When it comes to laws governing commercial and residential real estate, they are vastly different in just about all areas. Whether a person is selling a property, leasing a property, constructing a building, or making renovations, the same basic legal principles don’t usually apply. Commercial and residential real estate is used for vastly different purposes, and for that reason, it is regulated much differently. Confusing the two types of regulation or not understanding the laws can often cause a person or company to incur serious real estate-based financial losses. Real estate agents, property developers, and property investors should be well versed in the very different laws that apply to both property types.

The 5 Main Differences Between Commercial and Residential Real Estate Law

  1. Zoning Regulations – Commercial and residential property laws vary when it comes to zoning laws. Land that is designated as commercial or residential by a governing body must be treated as such. Failure to abide by property zoning laws can land a property owner in severe legal trouble, including criminal charges.
  2. Tenant Laws – When it comes to renting or leasing a property, the tenants and property owners are entitled to many different rights with commercial and residential properties. For example, lease contracts for commercial properties cannot be terminated as easily. Rent prices on residential properties are also much easier to increase.
  3. Foreclosure Rules – Commercial properties cannot be foreclosed on as easy as a residential property. Commercial property foreclosure time frames are typically longer, and the process is much more drawn out. Residential foreclosures typically take place with no strings attached, whereas in many cases commercial property owners must forfeit earned income on the foreclosed property.
  4. Disclosure Laws – The laws mandating what a property owner must disclose to a prospective tenant or lease widely vary between commercial and residential properties. Commercial property owners are usually required to disclose the presence of asbestos, lead paint, and other toxic materials. Residential owners have the same mandate. However, they must also disclose even minute damage to the property, something commercial property owners are exempt from.
  5. Construction Laws – The property development laws for commercial and residential projects are hugely different. Commercial safety regulations for newly-built structures are very strict, whereas the safety laws governing newly built residential properties are far more relaxed.