Ways Commercial and Residential Leases Differ
Most people have signed a lease at one point of another. Pretty much everyone has leased an apartment, and this usually involves signing a lengthy document that governs the rights and responsibilities of the parties. In addition, many people also need to sign a commercial lease if they own a business or use property for non-residential purposes. There are many ways commercial and residential leases differ, and it is important to understand these differences to know your rights and responsibilities as a tenant.
Length of Tenancy
One of the biggest ways commercial and residential leases differ is the length of the tenancies. As many people already know, most residential leases only last one year. Some residential leases may last up to two years, but it is uncommon to see a residential lease that lasts for more than a few years. On the other hand, commercial leases often include tenancies that last for many years. It is not uncommon for commercial leases to last for ten years, and some leases last even longer than this. The length of a lease depends on the industry, and due to the lengths involved, it is important to have a skilled leasing attorney carefully review all commercial leases.
Duty to Mitigate Damages
Another one of the ways commercial and residential leases differ is with the duty to mitigate damages. Depending on the state, residential landlords generally have a duty to mitigate damages after a tenant vacates the premises prior to the expiration of the lease. This generally requires landlords to show the premises to prospective tenants, advertise the space, and minimize the damages that the breaching tenant might have to pay. However, depending on the state, commercial tenants generally do not have a duty to mitigate damages. As a result, commercial tenants who breach their leases can face extremely stiff penalties, and it is important to have a commercial lease negotiated by an attorney who understands all considerations involving the mitigating of damages.
Self-Help
In residential leases, landlords typically do not have the ability to remove their tenants or change the locks without court approval. There are many laws that protect residential tenants, and landlords can get in trouble if they evict tenants, move their property, or change locks without permission. Typically, landlords must go through the eviction process before they are able to evict a tenant.
However, commercial leases have less safeguards for tenants. Indeed, commercial landlords are often empowered to use “self-help” when dealing with tenants who have breached the lease. This usually means that commercial landlords can change the locks on their tenants if they breach a lease and remove their property under certain circumstances. There are, of course, a number of limitations to this right, and it pays to always retain a lawyer before you use “self-help” against a commercial tenant. Nevertheless, it is important to know that this power is one of the ways commercial and residential leases differ.
Warranty of Habitability
Another one of the ways that commercial and residential leases differ is that commercial tenants have less defenses against their landlords. For instance, residential tenants usually benefit from a warranty of habitability. This means that residential landlords must provide tenants with habitable premises, which includes shelter from the elements, heat in the winter, and other basic necessities. Commercial tenancies do not usually include such a warranty. This is despite the fact that office space, warehouses, and other properties usually require basic necessities like shelter and heat so that tenants can get full use of the property. Although commercial tenants may be able to argue that they are being constructively evicted due to defects in the property, the warranty of habitability is a powerful defense that is not normally available to commercial tenants.
Fixtures
A fixture is a piece of personal property that is annexed to real property in such a way that it becomes part of the real property. Normally, landlords get to keep fixtures at the end of a lease term even if a tenant installed the fixture. Some of the factors that courts consider when determining if an item is a fixture that should be left with the property is the damage that could be caused if the fixture is removed, the use of the fixture, and whether the fixture improves the property.
Another one of the ways commercial and residential leases differ is that certain types of fixtures of commercial tenants are assumed to remain the property of the tenant. Indeed, there is a body of law that holds that “trade fixtures” or the fixtures necessary for a tenant to conduct business on a property do not become part of the property such that a landlord can make a claim to retain such fixtures. This issue is normally negotiated when the parties enter lease discussions, and as a result, it is important to retain a skilled leasing attorney to make sure that all considerations involving fixtures are properly handled.
The Rothman Law Firm has substantial experience negotiating commercial and residential leases on behalf of both tenants and landlords. We also have experience taking real estate matters to court if necessary. If you are looking for a seasoned New York and New Jersey real estate and leasing attorney to handle your legal issue, please feel free to contact The Rothman Law Firm to request a free consultation.