A business that leases real estate and improvements (buildings, etc.) in the form of space for offices, a warehouse, a restaurant, a nail or hair salon, a clothing store, a coffee shop, or other commercial (nonresidential) space will usually be required to sign a written contract known as a commercial lease agreement.

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 as 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.

But in some states courts have recognized an implied warranty against latent defects (defects not easily visible) in commercial leases. Courts that have recognized this implied warranty against latent defects in commercial leases have generally called it an “implied warranty of fitness or suitability for purpose” (the purpose being the tenant’s intended use) or “implied warranty against latent defects” and defined it to include:

• persistent water leaks through the roof, ceiling, or walls

• serious defects in the sewer or drainage systems

• inadequate or defective heating, ventilation, and air conditioning (HVAC), electrical, security, fire and smoke alarm, or other essential system, or

• latent physical or structural defects.

The implied warranty of fitness or suitability for purpose can generally be waived in the written lease agreement.

The law governing commercial leases varies from state to state but generally consists of a state's contract law (as applied to the lease agreement)—and in some states, includes the statutes enacted by the state's legislature that specifically apply to commercial tenancies, or that generally apply to both residential and commercial tenancies.

In New Jersey, a commercial lease agreement is a binding contract between a landlord and a business tenant for the rental of nonresidential property, such as office space, warehouses, or retail locations. Unlike residential tenants, commercial tenants are considered more knowledgeable and are expected to negotiate the terms of their leases, as they are not afforded the same level of legal protections. New Jersey law does not provide an extensive statutory framework specifically for commercial leases, which means the terms of the lease are largely governed by general contract law principles. However, New Jersey courts may recognize an implied warranty against latent defects in commercial properties, which covers issues not readily apparent, such as persistent leaks or serious defects in essential systems. This implied warranty ensures the property is fit for the tenant's intended purpose, but it can typically be waived by the tenant in the lease agreement. Commercial tenants in New Jersey should carefully review and negotiate lease terms to protect their interests, and it is often advisable to consult with an attorney to understand the implications of the lease agreement before signing.