How do residential and commercial leases differ?

On Behalf of | Jan 19, 2023 | residential real estate | 0 comments

Commercial and residential leases have many differences that separate the two. The protections offered to landlords in either situation will differ. Even the normal provisions of each contract look different.

Thus, it benefits tenants and landlords alike to understand what they are getting into when looking at residential versus commercial real estate.

Commercial property types

Business News Daily discusses real estate in different forms. First, it is important to understand the difference between residential and commercial real estate.

In short, residential real estate provides a home for people to live in. Commercial real estate, on the other hand, targets businesses and business-related uses.

Two forms of commercial property generally exist, with the classification depending on whether both parties classify the property as commercial. For example, the owner of a building may classify their units as commercial, but could end up used as residential by tenants.

Commercial properties must strictly involve business, though. This is why the majority of commercial properties consist of office buildings.

Differences in leases

As for differences in the lease itself, first of all, commercial leases last a longer period of time. A general contract period lasts 3 to 5 years, as opposed to the 1 year that most residential leases max out at.

On top of that, tenants of commercial leases also often hold responsibility for a portion of the property taxes. On top of that, these leases have less government regulation, which results in fewer protections to tenants than in residential leasing arrangements.

For these reasons, it is important to do a thorough review of any contract before signing it to really see the differences.