When going into your first commercial lease, you may feel tempted to treat it like a residential lease. After all, these are two similar things, right?
In reality, they actually have numerous differences. Going into a commercial lease expecting the same things as a residential lease could set you up for some nasty surprises.
Defining different leases
Business News Daily discusses what to know about different types of leases. Legally speaking, the primary difference between a residential and commercial lease is down to how the person uses the property. Commercial leases are strictly for businesses and people who intend to do business out of the space. Residential leases are for people who intend to live in the location, even if they may occasionally do business out of it.
The major differences
Residential leases are under close watch from the government and offer a lot of protection to the landlords in this equation. On the other hand, commercial leases are often much less monitored which allows for more wiggle room for contract negotiation. It also favors the person renting, rather than the landlord.
On top of that, even the term limits of each lease differ significantly. It is unusual to find a residential lease that lasts longer than a year, with most leases ending within 6 to 12 months before the resident needs to renew.
On the other hand, commercial leases often last 3 to 5 years at a time. This provides a more stable source of income, while also assuming the business will stick around for a decent amount of time, providing net benefits to both parties.