state any notice demands or early termination penalties. Discuss what would happen if the renter sold the company to a third party. Mention whether the lease will be immediately assumed by the new business owner or whether a new lease must be signed.
The Texas Property Code discusses a landlord's authority to take and store a tenant's belongings whenever a rented commercial property has been abandoned in Section 93.002 (e). You might want to include a subsection in which you affirm this right. Mention that if the items are not recovered within 60 days of being stored, you will use your legal authority to dispose of them.
4. Security Deposit
Another essential thing to mention in a Texas commercial lease agreement is the security deposit. List the permitted payment options and the amount the tenant will be required to pay as a security deposit.
Commercial landlords must reimburse a tenant's security deposit within 60 days of leaving the property, according to Section 93.005 of the Texas Property Code. Add a clause saying as much and mention that the tenant is accountable for providing you with a forwarding address.
Moreover, your tenant must also know that you retain the right to deduct a percentage of the security deposit to compensate for unpaid rent or significant damages above and beyond typical wear and tear.
5. Rental Amount
In this section of the commercial lease agreement, you must indicate the monthly, yearly, or biennial rental amount. Commercial leases usually apply for a significantly longer duration. As a result, you could want to raise the rent before the lease's term is over. Inform the tenant of how and when this will be done.
You might say, for instance, that rent will increase by a specific percentage each year. A different option would be to include the actual amounts with a list of particular dates on which the increase would take effect.
Rent paid after the due date may be subject to additional fees or fines. If so, these should also be mentioned in this section. Provide details about late fees and the duration to which they apply.
Next, you'll need to list each utility related to the commercial property and indicate who is in charge of maintaining it. You might need to specify what portion of a service your tenant is accountable for instead for shared facilities.
List waste disposal details separately and provide more information about how this is to be handled in your commercial lease agreement.
7. Repairs and Maintenance
Typically, landlords are responsible for upkeep and repairs. There might be some cases, though, when the tenant would be in charge. This includes routine housekeeping and mowing the lawn.
You will also need to mention upkeep and repairs for the parking area. State who is responsible for repaving, patching potholes, painting lines, and more. Remember that you will probably be in charge of significant repairs like road repairs but that you could want your tenants to take care of routine maintenance.
Your tenant may need to renovate the space, so it is important to specify who will be responsible for such changes and improvements to the property.
9. Other Inclusions
Here are some of the other details you may need to include in your Texas commercial lease agreement:
- Insurance coverage. Who will be responsible for paying this expense?
- Landlord entry. Specify the terms for your entry onto the premises.
- Child safety zones. If your city has enforced child safety rules that strict sex offenders from entering a particular public area, you will need to notify your tenant of this.
According to Texas law, landlords must make the following disclosures:
- Lead-based paint disclosure. You must inform your tenants of potential hazards posed by exposure to lead-based paint. This typically applies to properties built before 1978.
- Criminal activity. Include a clause stating that your tenant may not engage in illegal activities on the property or permit anyone else to do so. Inform your tenant that preventing crime related to the business is their responsibility and that they should take the necessary precautions.
- Identification of third parties. According to Texas law, commercial landlords must provide tenants with detailed information that includes the identity of anyone permitted to act on behalf of the landlord and the tenant's rights if the landlord fails to make repairs.
You have a few options if you want to build your own commercial lease agreement. The firs is to download and complete our free Texas commercial lease agreement template. We have a PDF and Word version that you can edit.
However, you can use our lease agreement builder if you want a more customizable option. This tool allows you to create professional, detailed contracts in just a few minutes! You can also use the DoorLoop platform to manage your lease agreements, accept rent payments, list properties, and more!
Drawing up a Texas commercial lease agreement doesn't need to be a challenge! With these tips and an intuitive Texas commercial lease agreement builder, you'll have everything you need to stay on top of your business.
Do I need to include a section for signatures and notary?
Yes, this is an important section to add to the end of your rental agreement. You must allow space for both parties to add their names, the date, and signatures. Although Texas commercial lease agreements do not have to be notarized, many prefer to have their leases notarized.
Can a landlord lock a tenant out of the property?
Yes, Texas law allows a landlord to lock the tenant out of the building or space if a tenant hasn't paid their rent.
Should a tenant rely on the security deposit to cover the last month's rent?
Texas law prohibits tenants from requesting a landlord to keep the security deposit to avoid paying the final month's rent. This is seen as acting in "bad faith" on the part of the renter. In addition to suing the tenant for the unpaid rent, the landlord has the right to ask the court to grant triple damages and order the renter to cover the landlord's legal costs.