Commercial Lease Letter of Intent (Multi-Tenant) - Texas

LETTER OF INTENT

MULTI-TENANT COMMERCIAL LEASE -- STATE OF TEXAS

Date: [__/__/____]

CONFIDENTIAL -- FOR DISCUSSION PURPOSES ONLY

IMPORTANT NOTICE REGARDING BINDING EFFECT UNDER TEXAS LAW: This Letter of Intent ("LOI") is intended to be non-binding except as expressly stated in Section 18 below. However, under Texas law, an LOI may become an enforceable contract if it contains all essential terms and reflects a meeting of the minds, even if the parties contemplate a subsequent formal lease. See John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12 (Tex. App.--Houston [1st Dist.] 2000); Karns v. Jalapeno Tree Holdings, L.L.C., 459 S.W.3d 683 (Tex. App.--El Paso 2015). Both parties are advised to seek independent legal counsel before executing this LOI.

1. PARTIES

Landlord:

• Legal Name: [________________________________]
• Entity Type: [________________________________]
• State of Formation: [________________________________]
• Address for Notices: [________________________________]
• Contact Person: [________________________________]
• Email: [________________________________]
• Phone: [________________________________]

Tenant:

• Legal Name: [________________________________]
• Entity Type: [________________________________]
• State of Formation: [________________________________]
• Address for Notices: [________________________________]
• Contact Person: [________________________________]
• Email: [________________________________]
• Phone: [________________________________]

Guarantor (if applicable):

• Name: [________________________________]
• Relationship to Tenant: [________________________________]

2. PREMISES AND BUILDING

• Building Name: [________________________________]
• Building Address: [________________________________], Texas [____]
• County: [________________________________]
• Suite/Unit Number: [________________________________]
• Approximate Rentable Square Footage: [________________________________] RSF
• Approximate Usable Square Footage: [________________________________] USF
• Rentable-to-Usable Ratio (Load Factor): [________________________________]%
• Floor(s): [________________________________]
• Building Class: ☐ Class A ☐ Class B ☐ Class C
• Building Type: ☐ Office ☐ Retail ☐ Mixed-Use ☐ Industrial/Flex ☐ Other: [____________]
• Total Building Size: [________________________________] RSF
• Number of Tenants in Building: [________________________________]
• Current Occupancy Rate: [________________________________]%
• Year Built / Last Renovated: [________________________________]

2.1 Property Condition Disclosure

Texas Practice Note: Texas does not impose an implied warranty of suitability for commercial leases. In Davidow v. Inwood North Professional Group-Phase I, 747 S.W.2d 373 (Tex. 1988), the Texas Supreme Court recognized an implied warranty of suitability in commercial leases, but subsequent legislative and judicial developments have allowed parties wide latitude to contractually disclaim this warranty. Tenant should conduct independent due diligence on the condition of the Premises.

• Environmental Condition: Landlord represents that, to its actual knowledge, ☐ no ☐ the following environmental conditions exist on or affecting the Premises: [________________________________]
• ADA Compliance: Responsibility for ADA compliance shall be allocated as follows:
• Common areas: ☐ Landlord ☐ Shared
• Within Premises: ☐ Tenant ☐ Landlord ☐ Shared
• Flood Zone: ☐ Not in flood zone ☐ Zone [____] per FEMA Map [________________________________]

3. LEASE TERM AND COMMENCEMENT

• Initial Term: [____] years [____] months
• Anticipated Commencement Date: [__/__/____]
• Rent Commencement Date: [__/__/____] or upon the occurrence of:
• ☐ Delivery of Premises in agreed condition
• ☐ Substantial completion of Landlord Work
• ☐ Issuance of certificate of occupancy
• ☐ [____] days after delivery, whichever occurs first
• Lease Expiration Date: [__/__/____]
• Early Access / Fixturing Period: [____] days prior to Rent Commencement for Tenant's non-structural fixturing at Tenant's sole cost, with no rent obligation but subject to insurance requirements

