Most family offices apply rigorous diligence to acquisitions and hold decisions. The lease, which governs how the asset actually performs after closing, tends to get less of that attention. Not because owners are careless, but because the lease looks like paperwork once the economics are agreed, and the problems embedded in weak lease language rarely surface until they cost real money.

The lease is the operating agreement for the investment. It determines how much of the property’s operating cost the tenant pays, how enforceable the income stream is if the tenant stops performing, what remedies are available and how quickly they can be exercised, and whether the asset can be repositioned or sold cleanly when the time comes. A well-drafted lease handles all of that. A poorly drafted one generates disputes, absorbs costs that should have been passed through, and constrains your options at precisely the moments when flexibility matters most.

What follows are five structural failures we encounter consistently in the leases of otherwise well-managed commercial portfolios. Each one is a drafting decision that produces the wrong outcome when it is finally tested.

Mistake 1: Ambiguous CAM Language

The Problem

CAM is where landlords most reliably lose money they should be recovering, and it happens in leases that look fine on their face. The problem is not that landlords forget to include CAM recovery. It is that CAM provisions are frequently written broadly enough to seem comprehensive but specifically enough to leave room for dispute on every individual charge a tenant prefers not to pay.

When a lease says the tenant will pay “its proportionate share of CAM” without defining what CAM includes, the landlord has created a contestable basis for every charge a motivated tenant wants to dispute. Capital expenditures, management fees, and insurance premium increases generate the most disputes because they are the categories most commonly left out of the definition. The tenant’s position is straightforward: if it is not listed, it is not included. Courts in most jurisdictions agree.

We have reviewed leases where the CAM provision ran to a single sentence. When a capital repair came due, the tenant argued successfully that capital expenditures fell outside the definition, and the landlord bore a cost that should have been allocated proportionately across the tenancy. The provision failed not because it said the wrong thing, but because it did not say enough.

The Fix

A well-drafted CAM provision defines the universe of recoverable costs with enough precision that no individual charge is genuinely contestable. That means addressing:

• Capital expenditures: whether included, and if so, how they are amortized over their useful life and passed through annually rather than in a single-year lump sum
• Management fees: included as either a specific line item or a defined percentage of total operating costs, not left to interpretation
• Exclusions: a defined list of costs the landlord bears, which typically includes executive-level compensation, leasing commissions, and costs recovered through insurance proceeds or warranties
• Audit rights: the window within which a tenant may audit (typically 12 months after the annual reconciliation), the process for conducting one, and whether overcharges trigger a credit or a cash payment
• Gross-up provisions: in a multi-tenant building, variable operating costs should be calculated as if the building is at least 95% occupied, so that a partially occupied year does not artificially depress recoveries and leave the landlord subsidizing the gap

Mistake 2: Guarantees That Don’t Guarantee Anything

The Problem

Most commercial tenants are single-purpose LLCs with no meaningful assets outside the business they are operating from your space. If the business fails, the entity folds and the lease obligation dissolves with it unless a guarantee extends liability to a creditworthy principal. The problem is not in whether landlords require guarantees. It is in how those guarantees are drafted once the landlord has agreed to require one.

Guarantees negotiated at the term sheet level often arrive at execution substantially narrowed by tenant counsel, with limitations buried in defined terms or carve-outs that the landlord’s team does not catch until enforcement reveals them.

The most consequential weaknesses we see:

• Sunset provisions that burn off the guarantee after two or three years, leaving the back half of a ten-year lease entirely unsecured
• Dollar caps set at six to twelve months of base rent, which sound substantial until you calculate the landlord’s actual exposure on a mid-term default
• Guarantees structured as secondary obligations contingent on the tenant’s primary default, rather than as independent primary obligations, which creates significant collection exposure in a tenant bankruptcy
• Scope limited to base rent, excluding holdover charges, restoration costs, and attorneys’ fees, which are often where the real exposure lies
• No collateral securing the guarantee, making enforcement a judgment collection exercise rather than a secured claim

The Fix

The operative language is absolute and unconditional, meaning the guarantor’s obligation arises independently of whether the landlord has first pursued remedies against the tenant. This distinction matters most in bankruptcy. A guarantee structured as a co-extensive obligation, one that rises and falls with the lease, may be stayed along with the primary lease obligation under Section 362 of the Bankruptcy Code. A guarantee structured as an independent primary obligation is more likely to survive the automatic stay and remain collectible from the guarantor while the bankruptcy proceeds.

