Differences Between Commercial and Residential Property Law

Differences Between Commercial and Residential Property Law

Many people have a basic understanding when it comes to the laws of real estate. This could include either when they are selling, buying or leasing a residential property. It may seem logical to apply the same rules to commercial properties as well, but it appears that they are quite different.

Commercial real estate

Commercial property is real estate that is used solely for business purposes. It covers a variety of real estate from hotels, shopping centres, apartments, agricultural property, manufacturing plants and retail or office spaces. Often if a piece of real estate is not a private residence, then it is classed as a commercial property. However, if private property is bought to be rented out, it would then be considered commercial real estate. The transactions that involve commercial property can be complicated. They are regulated by specific laws that fall under the federal, state and local levels. Purchases can also surround laws requiring contracts, insurance and tax. Commercial lawyers can assist individual’s and companies when it comes to commercial real estate. 

What are the key differences in residential and commercial property law?

Disclosure Requirements

These will vary by state, but most often, sellers will have an obligation to disclose any defects that can affect the value of the property. The definition of what’s classed as defective will vary from state to state and will depend on the type of property. For example, in Colorado, sellers of residential property must disclose defects that are visible and not visible. Commercial sellers don’t have this duty as long as the buyers are allowed to inspect the property. Sellers may not deliberately hide material facts regarding the property. Buyers in a commercial transaction are meant to conduct their due diligence and then evaluate the transaction terms and the property for potential liabilities. Under federal law, commercial properties have to disclose knowledge of lead paint, asbestos and other environmental hazards.


Foreclosure for both residential and commercial properties are quite similar. Most of the commercial foreclosures necessitate the additional process within their loan term. As commercial property usually produces income in the form of rent, commercial loans are structured in order to assign that income to the lender shall there be a default. So in a commercial real estate foreclosure, a judge will then appoint a receiver to take over the rent collection and management of the property until it sells.

Zoning Laws

Zoning is how the government tells you what type of development can go on that type of land. Zoning ordinates will apply to both commercial and residential properties but will make distinctions between the different types of properties and how they are being used. Zoning often divides the land for residential use from agriculture use and industrial usage.

Landlord and Tenant Laws

Just like the residential tenant and landlord relationship where the tenant has many protections, the law views a commercial lease as a transaction between two business units. The notion demonstrates the intention to generate profit. The law tends to assume that commercial tenants are on an equal footing to start negotiating the lease terms.

Residential and commercial property laws are quite complex and need to be understood by all parties that are involved. They can be different between properties and different areas. Do not sign anything until you have it looked over by a professional if you are feeling confused about what you are reading. Enlist the help of a conveyancing lawyer when dealing with buying and selling properties and if you come across any issues.