3.1 Delivery and Late Delivery Remedies

• Delivery Condition: ☐ Warm shell ☐ Cold shell ☐ Turn-key ☐ As-is ☐ Other: [________________________________]
• Outside Delivery Date: [__/__/____]
• Grace Period for Late Delivery: [____] days
• Abatement for Late Delivery: One (1) day of Base Rent abatement for each day of delay beyond the Outside Delivery Date plus grace period
• Tenant Termination Right: If Premises not delivered within [____] days after Outside Delivery Date, Tenant may terminate this LOI and, upon execution of Lease, the Lease itself, by written notice to Landlord
• Landlord's Liability for Delay Damages: ☐ Capped at [____] months' rent ☐ Unlimited ☐ Limited to abatement only

4. BASE RENT

• Rent Escalation Method: ☐ Fixed at [____]% annually ☐ CPI-based (capped at [____]%) ☐ Fair Market Value at intervals ☐ Other: [________________________________]
• Free Rent Period: [____] months of Base Rent only, commencing on Rent Commencement Date
• Abated Rent Repayment on Default: ☐ Yes, all abated rent becomes immediately due upon uncured default ☐ No

5. ADDITIONAL RENT -- OPERATING EXPENSES, TAXES, AND CAM

5.1 Lease Structure

• ☐ Triple Net (NNN) -- Tenant pays pro rata share of all operating expenses, taxes, and insurance
• ☐ Modified Gross -- Tenant pays increases over Base Year
• ☐ Full Service Gross -- All expenses included in Base Rent, subject to expense stop
• ☐ Other: [________________________________]

5.2 Common Area Maintenance (CAM) and Operating Expenses

• Estimated Year 1 CAM/Operating Expenses: $[____]/RSF
• Tenant's Pro Rata Share: [____]% (based on [____] RSF / [____] RSF total building)
• CAM Cap: ☐ Controllable expenses capped at [____]% annual increase over prior year ☐ No cap
• Gross-Up Provision: Operating expenses shall be grossed up to reflect [____]% occupancy (typically 95%) if the Building is less than [____]% occupied during any calendar year
• Excluded Expenses: Capital expenditures (except those required by laws enacted after the Commencement Date, amortized over their useful life per GAAP with interest at [____]%), leasing commissions, landlord's income taxes, costs of correcting structural or latent defects, costs of environmental remediation not caused by Tenant, ground lease rent, debt service, depreciation
• Audit Rights: Tenant shall have the right, at its sole expense, upon [____] days' written notice, to audit Landlord's operating expense records for the preceding [____] calendar year(s). If audit reveals overcharges exceeding [____]%, Landlord shall pay Tenant's reasonable audit costs

5.3 Real Property Taxes -- Texas-Specific Provisions

Texas Practice Note: Texas imposes no state income tax, making property taxes the primary revenue source for local government. Property tax rates in Texas are among the highest in the nation. Tex. Tax Code Ch. 42 provides a detailed process for protesting property tax appraisals. Under Tex. Tax Code § 41.413, a tenant who is contractually obligated to reimburse the property owner for property taxes is entitled to protest before the appraisal review board if the owner does not protest.

• Base Year for Real Property Taxes: Calendar year [____]
• Tenant's Obligation: Pro rata share of increases above Base Year taxes
• Tax Protest Rights: ☐ Landlord shall pursue tax protests in good faith ☐ Tenant retains independent protest rights under Tex. Tax Code § 41.413 ☐ Tax protest costs shared pro rata
• Special Assessments: ☐ Passed through to Tenant pro rata ☐ Excluded from Additional Rent ☐ Amortized over [____] years
• Tax Abatement or Incentive: If Landlord holds or obtains a tax abatement or economic development incentive (e.g., Ch. 312 or Ch. 313/328 agreements), Tenant shall ☐ receive proportionate benefit ☐ not receive benefit

5.4 Insurance Costs

• Insurance Pass-Through: Tenant pays pro rata share of Building insurance costs
• Tenant's Own Insurance Requirements:
• Commercial General Liability: minimum $[________________________________] per occurrence / $[________________________________] aggregate
• Property Insurance on Tenant's personal property and improvements: full replacement cost
• Workers' Compensation: statutory limits
• Business Interruption: ☐ Required ☐ Recommended
• Additional Insured: Landlord and its managing agent named as additional insureds
• Waiver of Subrogation: mutual waiver of subrogation