On the substantive terms, the guarantee should cover the full lease term with no sunset, extend to holdover rent, restoration costs, and attorneys’ fees, and be signed by a guarantor whose assets have been verified. For a corporate parent guarantor, that means reviewing actual financials, not just accepting the guarantee of an entity that may itself be a shell. For an individual guarantor, it means a personal financial statement reviewed and evaluated before execution, when the information is still actionable.

Mistake 3: Missing or Toothless Default Provisions

The Problem

Default provisions are where lease drafting quality is most consequential and most variable. A landlord who has never had to enforce a commercial lease tends to treat default language as boilerplate. A landlord who has been through a contested eviction, a mid-lease bankruptcy, or an unauthorized assignment understands that the default provision is the document’s enforcement engine, and the difference between a clean resolution and eighteen months of litigation is frequently in how it was written.

The most common structural failure is a default provision that lists remedies without preserving them as cumulative. If the lease says the landlord “may” terminate or “may” sue for damages but does not expressly state that these remedies are cumulative and not exclusive of one another, a tenant’s counsel will argue that election of one forecloses the others. Proving otherwise requires litigation.

Notice and cure periods are the second common failure point. A monetary default provision requiring 10 days’ written notice followed by a 10-day cure period sounds reasonable until the same tenant has triggered it four times in a year. Without a provision limiting repeat cure periods within a defined window, the landlord is locked in a perpetual notice cycle with no path to termination.

In Texas, recovering possession of commercial space requires a forcible detainer proceeding in justice court, with potential appeal to county court de novo. A deficient lease compounds this in two ways: it gives the tenant procedural arguments that extend the timeline, and it limits the landlord’s ability to recover the full economic value of the remaining term rather than just possession. Texas Property Code Section 93.002 governs commercial lockout specifically, and the penalties for a wrongful lockout run against the landlord regardless of whether the tenant was in default. A lease that is procedurally deficient does not just slow recovery of possession; it can create liability in the process.

The Fix

A well-drafted default provision does not need to be long, but it must be precise on the points that matter most in enforcement. It should address:

• Monetary defaults: notice period (typically 3 to 5 days for commercial leases in Texas), cure period after notice (typically 5 to 10 days), and a cap on the number of times the cure right may be exercised within any 12-month period before the landlord may terminate without further notice
• Non-monetary defaults: a longer cure period (typically 30 days, with an extension for defaults that cannot reasonably be cured within 30 days if the tenant commences cure promptly), but with the same repeat-cure limitation
• Deemed defaults: events that trigger default without any notice or cure period, including the filing of a voluntary or involuntary bankruptcy petition, general assignment for the benefit of creditors, appointment of a receiver, unauthorized assignment or subletting, and abandonment of the premises
• Remedies: expressly stated as cumulative and not exclusive of one another, covering termination, re-entry, re-letting on the tenant’s account, and the right to recover the present value of the full remaining economic benefit of the lease rather than being limited to accrued unpaid rent
• Attorneys’ fees: Texas follows the American Rule absent a contractual fee-shifting provision, so the lease must expressly provide for recovery of attorneys’ fees by the prevailing landlord, or the landlord absorbs that cost regardless of outcome

Mistake 4: Underestimating Holdover Exposure

The Problem

Holdover situations arise more frequently than most landlords anticipate, and the financial exposure is often larger than the lease reflects. Under common law in most states, including Texas, a landlord who accepts rent from a holdover tenant without a specific provision governing the tenancy may inadvertently create a month-to-month tenancy requiring 30 days’ notice to terminate. In an active market where the space has been re-leased or is scheduled for renovation, 30 days’ notice to a tenant who is not cooperating resolves nothing, and a contested holdover proceeding in Texas can take 60 to 90 days from filing to possession even on a straightforward set of facts.

The standard holdover premium of 125% to 150% of contract rent is widely understood to be punitive in theory. In practice, on any lease executed more than three years ago in a market that has appreciated, a 150% holdover rate may be at or below current market, which means the tenant has a rational economic incentive to stay and pay the holdover premium rather than renegotiate at market. The provision intended to deter holdover is instead subsidizing it.

