When it comes to leasing property in California, there are two main types of lease agreements: Residential Lease vs. Commercial Lease. While both agreements outline the terms and conditions of a lease, there are important differences between the two that landlords and tenants should be aware of. In this article, our real estate lawyer will discuss the differences between California residential and commercial leases, and what you need to know to protect your interests.
1. Purpose of Lease
The first major difference between a residential and commercial lease is the purpose of the lease. People use a residential lease for living purposes, whereas they use a commercial lease for conducting business activities. This means that a commercial lease is more complex and detailed, as it needs to cover the different types of activities that can take place within the commercial property.
2. Length of Lease
Another difference between Residential Lease vs. Commercial Lease is the length of the lease. Residential leases are typically short-term, ranging from six months to one year, while commercial leases can be long-term, ranging from three to five years or even longer. This is because residential tenants are often looking for temporary housing solutions, while commercial tenants are typically looking for a long-term base for their business operations.
3. Rent Increase
Rent increase is another significant difference between the two types of leases. Residential leases in California may be subject to rent control laws that limit the amount landlords can increase rent each year. In contrast, commercial leases do not have such protections and landlords are free to increase rent as per the terms of the lease. Further, a commercial lease may require a tenant to pay CAM (common area maintenance), or a portion of the owner’s property insurance in addition to the base rent price.
Commercial leases are generally more negotiable than residential leases. Commercial tenants have more bargaining power than residential tenants and can negotiate more favorable lease terms, such as rent, lease length, services or utilities covered by the landlord, and renewal options.
5. Maintenance and Repairs
Commercial leases may require tenants to be responsible for the maintenance and repairs of the property. This is in contrast to residential leases, where the landlord is usually responsible for maintenance and repairs unless otherwise specified in the lease agreement.
6. Security Deposits
Commercial leases require a much higher security deposit than residential leases. This is because commercial properties tend to be more expensive than residential properties, and the business activities conducted within the commercial property can result in more wear and tear.
In conclusion, the main differences between a California residential lease and a California commercial lease are the purpose of the lease, the length of the lease, rent increase, negotiation, maintenance and repairs, and security deposits. It is important for landlords and tenants to understand these differences and how they affect their rights and obligations under the lease agreement. We recommend consulting with a Los Angeles real estate lawyer who has experience in real estate and leasing matters for more information and guidance on California lease agreements.
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