Key differences that determine the rights of the landlord and tenant
If you rent out or lease premises—do you know that residential and commercial spaces are governed by different laws that provide for significantly different rights for the parties?
Did you know that evicting a tenant from residential premises is significantly more difficult than evicting a tenant from commercial premises—even for the same violations?
What is the most important thing to include in a commercial lease agreement to avoid ending up in a situation typical of residential rentals?
The owner leased retail space to a store. The tenant stopped paying. The landlord decided to evict him using the same procedure applied to residential leases—sent a notice, waited three months, and came to change the locks.
It turned out that the procedure for commercial leases is different and faster. The landlord wasted three months. Meanwhile, the tenant accumulated even more debt during this time.
MYTH No. 1: “A lease is a lease. One law for all”
Fact: Residential leases are regulated by a specific Residential Lease Law. Commercial space leases are governed by the Latvian Civil Code. These are fundamentally different systems.
MYTH No. 2: “A commercial tenant is protected just like a residential tenant”
Fact: Residential tenants enjoy significantly broader protection. This is a historical legacy of legislation aimed at protecting the right to housing. Tenants of commercial premises have fewer specific protection mechanisms—the relationship is governed by the general provisions of the Civil Code regarding leases.
Key differences: what you need to know
Contract term. Residential lease: as of 2021, open-ended contracts are prohibited—only fixed-term contracts are permitted. Commercial space lease: a contract may be concluded for a fixed term or for an indefinite term. In the case of an indefinite lease, each party has the right to terminate the contract by giving three months’ notice, unless otherwise provided in the contract.
Termination of the contract for non-payment. Residential lease: if the debt exceeds two months, the landlord has the right to terminate the contract. If the tenant disagrees, the matter must generally be resolved in court through the standard procedure. However: Section 400(1)(3) of the Civil Procedure Law provides for the possibility of evicting the tenant through non-contentious enforcement proceedings if the contract has been terminated and the tenant fails to vacate the premises. This procedure is faster, but it has strict formal requirements and is not applicable in all cases.
Commercial property lease: if the contract clearly specifies termination conditions regarding payment delays, the procedure is more flexible and faster. In practice, eviction of a commercial tenant occurs more quickly because there are no “residential protection” arguments, and notarized acknowledgments of debt are more frequently used.
Changes to rent. Residential property lease: strictly regulated by law—three months’ prior notice, restrictions on the amount of the increase. Commercial property lease: the parties may stipulate any procedure for rent changes in the contract.
Subletting. Residential property lease: the tenant does not have the right to sublet the premises without the owner’s consent. Commercial property lease: depends on the terms of the contract—it may be permitted or prohibited.
What is important to specify in a commercial property lease agreement
First: specific grounds for early termination of the agreement—delay in payment exceeding X days, use of the premises for purposes other than those intended, breach of the terms of the agreement.
Second: the procedure for terminating the contract—notice period, procedure for vacating the premises, liability for delay.
Third: the procedure for changing the rent—indexation, notification.
Fourth: arbitration clause—for the swift resolution of disputes regarding rent collection or eviction.
Where the procedure is faster
Recovery of rent arrears. In both cases—possible in arbitration within 6 weeks if a clause is included in the contract. Without a clause—in state court, taking months.
Eviction of a non-payer. Commercial property lease — faster: if the contract is properly drafted and there is a notarized acknowledgment of debt, a simplified procedure is possible. Residential lease — slower: if the tenant does not agree, only a state court, but with the option to invoke Article 400(1)(3) of the Civil Procedure Law if the contract has been terminated and the tenant fails to vacate the premises. However, this procedure is not applicable in all cases and requires precise documentation.
Changes to lease terms. Commercial lease — more flexible: by agreement of the parties. Residential lease — stricter: strictly limited by law.
One property—different laws. Do you know which one applies to your lease?
This article is for informational purposes only and does not constitute legal advice.