Differences between commercial and residential leasing

| Jul 20, 2020 | Commercial Real Estate

One of the biggest mistakes that new business owners make is not understanding the difference between residential and commercial leasing. Most individuals have engaged in residential leasing at least once in their lifetimes, and many mistakenly assume that the same terms apply to commercial leases.

However, the differences between commercial and residential leasing are significant. According to FindLaw, business owners should be aware that the government offers far fewer legal protections for commercial lessees as compared to residential ones.

Why are there fewer protections? 

The answer is that the government assumes persons engaged in commercial leasing are more savvy than those engaged in residential leasing. Again, the majority of people have a lease on an apartment or other residential property during their lifetimes, but a far fewer percentage engage in commercial leasing.

The lack of protections leads to far more varied terms in commercial leasing. However, this is often to the lessee’s benefit, because different businesses have different leasing needs. The varied terms lead to more negotiation possibilities. As a commercial lessee, you have more options to negotiate on rent amount and lease lengths as compared to the majority of residential lessees.

What precautions should I take? 

It is important to understand everything that is in a commercial lease. You should ask specific issues such as security deposits, rent amounts and potential increases, as well as your ability to make improvements on the property. You should also ensure that you have exclusive rights to the property as the lessee. Before signing any commercial lease, it is wise to ensure you have the help you need to fully comprehend all terms.