The tenant (the business occupying the space) who signs a commercial lease agreement is generally expected to be a more savvy, sophisticated, and informed tenant (also known as a lessee) than a tenant in a residential lease, and the law usually does not provide a commercial tenant with the same protections as residential tenant receives.
Because the law does not provide a commercial tenant with many protections, it is up to the commercial tenant to read, understand, and negotiate protections in a proposed lease agreement before signing it, as most every paragraph in a commercial lease agreement can have a significant impact on a business’s operations and financial stability.
Laws vary from state to state, but a commercial landlord’s ability to shut off a tenant’s utilities is usually determined by the terms of the lease agreement and the state’s contract law—to determine, for example, if any breach of the lease agreement by the tenant was a material breach that might justify an extreme measure such as shutting off the utilities.
Contract law in most states recognizes an implied duty of good faith and fair dealing between parties to a contract, and a commercial landlord who shuts off a tenant’s utilities because the tenant is a few days late paying the rent may be in breach of the landlord’s implied duty of good faith and fair dealing.
In Texas, commercial tenants are considered more knowledgeable than residential tenants and are expected to negotiate their lease terms. Texas law does not provide the same level of protection to commercial tenants as it does to residential tenants. Therefore, it is crucial for a commercial tenant to thoroughly review and negotiate the lease agreement to secure necessary protections for their business operations and financial health. The ability of a commercial landlord to shut off utilities is typically governed by the lease agreement and Texas contract law. While the law does recognize an implied duty of good faith and fair dealing in contractual relationships, a landlord's decision to shut off utilities for minor lease violations, such as being a few days late on rent, could potentially breach this duty. Commercial tenants should ensure that their lease agreements clearly outline the circumstances under which utilities may be shut off to avoid disputes and potential breaches of contract.