6. TENANT IMPROVEMENTS AND LANDLORD WORK

6.1 Tenant Improvement Allowance

• TI Allowance: $[____]/RSF ($[________________________________] total)
• Allowance Applicability: ☐ Hard costs only ☐ Hard and soft costs ☐ Including furniture, fixtures, and equipment ☐ Including architectural and engineering fees ☐ Including permit fees
• Unused Allowance: ☐ Forfeited ☐ Applied to rent ☐ Paid to Tenant (capped at [____]%) ☐ Carried forward for [____] months
• Disbursement Method: ☐ Landlord-funded construction ☐ Direct payment to Tenant's contractor upon lien waivers ☐ Reimbursement upon completion

6.2 Landlord Work

• Scope of Landlord Work: [________________________________]
• Landlord Work Deadline: [__/__/____]
• Plans and Specifications: Landlord to provide to Tenant within [____] days of LOI execution; Tenant to approve or comment within [____] business days
• Construction Standards: Building standard finishes unless otherwise specified; Landlord to comply with all applicable building codes and obtain all required permits

6.3 Code Compliance

• Existing Code Violations: ☐ Landlord responsibility ☐ Tenant responsibility for Premises only
• ADA/TAS Compliance: The Premises and common areas shall comply with the Americans with Disabilities Act (ADA) and the Texas Accessibility Standards (TAS) promulgated by the Texas Department of Licensing and Regulation. Responsibility allocated as:
• Landlord: Building common areas and base building systems
• Tenant: Premises interior improvements
• Life Safety / Fire Code: Landlord responsible for base building fire/life safety; Tenant responsible for any upgrades triggered by Tenant's specific use or improvements
• Certificate of Occupancy: ☐ Landlord to obtain/update ☐ Tenant to obtain for Tenant's specific use

7. PERMITTED USE AND EXCLUSIVITY

7.1 Permitted Use

• Primary Use: [________________________________]
• Ancillary Uses: [________________________________]
• Prohibited Uses: [________________________________]
• Zoning Verification: Tenant acknowledges responsibility to verify that the Premises are properly zoned for Tenant's intended use under applicable municipal zoning ordinances. Landlord represents that, to Landlord's actual knowledge, the current zoning classification is [________________________________]

7.2 Exclusive Use Rights

• ☐ No exclusive use rights
• ☐ Exclusive use granted for: [________________________________]
• Scope: No other tenant in the Building or ☐ Project shall be permitted to [________________________________]
• Existing Tenants: ☐ Carved out from exclusive ☐ Subject to exclusive upon renewal
• Remedies for Violation: ☐ Reduced rent to $[____]/RSF ☐ Percentage rent in lieu of Base Rent ☐ Right to terminate ☐ Injunctive relief ☐ Self-help with offset
• Continuous Operation Requirement: ☐ Tenant must continuously operate to maintain exclusive ☐ No continuous operation requirement

7.3 Co-Tenancy Requirements (Retail/Mixed-Use)

• ☐ No co-tenancy requirements
• ☐ Opening Co-Tenancy:
• The following anchor tenant(s) must be open for business before Tenant is obligated to open: [________________________________]
• The Building/Project must be at least [____]% occupied and open for business
• Remedy if not satisfied: ☐ Reduced rent of $[____]/RSF ☐ Percentage rent only ☐ Termination right after [____] months
• ☐ Operating Co-Tenancy:
• If the following anchor tenant(s) cease operations for more than [____] consecutive days: [________________________________]
• If Building/Project occupancy falls below [____]% for more than [____] consecutive days
• Remedy: ☐ Reduced rent of $[____]/RSF for up to [____] months ☐ Right to terminate after [____] months of reduced rent

7.4 Percentage Rent (Retail)

• ☐ No percentage rent
• ☐ Percentage rent applies:
• Breakpoint: Natural breakpoint ($[________________________________]) or Artificial breakpoint ($[________________________________])
• Percentage: [____]% of gross sales exceeding breakpoint
• Reporting: ☐ Monthly ☐ Quarterly ☐ Annually
• Excluded Sales: Internet/mail-order originated elsewhere, returns, employee discounts, sales tax collected

7.5 Tenant Mix Provisions

• Landlord covenants to maintain the following tenant mix standards: [________________________________]
• Landlord shall not lease to the following categories of tenants within the Building/Project without Tenant's consent: [________________________________]

