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 New Jersey, commercial tenants are indeed considered more sophisticated than residential tenants and are thus afforded fewer legal protections. The expectation is that a commercial tenant will thoroughly review and negotiate the terms of a lease agreement to secure their own interests. Unlike residential leases, which are heavily regulated to protect individual tenants, commercial leases are largely governed by the contract agreed upon by the landlord and tenant. New Jersey contract law does include an implied covenant of good faith and fair dealing, which requires both parties to act honestly and fairly towards each other in the execution of the contract. This means that while a commercial landlord may have the right to shut off utilities for a breach of the lease, doing so for a minor infraction or without proper notice may violate this implied duty. It is crucial for commercial tenants to understand their lease terms, especially regarding breaches and remedies, and to seek legal advice if they are unsure of their rights and obligations.