Residential vs. Commercial Leases

California law treats residential and commercial leases very differently. Generally, commercial tenants receive less legal protections than residential tenants. It is therefore critical for both landlords and tenants to be very familiar with the terms of a commercial lease, and not just assume that the same standard provisions are provided in each agreement.

Residential Lease Agreement

For starters, a residential lease agreement is a contract between a tenant and a landlord to use property for living. The agreement is usually a standard form, and the rental property is generally a house, townhouse, apartment, or condominium. Residential leases generally contain a provision that the tenant may not use the property for commercial purposes, or for the purpose of earning a profit. The rent is usually a set amount every month, and the term of the lease is generally a year.

Since a residential lease involves somebody’s future home, federal, state, and local laws provide specific tenant protections to ensure safe and secure housing. Most importantly, a landlord is required to provide safe and habitable housing. To further ensure that tenants are protected, California law allows a tenant’s attorney to collect fees for habitability violations of a residential unit.

Commercial Lease Agreement

A commercial lease, on the other hand, is a contract between a business tenant and a landlord for use of commercial property. Commercial leases are usually uniquely designed for the particular commercial tenant, unlike standard residential lease agreements. The property is intended to be used in a way that will generate a profit, and there is no right of habitability. The property is generally a business space such as a warehouse or office space. The rent is usually based on the amount of square footage occupied by the tenant, and may require the tenant to pay a percentage of their profit earned on the property. Commercial lease agreement terms are usually a set number of years, which sometimes include option rights that must be exercised within a certain period of time before the expiration of the lease.

A commercial tenant, usually a business entity, is presumed to be on equal footing with his or her or its landlord in negotiating a commercial contract, which means that there are fewer laws that specifically protect commercial tenants.