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Commercial Leases

Hudson Law Firm Jan. 24, 2023

commercialThe key difference between a residential and commercial tenant is the use of the property. Commercial leases concern spaces that produce or sell products or services, such as a retail store, warehouse, office, parking garage, or restaurant. The leases usually specify the types of business operations permitted on the premises. Residential leases relate to spaces where people live, such as an apartment or house. Residential leases usually prohibit the use of the property for most types of commercial activities, and commercial leases typically prohibit the use of the property as a living space.

Additionally, the length of the lease varies, with commercial leases typically being for longer periods, usually a minimum of three to five years, and residential leases usually being for one year. Residential tenants usually have more legal protections than commercial tenants, and responsibility for maintenance and repairs also differs. Residential tenants usually are not responsible for any repairs or maintenance, while commercial tenants usually are responsible for most of the maintenance and repairs.

Landlord Responsibilities

In New Jersey, commercial landlords are responsible for maintaining the physical structure of the rental property, including the roof, walls, and foundation. They are responsible for making sure that the premises comply with all applicable building, fire, and safety codes. Landlords must also comply with any terms of the lease that require them to provide certain services, such as heat and hot water. The lease should clearly define the parties' responsibilities for repairs, maintenance, and other related issues. Finally, landlords are responsible for providing “quiet enjoyment” to the tenant, meaning that they must ensure that their actions (or those of other tenants or occupants) do not interfere with the tenant’s ability to use and enjoy the premises.

A triple net lease in New Jersey is a type of commercial lease structure where the tenant pays the base rent plus the property's insurance policy, property taxes, and maintenance and repair expenses. The tenant is responsible for the property's operating expenses and the landlord is solely responsible for the building's structural maintenance costs. This type of lease is often used with single-user industrial facilities and the tenant is granted almost complete control over the property.

A double net lease in New Jersey is a type of net lease agreement where the tenant pays rent, property taxes, and insurance on the property. The landlord is held responsible for all maintenance and structural costs. The tenant is also responsible for their own operating expenses, such as utilities and repairs.

Tenant Protections

Commercial tenants in New Jersey do not enjoy the same level of legal protections as residential tenants. Specifically, commercial tenants are not afforded the same “protective” approach most tenancy courts in New Jersey take toward residential tenants. For starters, unlike residential tenants, commercial tenants are obligated to leave the premises once their lease expires, unless the parties agree upon a new term, or an extension of the old term. In addition, courts are less hesitant to enforce a lease provision against a commercial tenant, even if it is considered onerous.

Furthermore, New Jersey does not provide commercial tenants with implied warranties of habitability, nor does it provide any rent control or rent stabilization for commercial tenants. Lastly, unlike residential tenants, commercial tenants are not entitled to the same level of notice when a landlord terminates a lease.