8. RENEWAL OPTIONS

• Number of Renewal Options: [____]
• Renewal Term Length: [____] years each
• Renewal Rental Rate:
• ☐ Fair Market Value (see Section 8.1 below)
• ☐ Fixed escalation of [____]% over the then-current rent
• ☐ CPI-adjusted (capped at [____]%)
• ☐ The greater of FMV or [____]% increase
• Notice Period for Exercise: [____] months prior to expiration
• Conditions to Exercise: ☐ No uncured default ☐ Tenant in occupancy of at least [____]% of Premises ☐ Minimum net worth of $[________________________________] ☐ Original named Tenant or permitted assignee only

8.1 Fair Market Value Determination Process

If renewal rent is FMV:

1. Negotiation Period: Landlord and Tenant shall negotiate in good faith for [____] days after Tenant exercises the renewal option
2. Broker Determination: If the parties cannot agree, each shall appoint a licensed Texas commercial real estate broker with at least [____] years' experience in [____] County within [____] days. The two brokers shall select a third broker within [____] days. Each broker shall independently determine FMV within [____] days.
3. Baseball Arbitration: The FMV shall be the average of the two closest determinations, unless all three differ by more than [____]%, in which case the middle value shall control
4. Exclusions from FMV: FMV shall exclude the value of Tenant's improvements paid for by Tenant, any sublease premium, and temporary market anomalies (e.g., pandemic-related distortions)
5. Floor: In no event shall renewal rent be less than [____]% of the rent payable in the final year of the then-current term
6. Cost Allocation: Each party pays its own broker; the third broker's fee is shared equally

9. EXPANSION AND PREFERENTIAL RIGHTS

• ☐ Right of First Offer (ROFO): Landlord shall notify Tenant of available space in [________________________________] before marketing to third parties. Tenant shall have [____] business days to respond.
• ☐ Right of First Refusal (ROFR): If Landlord receives a bona fide third-party offer for space in [________________________________], Tenant shall have [____] business days to match.
• ☐ Must-Take Expansion: Tenant obligated to take [________________________________] RSF on or about [__/__/____] at terms [________________________________]
• ☐ Contraction Right: Tenant may surrender [________________________________] RSF after Lease Year [____] upon [____] months' notice and payment of [________________________________]

10. SIGNAGE

• Suite Entry: ☐ Building standard ☐ Custom (subject to Landlord approval)
• Building Directory: ☐ Included ☐ Not applicable
• Monument/Pylon Sign: ☐ Included, subject to size/design approval and municipal sign ordinance ☐ Not available
• Building Exterior/Facade: ☐ Tenant entitled to [____] sign location(s) on [________________________________] elevation(s) ☐ Not available
• Signage Costs: ☐ Tenant ☐ Landlord ☐ Shared
• Compliance: All signage subject to applicable municipal sign ordinances and any applicable deed restrictions, HOA/POA rules, or master lease restrictions

11. PARKING AND COMMON AREAS

11.1 Parking

• Parking Ratio: [____] spaces per 1,000 RSF ([____] total spaces)
• Reserved Spaces: [____] reserved spaces at $[____]/space/month
• Unreserved Spaces: [____] unreserved spaces at ☐ no charge ☐ $[____]/space/month
• Covered/Garage Parking: ☐ [____] spaces at $[____]/space/month ☐ Not available
• Visitor Parking: [____] spaces designated for Tenant's visitors
• Parking Structure: ☐ Surface ☐ Garage ☐ Both

11.2 Common Areas

• Loading Dock/Freight Elevator: ☐ Shared access ☐ Dedicated access ☐ Not applicable
• After-Hours HVAC: $[____] per hour per zone; minimum [____] hours
• Building Hours: Monday-Friday: [____] a.m. to [____] p.m.; Saturday: [____] a.m. to [____] p.m.; Sunday/Holidays: Closed
• 24/7 Access: ☐ Tenant has 24/7 access to Premises via [________________________________]
• Shared Conference/Amenity Space: ☐ Included ☐ At additional charge ☐ Not available
• Telecommunications: ☐ Building has fiber ☐ Tenant may install additional risers ☐ Riser fees: [________________________________]

