How do residential and commercial leases differ?

On Behalf of | Feb 19, 2021 | Real Estate |

Whether you lease the property to tenants or you play the role of a tenant, you likely heard the warning. Commercial and residential leases do not run parallel to each other. Protections for landlords of these property types also differ. While residential leases tend to favor the tenant, commercial leases tend to favor the landlord. 

Beyond this, the normal provisions included in each contract also differ. As a tenant, knowing these differences help you negotiate better deals. For landlords, you could use the knowledge to present more competitive offers to tenants in high demand. 

What is commercial real estate?

Two forms of commercial property exist. Generally speaking, commercial properties exist for the sake of conducting business, but whether the landlord, tenant or both conduct business in the property also plays a role. 

For example, residential properties may serve as commercial properties for the owner, but residential-only properties for tenants. In contrast, commercial properties exist solely for tenants to conduct business. In the latter case, office space makes up the bulk of property types. 

How do commercial leases differ?

According to a business loan professional who spoke to Business News Daily, commercial leases last longer than regular leases. Whereas residential tenants might rent a home for a year, commercial entities rent office spaces for three to five years. Business tenants might also feel surprised to know that they could become responsible for a portion of the property taxes. 

Another difference some people might find surprising stems from the fact that governments regulate commercial leases less frequently than residential leases. This explains why commercial leases provide fewer protections to their business tenants. 

Other key differences do exist, which prompts a thorough review of any contract before signing. Take some time to read over every word to ensure you get or offer a good deal. 

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