Commercial leases: a waiver clause may rule out compensation for improvements and construction

A business owner leases an empty property. Builds. Adapts. Invests. Runs the business there for years.

The commercial lease ends and the question arises: is the tenant entitled to compensation for the improvements and construction made on the property?

The answer may already be in the contract signed on the first day.

The STJ reviewed a business lease in which the tenant knew it would receive vacant land and would need to build in order to carry on its activity. The commercial lease agreement, however, contained a clause waiving compensation and the right of retention for improvements.

The Court held, in that context, that the clause also covered the construction and additions made to the property.

This is not just a matter of renaming things. Improvements and additions (accessions) are legally distinct concepts. But a business contract does not live on legal vocabulary alone. It also lives on the context of the negotiation, the economic purpose of the deal and the practices of the real estate market.

The tenant knew it would have to invest. It knew there was a waiver clause. It signed on those terms.

Seeking to change the economic allocation of risks only when the lease ends would turn contract interpretation into a tool for rebuilding the deal.

For business owners who occupy leased commercial properties, the practical consequence is clear: before spending on renovation, construction, industrial installations or adapting the property, the contract must define who will keep these works and whether or not there will be compensation for improvements at the end of the lease.

The so-called improvements waiver clause also deserves attention. If it exists, it should be examined before the investment, not when an eviction action or the return of the property arrives. The time to discuss compensation is before construction.