Differences Between a Residential and Commercial Lease

A residential lease and a commercial lease have many similarities, but there are also many differences.  A lease is an agreement between two parties to rent, or allow access to, a certain property for a certain amount of money over a fixed period of time.  By signing a lease, the parties are agreeing that they have agreed upon suitable terms, such as the permitted uses of the property, the dates of occupancy, and what changes are allowed to be made to the property.  In addition, a lease details what portion of the maintenance or upkeep of the property is the responsibility of the owner, and what portion is the responsibility of the tenant.  What are some other differences between residential and commercial leases?

Commercial Lease versus Residential Lease

  • Residential leases are often for properties that are in neighborhoods or other areas where residential codes apply to the maintenance or appearance of the home and property.  Commercial leases are for properties in areas that are zoned for commercial use, where typically looser codes apply. 
  • A residential lease is necessarily less detailed because even the owner wants to be sure that he or she is in compliance with the codes in the area and can maintain the property as livable, it is assumed that the property will be used for the purpose of a single family dwelling.  Commercial leases generally go into more specific detail about the permitted uses of the property, because there are many possible uses for most commercial properties.
  • Another main difference between residential and commercial leases is the fact that residential leases typically assume the property to be the individual house or apartment in question.  Commercial leases, which are often signed for buildings or areas with multiple tenants and multiple different uses, must be more specific about what exact portion of the premises is being occupied and what is allowed to be done in that portion.  This is why the premises clause of a commercial lease exists – to specifically define the property or the portion of the property that is being used by the commercial tenant.  Residential leases rarely have a premises clause.
  • A final major difference between residential and commercial leases is the inclusion of clauses regarding owner improvements versus tenant improvements.  Most residential real estate is rented as-is, with the assumption that the owner will fix or maintain the property and that the tenant must ask before making changes.  Commercial properties often need to be changed to suit individual tenants, so there may be more shared responsibility in making changes in a commercial lease.

Getting Help

Because of the specific complexities associated with a commercial lease, if you are going to enter into an agreement to rent commercial property, it is important that you get the help of a qualified and experienced attorney. Your lawyer can look over the terms of the lease agreement to ensure that the agreement is fair and enforceable.