Running head: COMMERCIAL LEASE ANALYSIS 1
Commercial Lease Analysis
Guadalupe E. Chapman
Liberty University
COMMERCIAL LEASE ANALYSIS 2
Commercial Lease Analysis
1. What is the distinction between a “commercial” and a “residential” 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?
Commercial and residential leases have many similarities and differences. But before I go
into the differences let me explain what a lease is. A lease is written agreement between two
individuals to rent or have access to a particular property for an agreed fixed amount of money
and time. A commercial lease covers properties that are in commercial use areas and have more
lenient codes while residential leases pertain to properties found in neighborhoods. Residential
properties have residential codes that apply to the maintenance and appearance. Most residential
leases have less details because the landlord and tenant are equally responsible to comply with
codes in the area. As for commercial leases have more specific detail, such as use of property,
property alterations and improvements. The most significant difference is the landlords (owner)
improvements and tenant improvements. “Most residential real estate is rented as-is, with the
assumption that the owner will fix or maintain the property and that the tenant must ask before
making changes. Commercial properties often need to be changed to suit individual tenants, so
there may be more shared responsibility in making changes in a commercial lease” (Commercial
Real Estate Lawyers, 2018). In my opinion I believe that the law should seek to protect both the
tenant and landlord in the same way. A commercial property is a business location for both the
tenant and landlord. They both have equal again from ensuring the property is within operational
code. Landlord and tenant both have responsibility to insure their property (building or goods).
For example, if a building fire occurred do to faulty electric wiring, should the tenant be held
responsible to the commercial property and loss of personal property in the building during the
fire or should the landlord do the ethical thing and replace all loss personal property the tenant
COMMERCIAL LEASE ANALYSIS 3
loss due to building lack of maintenance. In my opinion no in this situation the tenant interest
should be protected by the law. Its not always black in white. The only fix to this is to have both
interest of landlord and tenant be equally protected by the law.
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.
Being that this is a commercial lease, the imposed obligations to the tenant may not be to
far from the normal commercial agreements. I do believe that the landlord can take a little more
responsibility for their investment property. For instance, in section 5 it states that the tenant will
be responsible for all necessary repairs in the premises except for major mechanical systems and
roof. What if within the first week of lease term parts of the ceiling start to fall? Or lights and air
conditioner stop working? Now the tenant is required to fix a property that they haven’t fully
occupied yet. I understand that before you enter a lease agreement the tenant should always
complete a full inspection before taking responsibility for the property, but things like this occur
all the time. Now the tenant is responsible for ensuring the repairs are conducted. As Christians
we must look after one another as an investment. Being a reliable landlord and tenant will ensure
a better relationship between the two. “That which is gone out of thy lips thou shalt keep and
perform; even a freewill offering, according as thou hast vowed unto the LORD thy God, which
thou hast promised with thy mouth” (King James Bible Online, 2018). As per for section 6, I
believe should be imposed on the tenant. If the tenant is requesting to make alterations and
improvements to the premises for the tenants use, then after the term of the lease the commercial
property should be returned to the landlord as it was originally leased.
COMMERCIAL LEASE ANALYSIS 4
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.
A landlord has a duty to mitigate his damages when a tenant breaches a lease (LaMance,
2018). Breaching a lease can refer to a tenant moving out of the property before the lease
obligation is over. This can happen for many reasons, such as financial strain to the tenant,
buying a home, losing a job or moving a business to a different state (for commercial properties)
just to name a few. In this situation the landlord’s duty to mitigate damages requires the landlord
to make the property available for rent to new tenants and reduces the amount of money that the
old tenants owe for breaking their lease. In my opinion, landlords should be required to mitigate
damages. Although it may not seem right for many, renting out property can be a very fruitful
business or a difficult one. We have an ethical and spiritual responsibility to our self and God to
be a beacon of light to those in difficult times. In Mark 12:33, “And to love him with all the
heart, and with all the understanding, and with all the soul, and with all the strength, and to love
his neighbour as himself, is more than all whole burnt offerings and sacrifices” (King James
Bible Online, 2018). Many that enter the real-estate business should look over financial gain and
more to the human gain. It is reasonable for a landlord to mitigate in ensure some compensation
can be received to lessen the financial loss and at the same time lessen the financial strain of
tenants that have been found in breach of contract.
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?
Based on section 2 and 19 on the commercial lease contract these agreements favor the
landlord. The problem doesn’t come with required security deposit but the way the security
deposit is managed by the landlord. For instance, in section 19 it states that the landlord may
COMMERCIAL LEASE ANALYSIS 5
deposit tenant’s security deposit within their other funds. These other funds can be personal bank
account that may have nothing to do with his commercial leasing property. It also clearly states
that security deposit is not to be used as an advance payment of rent. On the other hand, in goes
on stating that “use security deposit to the extend necessary to make good any arrearages of
rent”, this itself is an inconsistency in the contract. It’s understandable that landlords what to
protect themselves, but there’s something unethical about depositing tenant security deposit
within the landlord’s personal accounts. What ensures the tenant that their security deposit would
be available after the lease has been fulfilled? A separate business bank account should be
established to ensure the security deposit is always available for the tenant. Having a separate
account prevents the landlord from spending the money, interest accrual, and lack of tracking
funds. “Technically, the security deposit money does not belong to the landlord. It’s on loan,
while the tenant [occupies] the rental property” (Hall, 2014). There are many states that prohibit
this time of funds commingling.
