Commercial leases in Texas: what your landlord's attorney already knows (and you should too).
Every commercial lease in Texas is drafted by the landlord's counsel to favor the landlord. Ten clauses that most tenants sign without understanding — each with the red flag buried in the default language and what a prepared tenant asks for instead.
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A commercial lease is not a form. It is a 5-to-10-year business constraint drafted by an attorney who has done this a hundred times, for a client who does it every day. The three provisions that cost Texas tenants the most: an unlimited personal guarantee on a failing business; CAM charges with no cap and no audit right; and a lease with no assignment clause when you try to sell. All three are negotiable. None of them are obvious to a first-time tenant reading a 40-page document at midnight before a move-in deadline.
Ten clauses are analyzed below — each with the red flag in the default language and what a prepared tenant asks for instead.
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I've handled acquisitions and restructurings where the lease was the most complicated part of the deal. Not the financials. Not the IP. The lease — because the lease had an anti-assignment clause that required landlord consent, the landlord was uncooperative, and the buyer was ready to walk.
I've also seen businesses locked into leases that prevented them from expanding, relocating, or exiting at exactly the moment they needed to. A lease that made sense in year one became a constraint by year four when the business outgrew the space, or a liability in year six when the business contracted. The business adapted. The lease didn't.
Commercial real estate in Texas is a landlord's market in most submarkets, most of the time. That means the initial draft of your lease reflects the landlord's interests, not yours. It also means that most provisions are negotiable — landlords want to lease their space, and a creditworthy tenant with counsel has more leverage than they typically exercise.
What follows is a clause-by-clause walkthrough of the ten provisions that matter most. For each one: what the default language says, why it favors the landlord, and what a prepared tenant asks for instead.
The ten clauses
The lease is labeled "NNN" but the definition of operating expenses is broad enough to include capital expenditures, property management fees above market rate, and costs from vacancies in adjacent suites. Your stated rent is $22/SF. Your actual occupancy cost after the first reconciliation is $31/SF.
Get a clear written schedule of what is and isn't included in operating expenses. Exclude capital expenditures (roof replacement, HVAC system overhauls — these are ownership costs, not operating costs). Cap management fees at market rate. Require the landlord to use total leasable area, not occupied area, as the denominator for your pro-rata share calculation.
The guarantee is unlimited, covers the full remaining lease term, and survives the business entity's bankruptcy or dissolution. If the business fails in year three of a seven-year lease, you personally owe four years of rent. The guarantee does not expire even if you pay on time for five consecutive years.
Push for a "good guy" clause: your personal liability terminates if you vacate and surrender the space in good condition with advance notice. Alternatively, cap the guarantee at 12–18 months of base rent, or add a burn-down provision that reduces the guaranteed amount after each year of on-time payments. A letter of credit in lieu of a personal guarantee is worth exploring for creditworthy tenants.
CAM estimates are set at signing. Actual costs are reconciled annually. There is no cap on year-over-year increases, no audit right, and no definition of what constitutes "controllable" versus "uncontrollable" expenses. In year two, landscaping, security, and parking lot resurfacing push your CAM bill 22% above the estimate.
Cap annual CAM increases on controllable expenses (typically 3–5% per year). Get an explicit right to audit the landlord's CAM calculations within 90–180 days of receiving the annual reconciliation. Exclude from CAM: capital expenditures, reserves exceeding actual expenses, costs covered by insurance, and expenses for other tenants' buildouts.
The lease requires landlord consent for any assignment or sublease, with no standard of reasonableness. When you find a buyer for your business, the landlord refuses to consent without a rent increase and a new personal guarantee from the buyer's principals. The deal falls apart. The lease survives.
Add "consent not to be unreasonably withheld, conditioned, or delayed" — and define what unreasonable means (creditworthy buyer, same or better use). Carve out assignments to affiliates and related entities as permitted transfers requiring notice only. Most critically: get an explicit right to assign in connection with a sale of all or substantially all business assets to a qualified buyer, without landlord consent, subject to assumption of lease obligations.
The TI allowance is mentioned in the letter of intent but not included in the lease body — only in an exhibit that's subject to change. Disbursement conditions are vague. Any unused TI funds revert to the landlord at lease commencement, whether or not the buildout is complete. The landlord controls the contractor selection.
The TI allowance must be in the lease body, not just an LOI or exhibit. Define disbursement conditions with specificity (lien waivers, completion certificates, draw schedule). Any unused TI funds should be available as rent credits or direct payment, not reverting to the landlord. If the landlord controls the contractor, specify the approval process for bids and change orders. Get realistic cost estimates before signing — if your buildout exceeds the TI, the overage is yours.