12. ASSIGNMENT AND SUBLETTING

• Landlord Consent: Required, not to be unreasonably withheld, conditioned, or delayed
• Permitted Transfers: No consent required for transfers to:
• ☐ Affiliates controlling, controlled by, or under common control with Tenant
• ☐ Successors by merger, consolidation, or reorganization
• ☐ Purchasers of substantially all of Tenant's assets
• Provided that the transferee has a net worth of at least $[________________________________] and assumes all Lease obligations
• Recapture Right: ☐ Landlord may recapture and terminate the Lease as to the sublet/assigned portion ☐ No recapture right
• Profit Sharing on Sublease/Assignment: ☐ [____]% of net sublease profit to Landlord after deducting Tenant's reasonable costs ☐ No profit sharing
• Response Time: Landlord to respond within [____] business days of receiving complete transfer package

13. SECURITY DEPOSIT AND FINANCIAL ASSURANCES

• Security Deposit: $[________________________________] (equivalent to [____] months' Base Rent)
• Form: ☐ Cash ☐ Letter of credit from a bank acceptable to Landlord ☐ Either
• Burn-Down: Security deposit reduces to $[________________________________] after Lease Year [____] provided no uncured default
• Return: Within [____] days after Lease expiration and surrender, less any amounts owed
• Letter of Credit Terms (if applicable): Evergreen, drawable on sight, from a bank with offices in Texas, minimum rating of [________________________________]
• Personal/Corporate Guaranty: ☐ Full term guaranty ☐ Good-guy guaranty (see Section 13.1) ☐ Burn-off after [____] years ☐ Not required

13.1 Good-Guy Guaranty (if applicable)

• Guarantor personally liable for rent and obligations through the date Tenant vacates and surrenders the Premises in broom-clean condition, provided Tenant gives [____] months' prior written notice of intent to surrender
• Guarantor released from liability for obligations arising after surrender date

14. INSURANCE AND INDEMNITY

• Tenant's Insurance:
• Commercial General Liability: $[________________________________] per occurrence / $[________________________________] aggregate
• Property Insurance: Replacement cost on Tenant's improvements and personal property
• Workers' Compensation: Statutory limits (Texas employers may opt out under Tex. Lab. Code Ch. 406, but Landlord may require coverage)
• Business Auto Liability: $[________________________________] combined single limit
• Umbrella/Excess: $[________________________________]
• Additional Insured: Landlord, Landlord's managing agent, and Landlord's lender
• Landlord's Insurance: Landlord shall carry property insurance on the Building (excluding Tenant's improvements and personal property) and commercial general liability for the common areas
• Mutual Waiver of Subrogation: Each party waives all rights of recovery against the other for losses covered by property insurance required under the Lease
• Mutual Indemnity: Each party shall indemnify the other for claims arising from the indemnifying party's negligence or willful misconduct in connection with the Premises or Building

Texas Practice Note: Under the Texas Oilfield Anti-Indemnity Act (Tex. Civ. Prac. & Rem. Code Ch. 127), certain indemnity provisions in agreements relating to wells or mines are void. While this statute generally does not apply to standard commercial leases, counsel should confirm if the Premises involves any oilfield or mining operations.

15. SUBORDINATION, NON-DISTURBANCE, AND ATTORNMENT (SNDA)

• Landlord shall deliver a commercially reasonable SNDA from Landlord's existing lender(s) within [____] days of Lease execution
• The SNDA shall provide that so long as Tenant is not in default beyond applicable cure periods, Tenant's possession and Lease rights shall not be disturbed in the event of a foreclosure or deed in lieu thereof
• Tenant shall subordinate the Lease to any future mortgage, provided lender delivers a commercially reasonable SNDA

16. CASUALTY AND CONDEMNATION

16.1 Casualty

• If the Premises or Building is damaged by fire or other casualty:
• Landlord shall notify Tenant of estimated restoration time within [____] days
• If restoration is estimated to exceed [____] days, either party may terminate the Lease
• Rent shall abate proportionately during restoration
• If damage occurs during the last [____] months of the Lease term, either party may terminate

16.2 Condemnation

• If all or a material portion of the Premises is taken by eminent domain or condemnation, either party may terminate
• "Material portion" means a taking that renders the Premises unsuitable for Tenant's permitted use
• Tenant shall have an independent right to claim from the condemning authority for Tenant's relocation expenses, loss of business goodwill, and unamortized leasehold improvements paid for by Tenant

17. DEFAULT AND REMEDIES

17.1 Tenant Default

• Monetary Default: Failure to pay rent or other amounts within [____] days after written notice
• Non-Monetary Default: Failure to cure within [____] days after written notice (or such longer period as reasonably required if cure cannot be completed within [____] days, provided Tenant commences cure within [____] days and diligently pursues)
• Bankruptcy/Insolvency: Filing of voluntary petition or failure to dismiss involuntary petition within [____] days

