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How do leases between residential and commercial properties differ?

On Behalf of | Jan 19, 2023 | Commercial Real Estate |

When dealing with commercial real estate for the first time, it is easy to want to compare it to residential real estate.

However, the leases that exist for these two separate types of properties differ in numerous and notable ways.

The intent and duration of leases

Business News Daily discusses what to know about different types of property leases. First, commercial leases exist for properties where a person intends to do business. Residential leases do not have the same use, though it is possible for people to work out of the home.

On top of that, the duration of a commercial lease is often much longer than a residential lease. Most residential leases last by the month, or up to a year. On the other hand, most commercial leases last from 3 to 5 years, with the assumption that a business will stick around as long as possible.

Who gets the most protection?

Commercial spaces often have fewer regulations than residential spaces, too. This means they usually have greater flexibility when it comes to negotiating terms.

Residential leases usually tend to favor the person renting out the space, as well. On the reverse, commercial leases usually offer more protection and general net bonuses to the potential renter.

Though some similarities exist, the two are entirely separate and a person should not go into a commercial lease with the mindset to treat it like a residential one. Doing so could potentially set a person up for failure, and will certainly leave them with unrealistic expectations for what to expect during the process.