If you are buying a commercial property in Florida, you are not just buying bricks, land, and square footage. You are buying leases, and those leases can either protect your investment or quietly reduce its value before you even close.
As commercial real estate litigation and transaction attorneys in Florida, we regularly see buyers focus heavily on price, financing, and inspections, but underestimate the legal impact of existing tenant leases. A poorly reviewed lease can affect cash flow, resale value, refinancing options, and even lead to litigation after closing.
Let’s break down what you need to look for and what most buyers miss.
What Happens to Existing Tenant Leases When You Buy Commercial Property in Florida?
When you purchase a leased commercial property, you step into the shoes of the landlord. That means:
- You inherit the lease terms
- You inherit the tenant’s rights
- You inherit the landlord’s obligations
If the prior owner gave concessions, side agreements, renewal rights, or unusual tenant protections, you are bound by them unless properly addressed before closing.
This is why reviewing tenant leases during a commercial closing is not optional, but a core part of due diligence.
What Should Be Reviewed in a Commercial Lease Before Closing?
Here are some of the most critical provisions we analyze:
1. Rent Structure and Escalation Clauses
Is rent below market? Are there fixed increases, CPI adjustments, or no escalations at all?
A property may look profitable on paper, but if long-term leases lock in below-market rent with no escalation, your upside is limited for years.
2. Renewal Options and Extension Rights
Tenants may have:
- Multiple renewal options
- Automatic renewals
- Renewal at fixed rent
- Renewal at fair market value
If a tenant has five years left plus two five-year renewal options at below-market rates, that significantly impacts property value.
3. Early Termination Rights
Some leases allow tenants to terminate early under certain conditions.
If you are financing the purchase, lenders will scrutinize this closely. A tenant with a termination right can disrupt projected income and impact loan underwriting.
4. CAM, Taxes, and Expense Pass-Through Provisions
A common issue in commercial real estate disputes involves ambiguous expense allocations.
Does the lease clearly define:
- Common Area Maintenance charges
- Property tax allocations
- Insurance costs
- Administrative fees
If the language is vague, disputes can arise post-closing when you attempt to reconcile expenses.
5. Maintenance and Repair Obligations
Who is responsible for:
- Roof repairs?
- Structural components?
- HVAC systems?
- Parking lots?
In some older leases, landlords carry far more responsibility than buyers anticipate. Unexpected capital expenditures can quickly erase projected returns.
Hidden Lease Risks That Can Lead to Litigation After Closing
Here is where things get serious. We have seen commercial buyers close on properties without fully understanding tenant rights, and then face immediate disputes.
Side Agreements Not Reflected in the Lease
Sometimes, prior landlords made handshake deals or informal amendments. If those agreements are enforceable, they can bind the new owner.
Always request:
- All amendments
- Estoppel certificates
- Side letters
- Payment histories
Tenant Defaults That Were Never Addressed
If a tenant is already in default and the prior landlord failed to enforce rights, you may inherit a complicated legal situation.
You need to know:
- Are tenants current on rent?
- Are there outstanding disputes?
- Has notice of default been given?
Exclusive Use Clauses
In retail centers especially, tenants may have exclusivity provisions.
For example, a restaurant tenant may prohibit another restaurant of a certain type from operating in the same plaza. If you violate that clause, you could face a breach of lease claim.
Assignment and Sublease Restrictions
Some tenants have broad rights to assign or sublease. Others require landlord approval.
If you plan to reposition the property or refinance, understanding these restrictions matters.
Do I Need Estoppel Certificates Before Closing on Commercial Property?
Short answer: yes.
A tenant estoppel certificate confirms:
- The lease is in full force and effect
- The rent amount
- Security deposit held
- No existing defaults
- No side agreements
Without estoppels, you are relying solely on the seller’s representations. That is not enough in a significant commercial transaction.
Most sophisticated commercial closings in Florida require estoppels from a defined percentage of tenants before funding.
How Lease Review Affects Property Value and Financing
Lenders carefully review tenant leases in commercial real estate transactions.
They evaluate:
- Lease term remaining
- Tenant creditworthiness
- Termination rights
- Rent stability
If leases contain unfavorable terms, financing can be delayed, modified, or denied altogether.
From a valuation standpoint, buyers are not just purchasing real estate, they are purchasing income streams. Those income streams are governed entirely by the leases.
Common Mistakes Buyers Make When Reviewing Tenant Leases
Here are the mistakes we see most often:
- Relying on summaries instead of reading the full lease
- Failing to review amendments
- Ignoring estoppel certificates
- Overlooking landlord repair obligations
- Not analyzing renewal and termination provisions
- Assuming all leases are “standard”
There is no such thing as a standard lease. Every lease is a negotiation.
Why Commercial Lease Review Requires a Real Estate Litigation Perspective
Many problems do not appear obvious at closing, but they show up later in court.
As a Florida firm that handles both commercial real estate transactions and real estate litigation, we review leases with one question in mind, “If this goes wrong, where is the risk?”
We are not just reviewing documents to close the deal, but we are reviewing them to prevent disputes, minimize exposure, and protect long-term value.
Buying Commercial Property in Florida? Protect Yourself Before Closing
If you are purchasing:
- A shopping center
- An office building
- An industrial property
- A mixed-use property
- A multi-tenant commercial investment
Lease review is one of the most critical steps in your due diligence process.
A thorough legal review before closing can:
- Identify income instability
- Reveal hidden liabilities
- Prevent post-closing disputes
- Protect your financing
- Preserve property value
Final Thoughts: The Deal Is Not Just the Property — It Is the Paper
Commercial real estate transactions in Florida can move quickly, but rushing through lease review is one of the costliest mistakes a buyer can make.
If you are under contract and reviewing tenant leases, this is the moment to slow down and analyze the details carefully. At Ayala Law, we represent commercial buyers, investors, and developers in complex real estate transactions and disputes across Florida.
If you are preparing for a commercial closing and need a thorough lease review, contact one of our experienced trademark attorneys in Miami at 305-570-2208.
You can also contact our team directly at: arianna@ayalalawpa.com
Schedule a case evaluation online here.
[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particulars of your case].
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