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24 August 2019

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Resolving Commercial Lease Disputes the Easy Way

Posted by: David Jones

For many businesses, leasing their working premises from a commercial landlord makes far more sense than owning property themselves. Renting allows them to invest in themselves instead of a building, and of course, the landlord is happy because his building or office is filled.

This is all well and good when you get on with your landlord or tenant, but what happens if the relationship sours? You’re busy enough without having to deal with a difficult landlord or tenant.

Luckily, commercial lease disputes shouldn’t be a common occurrence in your life. Even when they do raise their ugly head, there are a number of steps you can take to reach a resolution quickly and simply, whatever side of the issue you’re on.

What is a Commercial Lease Dispute?

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On the surface, commercial leases are simply contracts under which the tenant agrees to pay for the right to use the landlord’s property. However, any solicitor will tell you commercial leases are very complex documents.

As such, disputes can often arise because one or both parties disagree about who is responsible for what’s under the terms of the lease. While this confusion can often be resolved quickly with the help of a solicitor, it is often left to fester instead and a full-blown dispute is born.

Examples of Commercial Lease Disputes

It’s easy to say that a commercial lease dispute is a disagreement between a landlord and a tenant, but such a general definition doesn’t provide much insight. For that, it’s better to look at some examples of what disputes often centre around:

  • Rent reviews; 
  • Lease renewals; 
  • Service charges; 
  • Dilapidations (repairs); 
  • Rent arrears;

Of course, when it comes to something as complex as a commercial lease, there are many ways a dispute can arise. Even if the above topics don’t apply to your situation, it doesn’t mean a solicitor can’t help you.

So, just how do you resolve commercial lease disputes the easy way?

Start Talking

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Commercial lease disputes that end up in court can be costly for all parties. Therefore, the first positive step is to try and open lines of communication with your landlord or tenant with the intention of reaching an amicable solution.

While this may require some compromise from both parties, it is often the most effective path to take, especially when you consider the cost, time and stress taking the dispute forward could demand.

Even if you can’t come to a resolution with the other party, non-hostile communication can go a long way to clarifying exactly where the issue lies. This is particularly important where the dispute has come out of confusion about how building responsibilities are shared. A common example of this is who is responsible for building maintenance.

In these instances, disputes can often be resolved with the help of a solicitor, who can help determine where responsibilities lie according to the lease or, if necessary, act as a mediator and help all parties agree to new terms.

When No One is Listening

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While coming to an amicable solution with the other party is the dream resolution, we recognise that this is not always possible. This may be because the other party refuses to consider any kind of compromise or because they’re simply sticking their heads in the sand and refusing to pick up the phone.

In these cases, the goal should still be to resolve the dispute without the need for litigation, but a slightly more serious message may need to be sent to get their attention.

We’re going to look at the first steps landlords and tenants can take to resolve a dispute, but again, it’s important to stress that the methods you or a solicitor will employ will vary greatly depending on the specifics of the case. Therefore, you should always seek professional legal advice before acting.

Landlords

Where a tenant has breached the commercial lease and the landlord has not been able to reach a resolution with them, one of the first steps is to issue a section 146 notice. 

Under the Law and Property Act 1925, a section 146 notice is served following a breach of lease and is the first step in forfeiture proceedings. However, the notice is more than just some paperwork to allow you to remove a tenant.

Specifically, the notice must:

  • State the breach in question;
  • Require the tenant to remedy the breach, should it be capable of remedy;
  • Require the tenant to provide monetary compensation to the landlord;

A section 146 notice is a strong indicator to a tenant that you’re taking a breach seriously, and it can be a factor in motivating them to come to the table and work towards a solution.

What’s important in a section 146 notice is that you give a reasonable amount of time for the breach to be resolved. How long this is will depend on the nature of the breach. If you do end up in court, you want to show you gave plenty of opportunities for the problem to be solved.

Tenants

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For tenants, pursuing a commercial lease dispute is much more about keeping track of your correspondence with your landlord, whether they reply to it or not.

Keep track of every time you’ve reported the breach, whether that be via email, phone, text or letter, and begin documenting the impact of the breach on your business.

If the case does go to court, it’s more than likely you’ll be requesting damages, so make a note of every time the breach has resulted in a loss for you. For example, if a leak has forced you to replace equipment, keep the receipts so there’s a record of your expenditure.

Avoiding Court

There is no single method for resolving commercial lease disputes but the goal should always be to avoid court. Even relationships between landlords and tenants that have completely broken down can generally be rescued by expert alternative dispute resolution (ADR) such as mediation.

ADR works because it provides a neutral third party who is sympathetic to the points of view on each side of the dispute. So, if you’ve failed to reach a solution yourselves, ADR should be your next step.

If ADR is unsuccessful, your last option is to commence court proceedings, but even in these cases, your goal should still be to reach a resolution before you’re standing in front of a judge.

Regardless of whether you think the dispute will be solved by ADR or a court, you should seek the services of an experienced solicitor as soon as possible. This is key in knowing what specific legal steps you should take and how likely you are to come out on the right side of the dispute.

So, if you’re part of a commercial lease dispute or can see one on the horizon, speak to the Glaisyers team to find out how we can help you.

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David is a Partner and head of the Litigation team. He is consistently ranked in the Legal 500 for his tenacious problem solving and business acumen, acting in complex, high value disputes for successful entrepreneurs and corporates.

David Jones - Partner

To discuss how Glaisyers can assist you contact David Jones on David.Jones@glaisyers.com or via 0161 832 4666.

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