The larger exposure is downstream. If you have executed a lease with a successor tenant and the holdover delays delivery, you face damages claims from the incoming tenant that are not bounded by the holdover premium you are collecting from the departing one. Those claims are a direct function of how your successor tenant’s lease was drafted, but the trigger is entirely within your holdover tenant’s control.

The Fix

A holdover provision should be drafted with the realistic scenario in mind: a tenant who has decided the holdover economics work in their favor and is not in a hurry to leave. The provision needs to make that calculation wrong. It should:

• Set holdover rent at a rate that exceeds current market, not just contract rent, typically 150 to 200 percent of the final contract rate, with language tying the rate to the greater of that percentage or market rent if the lease is long enough that the spread may be significant
• Expressly state that holdover does not create a new tenancy, does not extend or revive any renewal or extension options, and does not constitute acceptance by the landlord of the tenant’s continued occupancy as a month-to-month arrangement
• Preserve the right to recover consequential damages, including costs arising from delayed delivery to a successor tenant, lost successor tenant rent during the holdover period, and construction or carrying costs caused by the delay, in addition to the holdover premium
• Specify that if a month-to-month holdover tenancy is created, the notice period required to terminate it is the shortest period permitted under applicable law, and that the lease expiration date itself constitutes the required notice of the landlord’s intent to recover possession

Mistake 5: Treating the Lease as a Template, Not a Transaction

The Problem

The mistake that enables the others is a standard landlord form that has not kept pace with current practice. Most family offices have one. It was drafted or reviewed when the portfolio was established, it performed adequately through a cycle when most tenants paid and most leases expired without incident, and it has been reused without material revision since. The form feels reliable because it has not produced obvious problems. What it has produced is a set of recoverable costs that were not recovered, defaults that were slower to resolve than they should have been, and guarantees that did not hold up under the conditions they were designed to address.

Form drift is the mechanism. A form lease typically reflects market practice at the time it was drafted. Over a decade, market practice evolves: CAM reconciliation procedures tighten, lenders begin requiring SNDA agreements with specific provisions, co-tenancy clauses migrate from retail to office, and what constituted an acceptable guarantee five years ago may be below the market standard today. A form that is not periodically updated against current practice gradually becomes a below-market document that tenants’ counsel recognizes, and negotiates against, from the first markup.

Form drift is one problem. The other is that no template can substitute for deal-specific judgment: this tenant’s actual credit, the right guarantee structure for this guarantor, which default provisions carry the most weight for this property type, and what holdover exposure looks like given where this asset is in its hold and redevelopment cycle. A lease treated as a transaction document rather than administrative paperwork addresses both. It recovers more operating cost, generates fewer disputes, produces cleaner default resolutions, and presents better to a buyer’s counsel at disposition. Across a portfolio, those differences accumulate.

The Fix

Addressing form drift and restoring deal-specific judgment to the leasing process requires four changes in practice:

• Using landlord-side commercial lease counsel on every transaction, including renewals. Renewals are where form drift does the most damage, because they are often handled administratively with minimal counsel involvement, and a tenant who has been in the space for five years knows where the original lease was weak
• Auditing the standard form every three to five years against current market practice and against your own claims history. The disputes you have had, and the provisions that did not perform as expected, are the most reliable guide to where the form needs updating
• Involving counsel at the letter of intent stage, not just at execution. The LOI is where guarantee structure, CAM scope, holdover mechanics, and default cure periods should be addressed in principle, before the tenant has committed to a lease form and position
• Maintaining a lease abstract for every tenancy that tracks notice deadlines, renewal option windows, CAM audit rights, guarantee expiration dates, and holdover provisions. Enforcement problems that should be straightforward become complicated when the landlord’s team has to reconstruct what the lease says under time pressure

The economics of the deal are agreed before the lease is drafted. The lease determines whether those economics are actually realized.

The Common Thread

Each of these five problems has the same origin: provisions that are adequate until they need to work. CAM language that has never been disputed looks fine. A guarantee that has never been called looks strong. A default provision that has never been invoked reads like any other lease. The quality of the drafting becomes visible only when a tenant stops paying, stops leaving, or stops performing, and by then the language cannot be changed.

All five of the issues described here are correctable at the drafting stage with modest incremental investment in counsel time. None of them is correctable after a default has occurred, a tenant has decided to hold over, or a CAM dispute has reached the point of formal demand. The investment in getting the lease right is fixed. The cost of not getting it right is open-ended.