If you are a landlord or are responsible for a commercial property, you may be subject to commercial property lease disputes. When these challenges crop up and start impacting your daily operations and profits, it can be stressful to determine how to address them.
In this article, our experts will explain what commercial property disputes are, why they occur, landlord responsibilities, out-of-court property dispute resolution methods and the best practices to avoid disputes altogether.
What is a Commercial Property Lease Dispute?
Before looking into commercial property dispute resolution establishing what a commercial lease dispute means is essential.
A commercial lease dispute is a disagreement between parties about the ownership, use, or leasing of commercial real estate. This can include office buildings, industrial facilities, retail spaces and more.
Commercial property disputes typically arise between stakeholders, such as property owners, tenants investors and developers.
What are the Most Common Causes of Commercial Leasing Disputes?
Before initiating property dispute resolution proceedings, you must understand what causes commercial lease disputes in the first place. The most common causes of commercial leasing disputes include:
- Rent arrears
When a tenant misses or is late in paying rent, they fall into arrears with their landlord. This can also include disagreements over rent increases and the timing of payments, leading to missed rent payments. Furthermore, if your commercial tenant isn’t paying rent, and property dispute resolution is unsuccessful, you may seek to evict them through processes such as forfeiture.
- Lease terms
Disagreements over lease clauses can lead to commercial lease disputes. For example, if your lease agreement is ambiguous, breaches could arise from misinterpreting or misunderstanding the duration of the lease, the permitted use of the property or the renewal terms. Our solicitors and their experience in business lease law and break clauses can support you with this.
- Dilapidation claims
If a tenant has failed to maintain the property in accordance with the lease by the end of the term or has caused damage to the property, disputes can arise over who is responsible for property repairs. If the lease agreement does not clearly stipulate landlord and tenant repair and maintenance responsibilities, it is difficult to ascertain which party is accountable. While landlords typically manage structural repairs, tenants are usually responsible for daily maintenance, but it can be tricky to know where to draw the line of responsibility.
- Property alterations and boundary disputes
Tenants might want to modify or renovate the property to suit their business needs. However, if modification clauses are not clearly defined in the lease, disputes could arise over whether renovations are permitted and who is obliged to pay for them. Moreover, if a tenant is extending the property, they may disagree with their neighbours about their shared property line and land ownership, which can lead to property title disputes.
- Subleasing
Tenants may want to sublease the commercial property to someone else or even transfer their lease, but if the landlord does not grant their explicit permission or if subleasing is not outlined in the lease agreement, this can result in a commercial lease dispute.
What are the Consequences of Commercial Lease Disputes?
There are four key and costly consequences of commercial lease disputes, especially when property dispute resolution tactics aren’t swiftly adopted:
- Financial loss
The most obvious consequence of a commercial lease dispute is financial loss. This can include lost rental income, damage repairs and legal action if disputes can’t be settled out of court.
- Business disruption
Tenants could face operational downtime if they need to handle eviction or disputes over property repairs. In turn, this may result in the business suffering from a loss of customers or a damaged reputation.
- Relationship deterioration
Ongoing hostilities between landlords and tenants about rent arrears or repairs can damage relationships, making future negotiations and lease renewals challenging. This may even result in an early lease termination.
- Legal consequences
If a party has violated tenancy or property laws, such as landlords avoiding general repair responsibilities or tenants illegally subletting, legal penalties may be brought into play.
What are the Best Commercial Property Dispute Resolution Methods?
There are three effective property dispute resolution methods to employ that you must try before resorting to in-court commercial property litigation:
- Negotiation
Negotiation is the go-to method for resolving commercial lease disputes informally and cost-effectively. If negotiations are successful, they can help maintain business relationships and lease renewals. However, this method does not always result in a resolution, especially if one or both sides are unyielding in their positions.
- Mediation
Mediation is a common commercial property dispute resolution method, where the parties use a mediator, otherwise known as a neutral party, to arrive at a mutually agreeable settlement cost-effectively. The mediator doesn’t impose decisions, but does keep negotiations on track to move towards a resolution. Mediation is especially useful when trying to preserve ongoing business relationships.
- Arbitration
Similar to a mediator, an arbitrator is a neutral third party who listens to both sides but can make a legally binding decision to resolve the commercial lease dispute out of court. Once the arbitrator has provided their final decision, it can only be challenged in court on very limited grounds.
- Litigation
As a last resort method, Litigation can resolve commercial lease disputes through the Courts. Because litigation is time-consuming and costly, it is only considered when the above out-of-court methods have failed. During litigation, you must file a claim, present evidence and a judge will decide the outcome. This is a necessary course of action if the parties fail to reach an agreement through other means.
The best method of commercial property dispute resolution will depend on the matter at hand. For example, if your commercial lease dispute is straightforward, negotiation is typically the least expensive and time-consuming method. However, taking legal action will be best if the circumstances are more complex.
How Can Legal Advice Help in a Commercial Lease Dispute?
Obtaining business legal advice for commercial property dispute resolution can be crucial, especially because these disputes frequently involve complicated financial and operational business issues with significant consequences.
Fortunately, our team of solicitors can assist you in navigating these complexities. Our solicitors can:
- Understand the lease agreement and ensure compliance with legal procedures.
- Offer guidance on commercial property dispute resolution methods.
- Protect the client’s interests by reducing reputational and financial risks.
Explore our commercial case studies to see our experts in practice.
Contact Us for Commercial Property Dispute Resolution
At Newtons Solicitors, our specialist solicitors can provide comprehensive legal advice about resolving commercial property disputes. Whether you’re a commercial tenant wanting to understand your rights or a landlord looking to sell your commercial property that’s tied to a dispute, our experts are happy to assist you.
We can also offer advice in other areas of commercial property law, whether you need guidance in agricultural conveyancing or commercial property development. Take a look at our blog for more commercial property insights, such as our guide to selling land to developers, or please contact us today if you have any questions.