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 Mexico, commercial tenants are indeed considered more sophisticated than residential tenants and are thus afforded fewer legal protections under the law. It is the responsibility of the commercial tenant to thoroughly review and negotiate the terms of a commercial lease agreement. The lease itself typically dictates the rights and obligations of both parties, including the circumstances under which a landlord may shut off utilities. While New Mexico law does not specifically legislate the conditions under which a commercial landlord can terminate utilities, such actions are generally governed by the lease and state contract law. Additionally, New Mexico recognizes the implied covenant of good faith and fair dealing in contractual relationships, which requires both parties to act honestly and fairly in the execution of their contractual obligations. A commercial landlord who shuts off utilities without a material breach of the lease by the tenant may be violating this implied duty, potentially giving the tenant grounds for legal recourse.