The holdover rate is 200% of the final lease rate, month-to-month, terminable by the landlord on 30 days' notice. If you're 45 days late finding a new space at lease expiration, you've paid two months at double rate and can be forced out on a month's notice during your most vulnerable moment.
Push the holdover rate to 110–125% for the first 60 days, escalating to 150% thereafter. Get a minimum holdover notice period of 60 days before the landlord can terminate. Better: negotiate a formal short-term extension option — a right to extend for 3 or 6 months at a specified rate, exercisable 6–9 months before expiration — so holdover provisions become a backstop rather than a starting point.
The landlord's form contains a radius restriction: if you open another location within five miles of the leased premises, the landlord can terminate the lease or impose a penalty. For a growing business planning a second location, this provision is invisible at signing and catastrophic 18 months later.
If the lease contains a radius restriction, eliminate it or reduce the radius to something workable (one mile vs. five). If you are negotiating an exclusivity clause — your right to be the only tenant in your category — get it defined with precision: what products or services are covered, what happens if the landlord violates it (rent abatement, termination right), and how new tenants are screened. An exclusivity clause with no remedy is not worth the paper it's on.
The force majeure clause was last updated in 2018. It excuses the landlord's performance obligations (maintenance, access, HVAC) in cases of government action or pandemic but does not excuse the tenant's rent obligations. When a government order prevents your business from opening, the rent runs regardless.
Post-2020, this clause requires specific attention. Push for symmetric force majeure — if the landlord's obligations are excused by a government order or declared emergency, the tenant's rent obligations are proportionally reduced for the duration of the impairment. At minimum, add a rent abatement provision for any period in which government orders prohibit the tenant's permitted use, tied to actual occupancy restrictions rather than complete closure.
The lease contains no early termination right. The business contracts significantly in year four of a seven-year lease. There is no exit. The tenant can try to sublease (subject to landlord consent) or negotiate a lease buyout, both of which favor the landlord entirely because there is no alternative.
Add a termination option exercisable at mid-term (e.g., at the end of year three in a five-year lease) with 6–9 months' advance written notice and a termination fee limited to unamortized TI and leasing commissions only — not a penalty. The longer the notice period, the lower the fee. For businesses with meaningful growth uncertainty, this option is worth the rent premium it takes to negotiate, because the cost of getting out of a lease you can't use without one is always higher.
The retail tenant leases adjacent to a major anchor in a shopping center. The lease contains no co-tenancy provision. Three years in, the anchor closes. Foot traffic drops 60%. The tenant's sales decline but the rent runs at the same rate for the remaining four years of the term. There is no remedy.
For retail tenants in multi-tenant centers, require a co-tenancy clause that provides: a rent reduction (typically 50% of base rent) if a named anchor vacates and is not replaced within 90–180 days; a termination right if the anchor vacancy persists beyond 12 months; and an occupancy floor — if overall center occupancy drops below 75–80%, similar remedies apply. Define the anchor by name and by category so that replacement by a substantially different use doesn't satisfy the clause.
The clause that connects all ten
Every provision above has a common thread: the default lease language allocates risk to the tenant, and the negotiated language redistributes it. Most landlords accept these modifications for creditworthy tenants with counsel. The question is whether the tenant knows to ask.
A lease isn't just a real estate document. It's a business constraint that affects every decision you make for the next five to ten years.
I've been in acquisitions where the lease was the hardest part of the deal — not because of the business, not because of the price, but because an anti-assignment clause with a cooperative landlord turned a two-week process into a three-month negotiation that nearly killed the transaction. I've seen businesses that outgrew their space in year two, locked in for five years with no early termination right and no subletting flexibility. The lease was negotiated on the landlord's form, by a business owner who was excited to open and didn't want to slow the process down.
Commercial lease review is not a luxury. It is the single most impactful legal investment most businesses make relative to the cost of the alternative. A lease attorney reviewing a 5-year, 3,000 SF office lease costs a fraction of one month's rent — and the modifications they negotiate typically save multiples of that over the lease term.
What to do before you sign
The sequence matters. The letter of intent is where the commercial terms are set — rent, term, TI allowance, exclusivity, and any major business-side protections. Once the LOI is signed and the landlord starts the lease drafting, your ability to negotiate fundamental terms is significantly reduced. The LOI negotiation is the leverage point.
After the LOI, the lease document is a 30–50 page legal instrument that modifies, qualifies, and expands on the commercial terms. This is where an attorney earns the fee. The lease will contain provisions that aren't in the LOI at all — holdover penalties, CAM methodologies, force majeure, assignment restrictions — and those provisions are all subject to negotiation before execution.
If you are the tenant, you should have counsel review the lease before you sign it, not after. The lease runs for years. The decisions in it run with it.