Commercial and Residential Lease Agreement Review

Question 1 

The main difference between commercial and residential lease agreement is their purpose where commercial leases are used for commercial properties whereas residential leases are rental agreements for residential properties. In a residential lease agreement, there is a contract between the landlord and a tenant to use the property for living arrangements and not for commercial purposes ( Miceli, Sirmans & Turnbull, 2001) . The leases have no commercial purposes and often run for a shorter period than commercial leases. The rent for occupying a residential rental is based upon a set amount per month and terminating a residential contract also requires less notice than the commercial lease. On the other hand, commercial lease agreements involve a landlord and business inhabitant who utilizes the property for commercial purposes to make profits ( Miceli, Sirmans & Turnbull, 2001) . The contract serves the purpose of providing property for the tenant to run a business rather than a place to live.

Residential renters often have more protections compared to commercial renters. Due to the value placed on safe and secure housing, residential lease agreements protect tenants from specific abuses and unscrupulous landlords that entail providing the safe and habitable house. In such a deal, the residential landlords have the obligation of maintaining the premises. In contrast, commercial landlords do not have such requirements to keep premises habitable unless they are spelled out in the lease agreement ( Miceli, Sirmans & Turnbull, 2001) . Commercial lease agreements do not oblige landlords to perform maintenance on the property, which falls on the hands of the tenant since commercial tenants are presumed to have equal chance to negotiate a contract that benefits them.

Therefore, there is no need to protect the commercial tenant more than the landlord since they have the experience to enter into a written commercial lease. Commercial tenants also have a chance to obtain services of skilled professionals for their contract negotiation such as lawyers and consultants ( Miceli, Sirmans & Turnbull, 2001) . They have more opportunities to negotiate the contracts than residential renters, and the lease is harder to break. Since the tenant is more like a corporation, the commercial landlord requires a personal guarantee that the individual will honor the contract.

Question 2 

Commercial lease agreements often contain provisions on who is liable for damage to the leased premise during the lease period. The commercial lease agreement places most of the responsibility for repairs on the tenant. Maintenance often contemplates steps to avoid deterioration of a place through preventive measures such as painting, cleaning, and servicing ( Oberle & Sloboda, 2010) . This means the tenant has to maintain the property in good operating order and make improvements whenever it wears or tears down. Usually, the tenant should be responsible for anything that they damaged and must also make the necessary improvements and remodeling at their expense.

When the leased property deteriorates to a less than agreed-upon condition, a determination should be made on who is responsible for the deterioration. The duty to make damages on the property is imposed on the landlord whenever damage arises from structural aspects such as weak foundation, walls or the roof. Therefore, the commercial landlord should be responsible for all structural repairs that include walls, ceilings, floors, and the foundation ( Oberle & Sloboda, 2010) . They should be allowed to cover all repairs that may be considered unpreventable, such as having a shaky foundation or walls. The focus is on determining the responsible party for damage on the leased property

Question 3 

The common law does not oblige the Landlord to mitigate damages following lease breach especially when the lessee must pay rent under contractual terms. In the past, landlords did not have any obligation to mitigate their damages since tenants were held responsible for balancing the lease. However, the typical modern trend requires commercial landlords to mitigate damages if a tenant turns over possession of the premises ( Flynn, 2000) . The obligation requires that landlords take reasonable steps to acquire a replacement tenant as soon as possible. A landlord can fulfill its duty to mitigate damages by taking the initiative to advertise the availability of the premise or engage the services of a broker. He must use reasonable efforts to re-let the premises upon a tenant’s breach of contract by finding another tenant and ensuring the property does not sit empty to undergo losses ( Flynn, 2000) .

