the process of restoring a person, piece of property, or institution to its ideal state.
From a legal perspective, rehabilitation refers to the process through which prison inmates turn their lives and thinking around to better function in society. Inmates are offered therapy and training in handyman skills like carpentry, steelworks, masonry, etc. This way, once released, they do not have to resort to crime to make money.
Companies in financial distress and on the verge of bankruptcy may go through rehabilitation to help them become a competitive participant in the market again. Rehabilitation, in this case, is meant to prevent bankruptcy and the liquidation of the company.
When someone rehabilitates a piece of property, they bring it back to its former, functional state. House rehabs are the most common form of real estate rehabilitation, but it may also apply to land.
Mr. X is the Chief Financial Officer for Company G. Little do his colleagues know that he's been laundering money through the company to pay for his gambling expenses. As he gets richer and richer, the company finds itself deeper and deeper in debt. In an attempt to rehabilitate the company, the President comes to Mr. X to review the company's assets. He believes that by downsizing, closing locations that aren't performing well, and selling unnecessary equipment, they can make enough money to clear the debt. However, after Mr. X leaves for the day, the President returns to the office and discovers Mr. X's crime.
Needless to say, Mr. X is given a hefty prison sentence for money laundering. While in prison, he goes through a rehabilitative program. He attends group therapy to help his gambling addiction, volunteers to teach other inmates how to manage their finances and takes up carpentry as a skill. Lucky for Mr. X, he is released early for his good behavior.
Now released and without a job, Mr. X decides to put his energy into something productive that will keep him busy. His family offers to purchase him a home—which is in pretty rough shape—so he can transition back into society easier. Mr. X rehabs the house—installs new plumbing, puts on a new roof, cleans up the floors, etc.
Rehabilitation vs. Restoration
Rehabilitation implies that someone knows something isn't in the best condition, and they need to fix it. It is a term that isn't reliant on a particular era and intended for things or people who have the potential to improve. Restoration deals with fixing an object—artwork or an antique—to the point where it doesn't look like it's been around for years.
For instance, someone can rehabilitate a house and return it to a functional state. Inside the house is original leather paneling from 1901. It's in bad shape and in desperate need of care. You can restore the leather paneling, though, by gently moisturizing it, cleaning it, and chipping off the unsalvagable parts. When you're done, the leather paneling looks like it was just installed that year—like new!