Commercial Lease Agreement Assignment
Reagan Ream
School of Business, Liberty University
BUSI 561: Legal Issues in Business
Dr. Maria MacMeekin
November 21, 2021
1. What is the distinction between a “commercial” and a “residential” lease? How do
the differences in use impact the terms of the lease? In a commercial lease agreement,
should the law seek to protect the interests of the commercial tenant more than the
interests of the commercial landlord? Why or why not?
There are quite a few differences between a commercial and residential lease. Commercial leases
are geared more towards spaces that are set up to sell or produce goods or services to the general
public. Examples of these would be warehouses, retail stores, office buildings, and many other
spaces that provide some level of service or goods for sale. Commercial leases tend to have a
longer time limit that is imposed on the tenant when they go to sign the agreement. Commercial
leases tend to have a minimum of three to five years on each agreement, and while this can vary
it tends to be the most common in the market today. Commercial resources also tend to have less
legal protections when it comes to their agreements. According to an article in the University of
Pittsburgh Law Review, the reason for this is because it tends to be true that those who are
signing commercial leases understand more about the law and what it affords to them, so they
need less protection in the agreement (University of Pittsburgh Law Review, 1973, p. 901).
Commercial leases are also responsible for the maintenance and building repairs that might be
needed over the time of the agreement. Residential lease agreements are geared more towards
individuals who are looking to rent a space to live in. These can be signed for apartments,
houses, rooms, and many other things but it is ultimately created for those who want to live in a
space for a shorter amount of time. Residential lease agreements tend to be limited to year
agreements and if the tenant chooses to stay, they must sign another agreement for the next year.
There are more legal protections for residential agreements since it is considered that the tenant
may not understand or have the knowledge of agreements so there are more legal restrictions that
must be followed. In the case of residential lease agreements, it is expected that the landlord
handles all the building maintenance and repairs that may occur over the lease. It is expected that
the landlord handles all those and that the tenant does not try to handle anything in that capacity
that may occur over the duration of their lease.
2. Sections 5 and 6, respectively, impose on the commercial tenant the obligation of making
repairs to the leased property, and of making alterations and improvements to the leased
property. Should the lease impose these obligations on the tenant, or should such
obligations be legally imposed on the commercial landlord? Explain your answer.
In the case of a commercial lease agreement, the tenant should have all the obligations regarding
the maintenance and building repairs that may occur over the duration of the lease. Commercial
spaces are typically used as places that conduct business with the general public, and it is
important they are responsible for what occurs in their place of business. According to an article
in the Deakin Law Review, there are some cases where the landlord is responsible for the
maintenance and repairs in the building that they own and some of those situations may be when
something structural is wrong with the building or there is an electrical issue occurs that needs to
be taken care of (Christensen, et. al, 2004, p. 632). For the most part, the tenant is responsible for
the repairs, and this makes the most sense considering it is a place of business and they know
what needs to be fixed or it has usually occurred due to their daily activities. Most things are
simple issues that can be fixed quickly, but in the case of those bigger situations it is best to
inform the landlord and allow them to proceed with the proper outcome for the situation.
3. In the default provisions of Section 15, what is the landlord’s duty to “mitigate”
damages? Should the landlord be required to mitigate? Explain.
It is the responsibility, as agreed upon in the lease agreement, of the tenant to pay agreed upon
rent for the space, in Section 1 of the agreement. In the agreement, the initial down payment is
set and the amount for the following payments, also within the agreement is the details
regarding late payments or “defaulted” payments on the side of the tenants and how the
landlord plans to handle those situations if a default occurs. If the tenant fails to meet the
agreed upon times, which would require a payment 15 days after the default date or 30 based
on the situation regarding the default, and the default agreement, the landlord then has the
right to terminate the lease agreement between themselves and the tenant. In Section 15 it lists
that in the case of a terminated agreement, the landlord shall use reasonable efforts to mitigate
the damages, which means the landlord is required to allow another tenant to rent under those
agreed upon terms. As stated before, within this agreement the landlord is required to mitigate
the damages as it was listed within the agreement. The landlord must allow another tenant to
sign the agreement under the same terms as the previous tenant to mitigate those damages due
to defaulted payments.
4. Sections 2 and 19 discuss the creation of, and the parties’ rights in, the security deposit.
Do these rights favor the landlord or the tenant? Is that appropriate? Why or why not?