17.2 Landlord Default

• Failure by Landlord to perform any obligation within [____] days after written notice from Tenant (or such longer period as reasonably required for cure)
• Tenant's remedies: ☐ Self-help with right of offset (capped at [____]% of monthly rent) ☐ Rent abatement ☐ Termination after repeated defaults ☐ Suit for damages

Texas Practice Note: Under Tex. Prop. Code § 93.002, a landlord of commercial rental property has a duty to install or reattach a security device at the tenant's request. Under § 93.012, a landlord who intentionally prevents a commercial tenant from entering the premises by interrupting utility service is liable for actual damages, one month's rent or $500 (whichever is greater), and reasonable attorney's fees. The Texas DTPA (Tex. Bus. & Com. Code § 17.41 et seq.) may apply to certain landlord representations made in connection with leasing, particularly regarding building condition or suitability.

18. BINDING AND NON-BINDING PROVISIONS

18.1 Non-Binding Provisions

All provisions of this LOI other than those specified in Section 18.2 are non-binding expressions of the parties' current intent and shall not create any legally enforceable obligations. Neither party shall have any liability to the other for failure to negotiate or execute a definitive Lease.

18.2 Binding Provisions

The following provisions shall be legally binding upon execution of this LOI by both parties and shall survive the termination or expiration of this LOI:

(a) Exclusivity Period. From the date of this LOI through [__/__/____] (the "Exclusivity Period"), Landlord shall not market, show, or negotiate with any other party for the lease of the Premises. If a definitive Lease is not executed by the end of the Exclusivity Period, either party may terminate this LOI upon written notice.

(b) Confidentiality. Each party shall maintain the terms of this LOI and all negotiations in confidence and shall not disclose them to any third party other than such party's attorneys, accountants, brokers, lenders, and prospective investors, each of whom shall be bound by this confidentiality obligation.

(c) Brokerage. See Section 19 below. Each party's indemnification obligation regarding brokerage claims is binding.

(d) Governing Law and Venue. See Section 20 below.

(e) Expenses. Each party shall bear its own costs and expenses (including attorney's fees) incurred in connection with the negotiation of this LOI and any definitive Lease, unless otherwise agreed in writing.

19. BROKERS

• Landlord's Broker: [________________________________], License No. [________________________________]
• Tenant's Broker: [________________________________], License No. [________________________________]
• Commission: Per separate agreement between Landlord and Landlord's Broker, with cooperating commission to Tenant's Broker
• Indemnity: Each party represents that it has not engaged any broker other than as identified above and shall indemnify, defend, and hold harmless the other party from and against any claims for brokerage commissions or finder's fees arising from such party's dealings with any other broker

20. GOVERNING LAW AND VENUE

• Governing Law: This LOI shall be governed by and construed in accordance with the laws of the State of Texas, without regard to its conflict-of-laws principles
• Venue: Exclusive venue for any action arising out of or relating to this LOI shall be in the state or federal courts located in [________________________________] County, Texas
• Jury Waiver: ☐ The parties waive trial by jury in any action arising under or related to this LOI ☐ No jury waiver
• Attorney's Fees: ☐ Prevailing party entitled to reasonable attorney's fees ☐ Each party bears its own fees

21. NEGOTIATION TIMELINE

22. ADDITIONAL TERMS AND CONDITIONS

22.1 Environmental

• Landlord represents that, to Landlord's actual knowledge, the Premises and Building comply with all applicable environmental laws, including the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), and the Texas Solid Waste Disposal Act (Tex. Health & Safety Code Ch. 361)
• Tenant shall not generate, store, or dispose of hazardous materials on the Premises except in de minimis quantities customarily used in Tenant's ordinary course of business and in compliance with all applicable laws
• Landlord shall deliver copies of any existing Phase I or Phase II environmental site assessments to Tenant within [____] days of LOI execution

22.2 Utilities

• Tenant responsible for: ☐ Electric ☐ Gas ☐ Water/sewer ☐ Telecommunications ☐ Trash removal
• Separately metered: ☐ Yes ☐ No (if no, allocated by [________________________________])
• Landlord responsible for providing utilities to the Premises demarcation point

