The average person may believe that residential and commercial leases work the same way. However, that is simply not true. There are many differences between these two due to the different land uses common to both. Therefore, it is essential to understand a few of these variations.
SummaryTypes of coverage Potentially restrictive clauses Commitment and conditions Other differences Help is available for youIf you don't understand these factors, you could find yourself in a difficult legal situation. For example, you might be in a commercial lease that you cannot break and that is financially burdening you. Legal assistance may be needed to fully understand and prepare for the potentials of your business.
A great residential lease is designed to protect the buyer in a variety of ways that you don't often get with commercial leases. But, of course, that doesn't mean you don't get some protection with a commercial lease. However, the government usually puts more emphasis on security in a residential lease. This is because they want owners to be more secure and protected when they are at home.
What kind of protections does a residential tenant get that a commercial tenant doesn't? For example, residential landlords generally have to maintain the property for the tenant, including paying for repairs to exterior features. In contrast, a commercial lease generally requires you to take care of the property and requires minimal steps to be taken by the landlord who owns it.
These terms vary depending on the state you live in and the type of contract you are entering into. For example, commercial landowners may enter into more restrictive and difficult leases than residential landowners. But, again, this fact is due to the use of the property. Governments protect people inside their homes, but know that people in a commercial establishment do not live there and (therefore) may not need as many protections.
By law, residential leases must be transparent and contain very few or no covenants. However, commercial owners have more freedom. What are restrictive covenants? These are statements in a contract that restrict how the property can be used. For example, residential property owners can insert clauses regarding the use of pets and minimize changes to the structure of the property.
Commercial leases may have more restrictive options than these and may even focus on various elements. For example, they may state the need to repair a building due to natural disasters, even though the owner has an insurance policy to cover such a problem. Other covenants may require you to carry commercial insurance, maintain the property and pay for new construction.
Commercial leases cannot, of course, require you to pay for changes made to the facility by the landlord on his initiative. However, you will have to pay for any changes you make that benefit you. These lease changes often challenge many businesses and make operating much more difficult. Worse still, you could have built-in rent increases and a complex clause dictating when you can end a lease.
A residential lease generally includes minimum commitment clauses for the landlord, beyond the maintenance of the property and its maintenance in good condition. They must make the house presentable and habitable for the owner, including repairs. Beyond that, their investment in the home is minimal. For example, they don't have to (but can) purchase furniture for residents to use while they live there.
Commercial leases have a higher level of commitment from the landlord. They are generally more complex and bind the owner and the business more closely. Why? Owners often engage and invest capital in preparing the business and the property. In a sense, they have invested in the business itself in a way that residential property owners have not. Does it benefit them or does it benefit the tenant?
The tenant benefits from the time the landlord spends preparing the property for rental and may even get direct investment from the landlord to keep the business running. However, lease terms generally last longer than residential options and provide greater legal protection for the landlord than the tenant. Therefore, it is essential that you read these terms carefully to ensure that you are fully protected.
Here are some other variations to consider between these leases:
Are you struggling with a residential or commercial lease and need help from a team you can trust to support you? Talk to us today to find a commercial lease attorney who understands your needs as a business owner. Our team is ready to fight for your rights and ensure you have a fair and reasonable commercial or residential lease that takes into account your best needs.