As regarded in Section 2 and 19 of the rental agreement, it states that rights of the tenant and the
landlord regarding the payment process, specifically in Section 2, and the security deposit, in
Section 19. Section 2 states the initial terms of rent, stating the total agreed upon amount for the
space, and the breakdown of how much is required of the tenant to pay on the first of the month,
which is their agreed upon date. Section 2 also sets the security deposit amount, and the renewal
lease fees, if the tenant in the future decides to renew their lease. Section 19 talks specifically
about the security deposit for the space stating the groundwork for the reasoning behind it. It
states what the security deposit is being held for, which in this case is for any damages that may
occur during the time period or to satisfy any other covenant or obligation to the tenant. If those
agreed upon rules are not kept by the tenant, the landlord has the right to keep the security
deposit to cover any necessary cost. If the tenant does not default on any payments or incur any
damages during their lease, the landlord is required to return the security deposit back to the
tenant at the end of the lease. This favors the landlord more in this case because it protects them
from any issues that may arise with the tenants regarding defaulting on payments or incurring
any damages. The issues that can arise with this are the unfair evaluations, done by the landlord,
at the end of the agreement to determine whether the tenant receives their security deposit back
(Plank, 2017, p. 339).
5. Section 29 requires mediation, followed by arbitration, in lieu of litigation, to resolve
disputes. What are the advantages and disadvantages of such a provision? How should
mediators and arbitrators be selected?
The agreement sets up a dispute resolution to resolve issues that do not need litigation to solve
them. This is necessary because it can help solve disputes on a civil level that does not require
the tenant and landlord to waste money on hiring litigation to mediate simple issues. A mediator
should be one who has no ties to either party or institution and should not be easily swayed. A
mediator must be objective and fair to both the tenant and the landlord and listen to both sides of
the story and points of view when it comes to the issue at hand. The advantages of do outweigh
the disadvantages by providing a solution to the issue with an alternative that saves money for
both parties and allows for a peaceful and civil decision to work the issue out. The disadvantage
of having a mediator is the objectiveness of the mediator. It is difficult to find someone who is
qualified to mediate who does not have ties to either party that would not hinder their decision
without paying for them. When it comes to looking for a mediator a good rule of thumb to follow
is compile the information and have each party meet with the mediator to determine what the
best possible outcome is for both parties first before any other actions are taken.
6. As a businessperson guided by a Biblical worldview, what changes would you make in
this lease to make the terms comport more closely to Scripture?
As a Christian, and someone who currently deals with tenants for storage units, one change that I
would make to this agreement is to have more forgiveness when it comes to defaulting payments.
Ephesians 4:32 states “Be kind to one another, tenderhearted, forgiving one another, as God in
Christ forgave you” (ESV). This is a great verse to live by especially when it comes to dealing
with tenants who may not make payments on time. Another verse that comes to mind is 1 Peter
3:8 which says, “Finally, all of you, have unity of mind, sympathy, brotherly love, a tender heart,
and a humble mind” (ESV). Of course, as a businessperson it is important to stand firm and to
ensure that your business is taken care of and not taken advantage of, but I do believe that there
is room for forgiveness in the world of business. In this agreement, it is stated that if the person
does not make a payment within 30 days, the landlord has the right to terminate the agreement,
and while I think it is important to stand up for yourself, I believe the agreement could have
space for forgiveness periods. I would amend it to say payments must be made at the first of the
month and if they are not, you have 15 days to make the payment. If the tenant defaults on two
payments, the landlord has the right to terminate the agreement. People make mistakes and they
often forget, I have multiple tenants who have forgotten to bring their storage unit payments on
the due date, but we showed them compassion and forgiveness and allowed them to keep their
lease. I believe this is how we show the love of Christ and the Gospel. People will watch our
actions and hopefully they can see the love of Christ.
References
Christensen, S. & Duncan, W. (2004). Exemptions from a tenant’s express obligation to repair : is
the landlord responsible by implication? Deakin Law Review, 9(2), 621–641.
COMMERCIAL VERSUS RESIDENTIAL LEASES: A NEW DOUBLE STANDARD?
(1973). University of Pittsburgh Law Review., 35. (901).
Plank. (2017). SECURITY INTERESTS IN DEPOSIT ACCOUNTS, SECURITIES
ACCOUNTS, AND COMMODITY ACCOUNTS: CORRECTING ARTICLE 9’S
CONFUSION OF CONTRACT AND PROPERTY. Oklahoma Law Review., 69(3). (339).
Sproul, R. C. (2015). The Reformation Study Bible: English Standard Version. Orlando, FL:
Reformation Trust.
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