22.3 Holdover

• Holdover rate: [____]% of the then-current Base Rent (typically 150%) plus all Additional Rent, on a month-to-month basis, terminable by either party upon [____] days' notice

22.4 Estoppel Certificates

• Each party shall deliver estoppel certificates within [____] business days of request, in a form reasonably acceptable to the requesting party or its lender

22.5 Force Majeure

• Neither party shall be liable for delays due to acts of God, war, terrorism, pandemic, government action, labor disputes, material shortages, or other events beyond the reasonable control of such party, provided that force majeure shall not excuse Tenant's obligation to pay rent

23. PRACTICE TIPS FOR TEXAS MULTI-TENANT COMMERCIAL LEASE LOI

For Tenant's Counsel:
- Property Tax Protest: Ensure the Lease preserves Tenant's independent right to protest property tax appraisals under Tex. Tax Code § 41.413, particularly in multi-tenant settings where Tenant's pro rata share may be significant.
- Operating Expense Audit: Negotiate robust audit rights, including the right to use a CPA or lease auditing firm, and require Landlord to maintain records for at least [____] years.
- CAM Caps: In multi-tenant buildings, controllable expense caps are critical. Distinguish between controllable expenses (management fees, landscaping, janitorial) and uncontrollable expenses (taxes, insurance, utilities).
- DTPA Protections: The Texas Deceptive Trade Practices Act (Tex. Bus. & Com. Code § 17.41 et seq.) may provide Tenant with remedies if Landlord makes false, misleading, or deceptive representations regarding the Premises or Building. However, DTPA waivers are enforceable against businesses with assets or annual revenues exceeding $25 million (Tex. Bus. & Com. Code § 17.49(f)).
- Implied Warranty of Suitability: While Davidow v. Inwood North recognized this warranty, parties may contractually disclaim it. Review any waiver carefully.
- Co-Tenancy: If a co-tenancy clause is included, define the remedy precisely (reduced rent, percentage rent, or termination) and set realistic cure periods.
- Exclusive Use: Draft exclusives narrowly to avoid antitrust concerns and specify remedies that are proportional to the harm.

For Landlord's Counsel:
- Non-Binding Language: Include clear, unambiguous language that the LOI is non-binding (other than specified provisions) to reduce the risk of enforceability under John Wood Group USA and its progeny.
- Expense Gross-Up: Ensure the gross-up provision is clearly drafted to reflect hypothetical full occupancy, avoiding disputes when the Building is partially vacant.
- Recapture Rights: Retain recapture rights for assignments and subleases, particularly to prevent Tenant from profiting from favorable rent terms.
- Continuous Operation: If the Lease includes exclusive use rights, require Tenant to continuously operate in the permitted use as a condition to maintaining the exclusive.

SIGNATURES

This LOI is executed as of the date first written above. This LOI is non-binding except as expressly set forth in Section 18.2.

LANDLORD:                                    TENANT:

_______________________________________      _______________________________________
Entity Name                                  Entity Name

By: ____________________________________     By: ____________________________________
Name: __________________________________     Name: __________________________________
Title: _________________________________     Title: _________________________________
Date: [__/__/____]                           Date: [__/__/____]


GUARANTOR (if applicable):

_______________________________________
Guarantor Name

By: ____________________________________
Name: __________________________________
Title: _________________________________
Date: [__/__/____]

SOURCES AND REFERENCES

• Texas Property Code, Chapter 93 (Commercial Tenancies): https://statutes.capitol.texas.gov/Docs/PR/htm/PR.93.htm
• Texas Tax Code, Chapter 42 (Judicial Review): https://statutes.capitol.texas.gov/Docs/TX/htm/TX.42.htm
• Texas Tax Code § 41.413 (Tenant's Right to Appeal): https://statutes.capitol.texas.gov/Docs/TX/htm/TX.41.htm
• Davidow v. Inwood North Prof. Group-Phase I, 747 S.W.2d 373 (Tex. 1988): https://law.justia.com/cases/texas/supreme-court/1988/c-6618.html
• John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12 (Tex. App.--Houston [1st Dist.] 2000)
• Texas Deceptive Trade Practices Act, Tex. Bus. & Com. Code §§ 17.41-17.63: https://statutes.capitol.texas.gov/Docs/BC/htm/BC.17.htm