In real estate law, the legal term for the owner of property is "landlord" and for the renter is "tenant." A landlord and a tenant may have a residential lease or a commercial lease. The property in a commercial lease must be used for business purposes.
Bargaining Power in Tenancy Law
Tenancy laws are based on the respective power of the parties negotiating the lease. With a residential lease, tenants have special rights to make sure the property is habitable and problems are fixed because it is assumed that most residential tenants do not have very much bargaining power in negotiating a lease.
Commercial tenants, on the other hand, are assumed to be knowledgeable and sophisticated about business and real estate laws. Therefore, businesses are not given the protections extended to residential tenants. Realistically, however, many business persons are not more sophisticated than the average residential tenant in terms of their knowledge of real estate laws.
Reading a Commercial Lease
The law assumes that the tenant in a commercial lease understood or took steps to understand the lease and could have negotiated, so it is important that tenants understand the significance of signing a commercial lease. Commercial leases are usually much longer and much more expensive than residential leases, so understanding the terms is especially important.
Commercial leases have many terms that seem to say one thing in plain English, but may refer to something totally different in contract terms.
Here are some specific issues that may come up in your commercial lease:
- Security Deposits – Each state has different laws regarding security deposits, and landlords can often demand high security deposits for commercial leases.
- Assignment and Sublease – Commercial leases often are for many years and you may want to transfer your interest in the lease. Watch out for rules concerning assignments and subleases, such as a ban on assignment or sublease or landlord approval.
- Implied Warranty of Suitability – A landlord may be required to fix certain defects so that you can use the space for your particular need. Also, a landlord cannot wave the warranty of suitability within a lease.
- Duty to Repair – often times there is dispute as to whether it is the company or the property owner that has a duty to make repairs
Do I Need an Attorney for My Commercial Lease?
A landlord will likely have a real estate attorney and the tenant should also have one to negotiate on his or her behalf. Because an attorney is an expert in leases, he or she will work towards the best deal for the client. An attorney can figure out what is best, especially in commercial leases because of their complexity, long duration, and high costs.