Mitigating damages usually entails making reasonable efforts to re-let the premises to a replacement tenant as quickly as possible hence saving on the costs. Damage will be reduced based on the amount that can be recovered by mitigation. In most cases, the duty to mitigate damages requires the non-breaching party to make a reasonable effort to reduce any losses ( Flynn, 2000) . There is no sitting back and waiting for the lease term to end while the tent accrues, and the landlord must jump into action to restore any damage. In most cases, it is not possible to recover costs if the landlord fails to make a reasonable effort to cover the losses by obtaining a new tenant to fill the abandoned space. It is a natural consequence that tenants will be unable to comply with terms of lease agreement when breaching the contract. As such, commercial landlords have the obligation to deal with damages from breach of contracts by redressing them.

Question 4 

The rights discussed in section 2 and 19 such as the security deposit favor the landlord and do not benefit the tenant in any way. Instead, the rights serve as a guarantee to the landlord to ensure the tenant pays al rent and performs other responsibilities of the lease. The security deposit is part of the package of rights and duties in a rental and is mostly in favor of the landlord. The security deposit also ensures that the landlord protects against any default by the tenant and any expenses in repairs ( Oberle & Sloboda, 2010) . They use this provision to cover themselves against any potential misfortune.

These rights are appropriate for residential lease agreements as opposed to the commercial lease agreement due to the obligation to protect residential tenants. Landlords in residential lease agreements are obliged to protect the tenant and will, therefore, need the security deposit as a protection for their properties. At the same time, commercial landlords also benefit from these rights in case tenants choose to breach the contract and leave them with losses.

Question 5 

Disagreements may arise between the landlords and tenant, for example, whether they adequately withheld the security deposit. Whenever a dispute arises, both mediation and arbitration are forms of solving disputes by seeking to avoid high costs and unpredicted outcomes. They are private forms of dispute resolution that can be important to parties in a discussion, allowing them to establish ground rules for solving a dispute ( Lebovits & Hidalgo, 2009) . These two forms help save on costs and time over litigation and ensures that parties resolve the conflict amicably.

Mediation should be the first step of resolving a dispute as it allows a neutral third party to help parties negotiate a resolution. Here, the two parties under conflict comes up with a solution without the mediator imposing any decisions on the parties. The third party only helps in listening and offering suggestions to benefit both parties participating in resolving the dispute ( Lebovits & Hidalgo, 2009) . If mediation fails with parties failing to come up with an agreement, they can seek arbitration that follows formal rules and procedure. An arbitrator often has legal training compared to a mediator who also acts as a neutral third party but with some expertise in the area of dispute. An arbitrator can also make made determinations and decisions that are binding to parties under discussion, thus helping to avoid the risk that parties will not agree. The selection of a mediator or arbitrator should entail getting someone who is neutral and impartial ( Lebovits & Hidalgo, 2009) . Both disputing parties should agree on getting a neutral party who would help in getting a solution to the problem.

Question 6 

In most cases, lease agreements are standard making it challenging to make changes in a typical contract. However, some of the changes that can be introduced to lease agreements are to make provisions that improve the landlord-tenant relationship that is governed with principles of trust and accountability. Poor business relationships often arise from a lack of confidence and mutual responsibility and can contribute to a breach of the lease contract. Creating a good working relationship can prevent a violation of agreement from the tenant who can also make an effort to avoid making damages on the property. The Bible especially emphasizes on parties working together in harmony to prevent any disputes. As such, the lease agreement can include a provision that requires staying in balance and correctly solving any conflicts to reduce the chance of destroying a relationship

References

Flynn, S. G. (2000). Duty to Mitigate Damages upon a Tenant's Abandonment.  Real Property, Probate and Trust Journal , 721-784. 

Lebovits, G., & Hidalgo, L. R. (2009). Alternative dispute resolution in real estate matters: the New York experience.  Cardozo J. Conflict Resol. ,  11 , 437. 

Miceli, T. J., Sirmans, C. F., & Turnbull, G. K. (2001). The property-contract boundary: an economic analysis of leases.  American Law and Economics Review ,  3 (1), 165-185. 

Oberle, K., & Sloboda, M. (2010). The importance of'greening'your commercial lease.  Real Estate Issues ,  35 (1), 32-42.