Paper Example: Commercial Lease Vs. Residential Lease

Published: 2023-02-14
Paper Example: Commercial Lease Vs. Residential Lease
Type of paper:  Essay
Categories:  Contract Business law
Pages: 6
Wordcount: 1449 words
13 min read

A contractual document stating the rights and responsibility between a landlord and a tenant regarding the letting of a property is known as a lease. A commercial and a residential lease binds the landlord and the tenant, however a commercial lease mainly states the terms and conditions laid out for a business property while a residential lease involves a property for living (Law, 2019). The essay will elaborate on the difference between Residential and commercial lease.

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Differences That Exist Between Commercial and Residential Leases

The most significant difference between a commercial and a residential lease is that, commercial lease administers the terms involving a property used for business while a residential lease is for a property used for living. A commercial property for lease includes, a warehouse, a mall, shops, or an office space in an industrial building while a residential property for lease generally involves, an apartment, a condominium, a pent house, a standalone built home or a town house.

Profit margins, the rent consideration depends on space, time, environment and the structure on lease. For a commercial property the rent depends on the square footage or the money received by the tenant letting the property, while for residential property, the rent is set within the market price of the same. The rent for commercial buildings is paid for a number of years, typically known as a term. After which the tenant have an option to renew the contract or withdraw from the contract. In a residential lease, the rent is set on a monthly basis or annual basis, hence the tenant must pay every month or for a period of given time not more than a year (Law, 2019).

There is a major difference between a commercial and a residential lease on protections rights and responsibilities. In a commercial lease, there is almost little or no protection for the tenant, it is assumed that the tenant is aware of the terms and is almost equal with the landlord while negotiating for the contract. It is said, the commercial tenant, has vast knowledge, experience, and training to enter such a negotiation with an open access to third party professionals such as engineers, lawyers and contractors The residential lease however protects the tenant from landlords by putting across strict measures, in which a landlord should provide a safe and habitable housing to the tenants.

The Content of Each Lease

The contents in the commercial or residential lease are common, however elements differ depending on the terms agreed upon by both parties. In a commercial lease, general information relating to both the lesser and the lessee should be well noted. The information includes, names of both parties, the property, rent dates, term of the lease, granted rights, reserved rights and any other provisions. In a commercial lease, it is upon the landlord to maintain the common parts of a building used by all tenant inclusive of the service charge. In a commercial lease, rent clause is clearly stated in regard to review of terms and rent-free period. It can be reviewed either upwards or downwards (, 2019).

VAT, Landlords to commercial property charge Value Added Tax in order to recover the cost of developing the property. Alienation is another element in the commercial lease. This clause involves, subletting, assigning and using the property however the lessee deems. However, in cases like subletting, the lessee must involve the landlord since it may be prohibited otherwise, they become the immediate landlords to the sublets. Insurance clause in a commercial lease states that the landlord is responsible of insuring the property against risks, other provisions include, rent reduction or the landlord reestablishing the property or lease termination (, 2019).

Elements in a residential lease include, detailed information about the landlord and the tenant, information about the property for leasing, clear details about the rent and the security deposit, if it's refundable and on what terms the deposit is refunded. In case of any furniture's and utility services provided by the landlord terms of use and maintenance. The agreement should state due dates and penalties in case of late payments. Other elements may include, sharing of the parking space, common space, and garden spaces if they are available in the environment of the property for rent.

Duties of both the landlord and tenant

In a commercial lease, it is the duty of the landlord to ensure the property for lease is safe, clean, and hospitable for the tenant to conduct their business, to ensure property maintenance by paying taxes, service charge and utilities and to maintain free areas around the property in case of hazards. It is the duty of the tenant in a lease agreement to maintain the rented space, to pay the rent as stated in the contract and use the property only as stated in the lease agreement (Lipton, 2004).

In a residential lease, it is the duty of the landlord to ensure warranty of habitability, by ensuring the property is safe and secure for living, to disclose and explain important information to the tenants regarding the property on lease. For example, if they are restricted to any alterations, changer of ownership or common space rules. It is the duty of the landlord to access the premises, inspect and repair the property and also increase rent gradually as they wish.

It is the duty of the tenant to pay rent as agreed upon in the agreement, failure to which may call for penalties, to maintain the building, whereas they may make small alterations in the property to maximize the use of space without damaging or making structural alterations. It is their duty to restore the property to its originality once the lease period is over and not breach any terms of the lease by using the building for business or illegal property making it inhabitable for other tenants (Lipton, 2004).

Differences and Significance That Exist Between the Two Leases

Differences between the two leases include, a commercial lease is used for business properties while a residential lease is used for someone letting a property to live in. Cost of the property, commercial properties are expensive compared to residential property. They are expensive to put up hence the letting terms in the lease are complicated than that of residential property, including the cost of letting ie the rent and terms of payments. Lease period, a commercial lease may go up to four years or more, while a residential lease go up to a year or less. This restricts the number or occupancy in a commercial property and increases that of a residential property (Law, 2019).

Legal responsibilities, as noted in the elements of the different leases, a commercial lease may require a third-party assistance such as a lawyer, to understand the legal statues in the lease, while in a residential lease the landlord should explain everything and come to an agreement with the tenant. Maintenance hassles, in the two leases are very different. In a residential lease, it's the duty of the landlord to repair and maintain the property to make it safe, secure and habitable to the tenants. In a commercial lease, tenants are responsible for the cost. Another difference is that, it is easier to evaluate the value of a residential property than that of a commercial property. A residential property is basically evaluated by checking the market value while a commercial property requires expertise to determine its worth.


A lease, be it commercial or residential states the agreements, terms and conditions, rights and responsibilities between a landlord and a tenant. The two leases are common, the only difference being that a commercial lease is applied on a business property while a residential lease is used on a property for living. Other differences may appear in the terms of leasing, space, legal status and rights and responsibility of the two. Some of the components in the lease include, detailed information about the landlord and the tenant, information about the property for leasing, clear details about the rent, security deposit, VAT, terms of contract renewal and alteration of the property. The two leases differ in outline, this depends on cost of property, cost evaluation of the property, legal responsibilities and maintenance hassles of the property. It is the fore important for both parties, the lesser and the lesser to abide within the terms of each contract to enhance mutual relationship between the landlord and the tenant.


LAW, K. (2019). Commercial Lease Agreements vs Residential Leases | Kaass law. [online] KAASS LAW. Available at: (2019). Commercial Lease Agreement Template | LegalNature. [online] Available at:

Lipton, J. (2004). Information Property: Rights and Responsibilities. Fla. L. Rev., 56, 135.

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