Breaking of a Commercial Lease in Texas

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Texas law codifies the relationship and statutory duties between landlord and tenant of commercial rental property. But in many cases, the law simply provides the default for matters that are not discussed in the language of the lease. Commercial leases are largely creatures of contract.

If either party to a Texas commercial lease breaches their duties under the law and the lease terms, state laws provide for both remedies and consequences. Texas landlords can sue tenants who breach a commercial lease, while landlords who breach a lease face stiff fines, liens and lawsuits.

What Is a Commercial Lease?

Texas law governing commercial leases is found in Title 8, Chapter 93 of the Texas Property Code. Under its terms, the title applies only to the relationship between landlords and tenants of commercial rental property, defined as rental property that is not residential. In other words, if a property owner in Texas rents property for a purpose other than use as a dwelling, it is commercial rental property.

While in residential leases, the term of the lease is usually a matter of years, commercial rental agreements are called leases if they are for a month or even one week. The lease can also continue periodically until cancelled by one of the parties. Either party can end a commercial lease that runs periodically by giving the other party notice equal to the period of the lease.

In other words, both landlords and tenants can terminate a 30-day commercial property lease in 30 days or less without penalty by giving 30 days' notice of the termination to the other party. This is a termination, not a breach of the lease contract.

Rules for Commercial Lease Agreements

A commercial lease in Texas is a written contract usually negotiated between the owner of a piece of property and the renter. Under the lease terms, the owner lets the renter use commercial property for a specified period of time in exchange for specific payments. Commercial real estate does not have to be used for an office, but can be used for any business purpose, including warehouse space, parking facilities or even a car dealership.

Residential leases are usually generated by a landlord and signed by a prospective tenant without much negotiation. Commercial lease contracts, however, are often lengthy and complex documents that outline terms. The parties discuss these terms, sometimes with legal assistance, and negotiate such tenancy matters as:

  • Obligations of the parties to each other.
  • Use to which the property will be put.
  • Length of the lease.
  • Terms of payments.
  • Resolution of disputes.
  • Penalties for breach.

Breaking a Commercial Lease

Can a commercial lease be broken? Just like a residential lease, a commercial lease is subject to being broken, or breached, by either party. In many cases of broken leases, penalties will apply. However, these generally are detailed in the commercial lease contract rather than provided by Texas law.

It is by no means easy for a commercial tenant to get out of a valid commercial lease in Texas without penalty. The language of the written lease is the tenant's best bet, so it is very important to consider in advance the different situations that might arise making the lease contract impossible to fulfill and to include them in the lease terms.

It is always possible that a landlord, approached by a commercial tenant about problems with continuing the lease, will allow modifications or even cancellation of the lease. It may also be possible for the tenant to buy their way out of the lease or to find an alternate tenant or subtenant that is acceptable to the landlord. But none of these are guaranteed to work and will depend on the parties' relationship.

Termination vs. Breaking a Lease

Typically, commercial leases include a list of conditions under which a commercial tenant can terminate the lease early, how that is to be accomplished, and the penalties resulting from an early termination of the lease. Many include language permitting the lease to be terminated early without penalty in specified circumstances. In that case, a tenant would be entitled to terminate the lease early. Only if lease terms are broken would the termination be considered a breach or "breaking" of the lease.

To figure out who can terminate the lease for what reasons, it is important to start with a careful review of a Texas commercial lease. Given the length and complexity of many commercial leases, the question of terminating versus breaking a lease is one that may well require legal counsel. In other words, it may be possible for one commercial tenant to get out of their lease early without penalty for reasons that do not apply to other commercial tenants with different contract terms.

Commercial Landlord Rights in Texas

When it comes to commercial lease disputes, Texas has the reputation of being a pro-landlord state. This stems in part from the commercial rental statutes that permit a landlord to lock out a commercial tenant who fails to pay any part of the rent in a timely fashion. But changing the locks is not the first step a landlord should take when rent is not paid.

Normally, if a commercial rent payment is overdue or a commercial tenant abandons the property in breach of the lease, a landlord must provide the tenant with written notice of default. Commercial leases will control in Texas, and they generally require a written notice of default that includes a set time period and cure rights. Notice periods are often negotiable and will vary by lease. A landlord must read and follow the terms in their own lease or they may forfeit later use of the statutory lock-out and eviction provisions.

Landlord Lockout and Options

If the commercial tenant is given notice and fails to cure the breach, the next step is to terminate the tenant’s right of possession. Here the property management is faced with several options, depending on the lease terms.

Many commercial leases in Texas often allow a landlord in this situation to terminate the tenants’ right of possession, terminate the lease, or maintain the lease and sue for rent as it becomes due. If this is the case, the landlord must select their path carefully since termination of the lease can cut off the tenant’s liability for future rent. Termination of the tenant's right to possession of the leased premises without terminating the lease is often the preferred option. This preserves the landlord’s claim to future rentals under the lease.