Permitted Use & Implied Warranty of Suitability in Texas Commercial Leases

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Texas commercial real estate transactions, including commercial lease contracts, are often subject to specific statutory protections. Commercial leases in Texas are subject to an “implied warranty of suitability,” which is a landlord’s guarantee that both protects a tenant and increases costs passed down from a commercial landlord. A Texas commercial real estate attorney can advise your commercial lease contract to protect your rights and liabilities, and to reduce the cost of risk management.

Limiting Tenant’s Risk in Commercial Lease Contracts

A fair commercial lease contract will provide for a termination of the lease without risk of penalty if the tenant cannot obtain the commercial lease financing, permits, licensing, zoning, etc., that it requires to operate. Advice from a commercial real estate lawyer can help you draft such language into a letter of intent (LOI) or a commercial lease. However, after opening your business, an outside event could prevents the you from using the commercial real estate for its intended use, or could require a large investment of capital to continue the intended use (zone or code changes, for example). The implied warranty of suitability operates as a landlord’s guarantee that the commercial real estate will continue to be fit for the tenant’s intended purpose and permitted use.

Permitted Use in a Texas Commercial Lease

Permitted use is a fundamental commercial lease contract tool that allows a commercial landlord to control the use of the property and to limit risks stemming from the implied warranty of suitability. A commercial tenant should try to secure all permitted uses that are relevant to its business development plan, and should negotiate exclusive permitted uses for core services or products when possible. Some commercial leases have very specific permitted uses – typical for retail stores and restaurants. Other commercial leases may have very broad or unrestricted permitted use, which may impose higher risks on commercial landlords under the implied warranty of suitability. A Texas commercial real estate attorney can help you identify risks and negotiate lease terms that make sense for your business.

Limiting Landlord Liability: Implied Warranty of Suitability

A commercial landlord can limit risks related to the implied warranty of suitability in a number of ways, including control over various tenants’ permitted use. An experienced Texas commercial real estate attorney can help you draft additional provisions that limit your liability for warranty of suitability by reference to specific ordinances, zoning, conditions, etc..

Our Austin law firm regularly advises Texas commercial real estate transactions and commercial leases. Contact our law firm to talk with a Texas commercial real estate lawyer today.

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