Most commercial leases signed in North Texas contain a short paragraph saying the tenant accepts the space “as is.” It usually sits near the front of the document, it is often typed in capital letters, and it rarely gets much attention during negotiation. Landlords treat it as a wall. Tenants assume it means they have given up the right to complain about anything they find later.
A ruling issued by the Texas Business Court on October 2, 2026 is a useful reminder that the wall has doors in it. In Exeter Denton Land, L.P. v. Ariat International, Inc., No. 25-BC08B-0019, 2026 Tex. Bus. 71, the Eighth Division considered whether an as is clause in a Denton County industrial lease wiped out a tenant’s counterclaims after the tenant walked away from a 609,127 square foot distribution building. The court said it did not. The reasoning is worth understanding before you sign your next lease, and before you assume the one you already signed has settled the question.
What the Denton County case was about
Exeter Denton Land leased the Westpark property to Ariat International, a footwear distributor, on May 20, 2023. The lease covered 609,127 square feet for use as a distribution center, with an initial term of 50 months. A first amendment followed on July 20, 2023, and a commencement date memorandum signed on November 6, 2023 fixed the commencement date at September 1, 2023 and the expiration at October 31, 2027.
Beginning in early 2024, Ariat observed moisture accumulating in the concrete floor slab and movement in the slab itself. Its consultant, Reed Engineering, reported swell potential of one to six and one half inches beneath the slab, against a design criterion of one inch. The landlord’s expert disputed how severe the anticipated movement would be. On February 26, 2025, Ariat sent a notice of constructive eviction asserting an incurable default. It vacated on June 30, 2025 and moved into a replacement facility in Fort Worth.
Ariat then asserted four counterclaims: constructive eviction, breach of contract, breach of the implied warranty of suitability, and breach of the warranty of quiet enjoyment. Its damages expert put the total between $53.29 million and $61.37 million across five categories, plus the return of a $256,340 security deposit.
Exeter moved for summary judgment on all four counterclaims using three independent theories: the as is clause, the economic loss rule, and a contractual limitation on damages. The court granted the motion in part and denied it in part. No counterclaim was dismissed. Several damage categories were cut.
What an as is clause actually says
The clause at issue, Section 2(a) of the lease, said that Ariat accepted the premises “AS IS, without relying on any representation, covenant or warranty by [Exeter] other than as expressly set forth in this Lease.”
Read that closing phrase again, because the entire ruling turns on it. The clause did not stand alone. It carved out every representation, covenant and warranty that the lease itself contained. And the lease contained several that mattered. Section 9(a) obligated Exeter to maintain the building’s footings and foundations in good condition and repair, at Exeter’s sole expense. Section 10(f) stated that the premises would comply with applicable laws relating to general warehouse, distribution or storage use as of the commencement date. Section 17 was an express covenant of quiet and peaceful possession.
Section 9(b) made Ariat responsible for interior, nonstructural portions of the premises, including floors, but it said so “except as provided in subsection (a) above or elsewhere in this Lease.”
The court’s conclusion followed from reading those provisions together rather than in isolation. Construing the as is clause to bar every claim would have rendered the landlord’s own express obligations meaningless. A document that promises to maintain the foundation on one page cannot be read on another page to mean that nobody may ever complain about the foundation.
Why the clause did not end the tenant’s claims
On the express covenants, the analysis was short. Section 2(a) preserved the covenant of quiet enjoyment in Section 17 by its own terms. A clause that expressly preserves a covenant cannot simultaneously defeat a claim for breaching it. The constructive eviction and quiet enjoyment counterclaims survived on that basis.
The implied warranty of suitability took longer. Texas law implies a warranty of suitability into commercial leases, a principle traced to Davidow v. Inwood North Professional Group, Phase I, 747 S.W.2d 373 (Tex. 1988). The question in the Denton case was whether an as is clause that contains no express disclaimer language waives it.
The court declined to find a waiver. It followed Parts Industries Corp. v. A.V.A. Services, Inc., 104 S.W.3d 671, and Gober v. Wright, 838 S.W.2d 794, for the proposition that an as is clause without express disclaimer language does not waive the implied warranty where the landlord retained responsibility for the component that failed. Section 9(a) assigned Exeter a continuing duty to maintain footings and foundations, so the court could not conclude that Ariat had waived the warranty as to conditions falling inside that duty.
The economic loss rule did not close the door either
Exeter’s second theory was that all four counterclaims arose solely from the lease and were therefore barred by the economic loss rule, which generally confines a party to contract remedies when the alleged duty arises only from the parties’ agreement and the injury is the lost benefit of the bargain.
The court rejected that argument on each counterclaim. The implied warranty of suitability is implied by law into every commercial lease, which means it binds landlords who made no express promise about condition at all. Quoting Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019), the court noted that the warranty “exists separately and apart from any obligation the landlord may have under the lease.”
On constructive eviction, the court made a practical observation. Every constructive eviction claim arises out of a lease. If that fact alone barred recovery, the claim could never survive anywhere. Texas courts have long allowed tenants to recover where substantial landlord interference forced them out.
The quiet enjoyment counterclaim was treated as a contract claim under Section 17. That characterization limits the available remedies to contract damages, but it does not defeat the claim. The court also noted that because the elements of quiet enjoyment and constructive eviction overlap, Ariat could not recover twice for the same injury.
