What’s the Difference Between Residential and Commercial Real Estate?

August 10, 2021

What’s the Difference Between Residential and Commercial Real Estate?

Real estate is property made up of land or buildings. There are two types of real estate: residential and commercial; one type is where you live, and the other type is where you work.

This important distinction means that there are different real estate laws at play for leasing, buying, or owning/using each type of real estate. Knowing all about one does not mean that someone knows all about the others. For instance, there are laws and clauses in a residential real estate lease agreement to keep the leaser from changing the property. The same thing isn’t true for lease agreements for commercial properties where changes to the property can be expected.

Not to forget, depending on whether you are a business or a resident, there are also different laws for owning or at least using the property. This only makes it good to know and understand the most important differences between them.

The Important Differences When Leasing

It’s common for people to lease properties. A lease is a contract over land that, in basic terms, allows someone to borrow it for a period of time. It’s in the details where leasing becomes different for residential and commercial real estate.

As said before, residential real estate has clauses in the leasing agreement to ensure that the one leasing doesn’t change much about the apartment. There is an expectation that the property will be in the same condition when the lessee leaves as when they arrived. It’s far more common for commercial real estate agreements to lack restrictions like these. Sometimes they’ll have to set boundaries on what can be changed because things must be changed for the business to turn a profit.

With residential real estate, there are also common clauses in leasing agreements concerning capacity and guests. A commercial real estate location, like any store, usually only has to obey the capacity limit in most instances. They’re expected to pack their location, especially if they’re a consumer-facing storefront.

These expectations and uses will leave a leasing agreement for residential property and one for a commercial property reading completely different.

The Important Differences When Buying

When buying real estate, the difference between residential and commercial depends on where you’re purchasing your property first. Buying a piece of real estate within city limits comes with its own regulations and rules. Cities have their own laws that aren’t a factor when you purchase property outside of a city. These serve to protect the city’s economy and keep it running smoothly.

This has led to laws that pertain to commercial real estate rather than residential. Cities have procedures that anyone buying a property and/or starting a business must complete. The city wants to ensure that you are running a safe and viable business in their city. Should your business fail or injure anyone, that would reflect on the city itself. This is true of residential real estate too but to a far lesser extent. Considering that a city can’t quite keep anyone who can afford to live in the city from moving in or people who can’t from moving out.

The Important Differences When Owning/Using

A home and a workplace are two different things. It makes sense that the laws controlling them would be different as well.

Residential real estate actively deals with laws concerning the matter of bankruptcy in relation to home equity. Unlike with a commercial property, if you personally go into bankruptcy, you would want to try saving your home’s equity. There are actually Homestead laws to help residential real estate owners for this specific purpose.

There isn’t such support for commercial real estate. There are financial services and laws to assist a business going bankrupt, but there aren’t ones that help to save your property like Pennsylvania’s Homestead laws that help you save your residential property.

Why Contact Our Residential and Commercial Real Estate Attorneys?

Whether it’s for your future home or for your business, you should have a lawyer who can handle any real estate issue you’re having. Here at Mazzoni Karam Petorak & Valvano, we have the extensive knowledge and experience to help with either type of real estate agreement.

If you live in Northeastern Pennsylvania and are looking for help on how to proceed with a real estate case that’s outside your comfort zone, contact Mazzoni Karam Petorak & Valvano for a free consultation.

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