How Commercial and Residential Leases Differ

How-Commercial-and-Residential-Leases-Differ-Article-4-300x200If you operate a business and are looking to lease space for your operations, you need to know that the rules that apply to residential tenants are different from those that apply to commercial tenants.

Most states, including California, have extensive legal protections for residential tenants in furtherance of the overall public policy of providing safe and secure housing to residential renters. Both federal and state laws are designed to protect the rights of residential tenants, who are deemed to be in an inferior bargaining position vis-à-vis their landlords.

In contrast, commercial tenants are regarded as having the same skill and knowledge as their landlords, and therefore are presumed to be able to negotiate a fair and equitable lease arrangement without legalized protections. The difference in bargaining positions is largely reflected in the varying obligations of the parties in commercial and residential leases.

Lease agreement form. Most residential lease forms are uniform in nature and the negotiated terms are generally limited to the rental amount, security deposit and term of the lease. Commercial leases are not standardized and contain a multitude of negotiation points, such as business-related modifications to the property, compliance with federal regulations, and permitted uses of the property. Commercial leases tend be lengthier, highly-individualized and more complex than residential agreements.

Right to Habitability. While residential tenants have the right to a habitable, safe space with operational utilities and plumbing, renters of commercial properties are not entitled to these rights unless agreed to in the lease. Barring a specific clause in the lease ordering repairs or curing defects, the landlord has no legal responsibility to maintain the premises in a certain condition.

Safeguards for tenants. Commercial leases are not subject to inherent limitations that often accompany residential leases. These may include caps on rental increases, security deposit amounts and late fees.

Evictions. When the landlord fails to cure a defect in a timely manner, residential renters are permitted to either withhold rent or repair the defect themselves and deduct the cost from the rental price. Commercial tenants may not rely on this remedy; they may be evicted for failure to pay rent even if the landlord breached a maintenance provision in the lease.

Chase Law Group, P.C. has attorneys knowledgeable in all areas of commercial real estate law. They can assist you, whether you are a landlord or a tenant, in negotiating your lease, legally fulfilling your obligations and protecting your rights under California law. Contact DeAnn Flores Chase and her experienced team of attorneys at (310) 545-7700 or visit them at to find out how they can advise you on obtaining the most advantageous terms possible in your lease agreement.