What Is a Business Tenancy?

Renee Booker

When a building, portion of a building, or land is rented or leased for the purpose of conducting business, it is said to be a business tenancy. In most jurisdictions, a business tenancy is very similar to a residential tenancy. The predominant differences in a business tenancy are that they tend to be for a longer period of time and the tenant may be responsible for more of the upkeep and maintenance than in a residential lease.

A business lease agreement frequently has a lease term of two years or more.
A business lease agreement frequently has a lease term of two years or more.

In most jurisdictions, a business tenancy is created by the parties' agreeing to the terms of the tenancy and reducing them to writing in the form of a lease agreement. The exact requirements for a lease agreement will vary by jurisdiction; however, in most cases, some basic terms are required, such as the length of the tenancy, the monthly rent, and a section regarding who is responsible for repairs or maintenance. Both parties must sign the agreement, often in front of a notary public.

Whereas a residential lease agreement typically last for a year or less, a business lease agreement frequently contemplates a lease term of two years or more. In fact, many business lease agreements are for terms of over 10 years. From a landlord's standpoint, securing a long-term tenant assures him or her income from the property for a longer period of time without having to worry about re-leasing the property. From the tenant's point of view, once a business becomes established, having to move the location can be detrimental, if not fatal, to the success of the business, making a longer rental period advantageous.

Aside from the length of the tenancy, another typical difference between a residential and business tenancy is that a business tenant is often responsible for general upkeep and maintenance. On the other hand, a business tenant is also frequently allowed to make repairs or improvements to the property, such as painting, remodeling, or even building a structure on the property. which a residential tenant usually cannot do. Because a business tenant often has members of the public in the establishment on a regular basis, many landlord's require the tenant to be responsible for maintenance or repairs, as the heavy traffic is likely to cause more damage than in a residential lease arrangement.

A business lease may also contemplate a renewal in the original lease agreement, unlike a residential lease. In some jurisdictions, there is an automatic right to renew absent a good reason not to by the landlord. A business tenancy will commonly include a section in the lease agreement that gives the tenant the first right to renew or re-rent the property when the tenancy ends.

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