Required Disclosures in Michigan Commercial Leasing

Since Michigan's admission to the Union on January 26, 1837, the state's commercial legal framework has evolved to prioritize freedom of contract between sophisticated parties. Unlike residential leasing in Michigan—which demands highly specific "Truth in Renting Act" (MCL 554.631) clauses, 14-day security deposit bank location notifications, and mandatory inventory checklists—the commercial real estate sector relies on a combination of "Caveat Emptor" and specific statutory environmental disclosures.

In Michigan commercial leasing, the governing legal principle is largely "Caveat Emptor" (Let the Buyer/Lessee Beware), though this is tempered by specific environmental disclosure mandates.

Limited Mandatory Statutory Disclosures

In Michigan commercial leasing, while there is no general "Commercial Disclosure Statement" mandated by state statutes—such as the Seller Disclosure Act (MCL 565.951), which applies exclusively to residential properties with 1–4 units—there are specific statutory disclosure requirements. The Truth in Renting Act (MCL 554.631) also applies exclusively to residential properties.

However, commercial landlords must disclose known environmental hazards under Part 201 of Michigan's Natural Resources and Environmental Protection Act (NREPA), MCL 324.20101 et seq.

The Tenant's Burden of Due Diligence

While the landlord has specific statutory duties regarding environmental hazards, the commercial tenant is still largely responsible for executing their own exhaustive due diligence before signing the contract. The sophisticated tenant (and their corporate counsel) must insert specific contingencies into the Letter of Intent (LOI) or the drafted lease allowing them to investigate:

1. Zoning and Permitting

A landlord does not have to verify that a tenant's specific business operation (e.g., a commercial bakery or an auto repair shop) is legally permitted under local municipal zoning codes. If a tenant signs a 10-year lease and discovers 30 days later that Detroit zoning prohibits them from operating their intended business in that specific building, the tenant is still legally obligated to pay the entire 10-year lease.

2. Environmental Hazards

Commercial landlords must disclose known environmental hazards, such as asbestos and underground storage tanks, under federal law and Part 201 of Michigan's NREPA (MCL 324.20101 et seq.). Part 201 defines "nonresidential" land use to include industrial, commercial, retail, office, and service uses, and establishes responsibilities for owners and operators of "facilities" where hazardous substances are located. While tenants should conduct Phase I Environmental Site Assessments, the landlord is legally obligated to disclose known contamination.

3. As-Is/Where-Is Clauses

Most standard commercial leases in Michigan contain an "As-Is" clause. This means the landlord is delivering the space precisely in its current condition, with all faults. If the HVAC system dies on the second day of the lease, the landlord is not required to fix it unless the lease explicitly guarantees the system's functionality.

The Limits of Caveat Emptor (Fraud)

While a commercial landlord does not have to proactively point out every flaw, they are still constrained by federal and state laws regarding outright fraud and active concealment.

A landlord cannot:

1. Actively Lie: If the tenant directly asks, "Does the roof leak?" and the landlord answers "No," knowing full well the roof has failed, the landlord has committed actionable fraud.
2. Actively Conceal: A landlord cannot physically paint over severe structural water damage or erect a fake wall to hide black mold in an effort to deceive the tenant's building inspector.

Managing Sophisticated Letter of Intents workflows

Because every disclosure and guarantee must be manually negotiated into the contract, the "Letter of Intent" (LOI) phase in Michigan commercial real estate is highly complex. Landager provides institutional landlords with centralized deal-flow tracking, ensuring that every time a leasing agent negotiates an environmental indemnity clause or a custom HVAC warranty into an LOI, those specific contingencies are automatically flagged for legal review before the final binding lease is generated, ensuring consistency across your statewide portfolio.

How Landager Helps

Landager tracks lease terms, important compliance deadlines, and security deposit details - making it easy to stay compliant with Michigan regulations.

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