Where the tenant lost ground: the damages cap
This is the part of the ruling most likely to affect what a lease dispute is actually worth. Section 24 of the lease said that “[i]n no event shall Landlord be liable to Tenant for any loss of business or profits of Tenant or for consequential, punitive or special damages of any kind.”
Limitation of liability clauses are generally enforceable in Texas as an expression of freedom of contract, and the court enforced this one category by category, applying the familiar line from Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex. 1997): direct damages flow naturally and necessarily from the wrong, while consequential damages arise from the injured party’s particular circumstances.
Improvement and installation costs of roughly $9.9 million survived. Money spent on improvements the lease itself contemplated can support a claim for direct damages tied to the value of the leasehold the landlord promised to deliver.
Assessment and investigation costs of roughly $669,479 were split. The court excluded $563,860 in labor retention charges as consequential, because they flowed from Ariat’s own staffing arrangements rather than from the landlord and tenant relationship. The remaining surveys, geotechnical investigation and structural engineering work survived, on the reasoning that the reasonable cost of identifying a condition the landlord was obligated to repair can be a direct loss.
Relocation and storage expenses of roughly $4.3 million were largely excluded. Texas courts treat moving and relocation expenses as special damages. Charges incurred to clear space so the defect could be investigated survived.
Incremental customer fulfillment costs of roughly $22.5 million were excluded in full. The court characterized them as the operating savings Ariat expected from an automated distribution center that never opened, which measured Ariat’s own business plan rather than the value of the leasehold.
Replacement lease costs of roughly $15.9 million to $24 million were cut down. A displaced tenant’s direct damages are measured by the difference between the agreed rent and the market rental value of the leasehold for the unexpired term. Ariat’s unexpired term ended October 31, 2027. Its expert had built calculations on an unexecuted second amendment that would have expanded the space and extended the term to March 2032 or later. Damages built on a transaction that was never consummated were excluded. The ordinary measure for the term that actually existed remains available.
What North Texas business owners should take from this
Four practical points come out of the ruling, and none of them require a lawsuit to act on.
First, the words after the as is language do more work than the as is language itself. A clause that carves out representations, covenants and warranties “expressly set forth in this Lease” is a very different clause from one that does not. If you are a tenant, that carve out is worth insisting on. If you are a landlord, its presence is the reason the Denton case went past summary judgment.
Second, maintenance allocation drives the outcome. Section 9(a) put footings and foundations on the landlord. That single sentence is why the implied warranty argument survived. Read your lease for which party owns the structure, the roof, the slab and the systems, and understand that whoever holds the duty holds the exposure.
Third, the limitation of liability clause is where the money is decided. The counterclaims all survived, and more than $27 million of claimed damages still came off the table because of one sentence in Section 24. A clause that excludes consequential, special and punitive damages and lost profits will not stop a lawsuit, but it will reshape it.
Fourth, the measure of damages for a displaced tenant is narrower than most tenants expect. It is the gap between contract rent and market rent for the time left on the lease, not the cost of the better building you moved into or the business plan you had to abandon.
What this ruling does not decide
It is worth being precise about the limits of the decision, because a ruling on a summary judgment motion is not a ruling on the merits.
The order is interlocutory. The court established no liability and awarded no damages. All four counterclaims remain pending, and Exeter’s own claims for unpaid rent and other sums are still unresolved. The case continues.
The underlying legal question is also still open at the highest level. In Gym-N-I Playgrounds, Inc. v. Snider, 220 S.W.3d 905 (Tex. 2007), the Supreme Court of Texas expressly reserved the question of whether an as is clause lacking express disclaimer language would effectively waive the implied warranty of suitability. The Business Court declined to find a waiver on the facts in front of it, with a lease that assigned foundation maintenance to the landlord. That is persuasive on similar facts. It is not a statewide answer, and a lease with express disclaimer language would present a different question.
Separately, the court noted that in Westwood Motorcars, LLC v. Virtuolotry, LLC, 689 S.W.3d 879 (Tex. 2024), the Supreme Court has not expressly recognized constructive eviction as an affirmative claim for damages, as opposed to a defense to a rent obligation. Any tenant planning to vacate and sue should treat that as an open question rather than a settled one.
The practical move is earlier than the dispute
The most expensive part of the Denton case was not the ruling. It was the structure of the lease, which was fixed in 2023. By the time a slab is swelling and a notice of constructive eviction is in the mail, the allocation of repair duties, the scope of the as is clause and the reach of the damages cap are already written and already binding.
If your company occupies leased industrial, office or retail space in Collin, Denton or Dallas County, the useful exercise this quarter is to pull the lease and read four things: the as is clause and what it carves out, the maintenance and repair sections, the express covenant of quiet enjoyment if there is one, and the limitation of liability clause. Those four provisions will decide most of what happens if the building turns out not to work.
You can read more about how commercial lease and property disputes are handled on our litigation practice area page.
Related reading
- 5 Contract Clauses Every Texas Business Owner Should Understand Before Signing
- Does Your Texas Business Dispute Belong in the Business Court?
- What Is a Breach of Contract Under Texas Law?
About the author: David R. Wortham Jr. is a partner at Hanshaw Kennedy Hafen in Frisco, Texas. He is a business litigation attorney who has advised and represented businesses and individuals in complex matters for more than a decade.