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 the mediator and/or
arbitrators be selected?
Section 29 covers the tenant and landlords dispute resolution, which states that mediation
would first occur between both parties and their counsel. Mediation are found to have the most
success rates in disputes. Reason for this is the neutrality and relaxed atmosphere. This allows
both parties to share their point of view an come to an agreement. If agreement has not been
reached, then the dispute will be taken to arbitration. There are many advantages and
disadvantages to this provision. Some pros of arbitration are cost, time, fairness, finality,
COMMERCIAL LEASE ANALYSIS 6
simplified procedures and confidential (Find Law, 2018). Some of the same pros can become
cons such as cost, fairness, time, finality. Additionally, the location and possibility of no jury.
Litigation should be avoided because of the expense, “time consuming, emotionally draining and
unpredictable - until a judge or jury decides the case, you can never be certain of the outcome”
(Find Law, 2018). Mediation and arbitration should be chosen bases on the severity of the
dispute. In the case of the commercial lease I believe that mediation would be the best course of
action if any dispute ever arises. This course of action will ensure a more cost effective, timely
and confidential solution to both parties. The mediator can be chosen by both parties and cost
would be split between both.
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?
We must understand what Biblical worldview refers to because many people tend to get
this backwards. “Biblical worldview means having the Bible interpret the world, not the world
interpret the Bible” (McDurmon, 2018). This is where many people go wrong. For instant this
commercial lease agreement protects a person’s property with no consideration of the tenant’s
own protection. Its proven that an individual’s biblical worldview will impact the way they
conduct themselves in business. This agreement lacks ethics, moral, and spiritual standards.
Being a Christian its our believes in the Lord that guides our daily route. He empowers us, so we
may empower others in his light. As business owners we should follow his guidance, “God will
strengthen you with his own great power so that you will not give up when troubles come, but
you will be patient” (Colossians 1:11, 2018). I would make changes to section 5, 6 and 19, these
sections to me lack biblical worldview. We as brothers and sisters in our fathers’ eyes should care
COMMERCIAL LEASE ANALYSIS 7
more of the human and spiritual aspect of doing business than material or monetary. Showing
compassion and kindness should be part of business daily practice. “Blessed is he who cares for
the poor; the Lord will deliver him in the day of trouble. The LORD will protect and preserve
him; He will bless him in the land and will not surrender him to the will of his foes” (Psalm 41:1-
2, 2018). Section 5 and 6 coincide with each other, we should invest in the human aspect of
business. As a landlord you should take pride and interest in your tenant commercial success.
Repairs, alterations and improvements should be a spiritual investment to both parties. Act of
kindness and willingness to help go along way. As for section 19 a security deposit should be
kept separate to ensure fairness and trust between both landlord and tenant. Trust and belief in an
individual go a long way and prevents many misconceptions. Put your trust in the Lord, that he
will not mislead you. Do everything in his eyes and he will continue to bestow blessings daily.
COMMERCIAL LEASE ANALYSIS 8
References
Colossians 1:11. (2018). Colossians 1:11-20 - NCV - God will strengthen you with his own
great powe... Retrieved November 18, 2018, from
https://www.biblestudytools.com/ncv/colossians/passage/?q=colossians+1:11-20
Commercial Real Estate Lawyers. (2018). Differences Between a Residential and Commercial
Lease | commercialrealestatelawyers.com. Retrieved November 17, 2018, from
http://www.commercialrealestatelawyers.com/resources/real-estate/commercial-real-
estate/differences-between-a-residential-commer
Find Law. (2018). Arbitration Pros and Cons - FindLaw. Retrieved November 18, 2018, from
https://adr.findlaw.com/arbitration/arbitration-pros-and-cons.html
Find Law. (2018). Mediation vs. Arbitration vs. Litigation: What's the Difference?
Retrieved November 18, 2018, from https://adr.findlaw.com/mediation/mediation-vs-
arbitration-vs-litigation-whats-the-difference.html
Hall, L. (2014, October 13). How to Handle Security Deposits Properly.
Retrieved November 17, 2018, from https://www.landlordology.com/how-to-properly-
handle-security-deposits/
King James Bible Online. (2018). DEUTERONOMY CHAPTER 23 KJV.
Retrieved November 17, 2018, from
https://www.kingjamesbibleonline.org/Deuteronomy-Chapter-23/
King James Bible Online. (2018). MARK 12:31 KJV "And the second [is] like, [namely] this,
Thou shalt love thy neighbour as thyself. There is none other...".
Retrieved November 17, 2018, from https://www.kingjamesbibleonline.org/Mark-12-31/
COMMERCIAL LEASE ANALYSIS 9
LaMance, K. (2018, May 15). Duty To Mitigate Damages | LegalMatch Law Library.
Retrieved November 17, 2018, from https://www.legalmatch.com/law-
library/article/duty-to-mitigate-damages.html
McDurmon, J. (2018, July 7). The high cost of a consistently biblical worldview.
Retrieved November 18, 2018, from https://americanvision.org/16227/the-high-cost-of-
a-consistent-biblical-worldview/
Psalm 41:1-2. (2018). Psalm 41:2 The LORD will protect and preserve him; He will bless him
in the land and will not surrender him to the will of his foes. Retrieved November 18,
2018, from https://www.biblehub.com/psalms/41-1.htm
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