If you own or manage a commercial property, you may face various issues when it comes to commercial property lease disputes. When these challenges crop up and start impacting your daily operations and profits, it can be stressful to determine exactly how to approach them.
In this post, our experts will explain what commercial property disputes are, why they occur, how you can solve a dispute, and the best ways to avoid them in the first place.
What is a Commercial Property Dispute?
Before looking into commercial property dispute resolution, establishing what a commercial property dispute means is essential.
A commercial property dispute is a disagreement between parties in relation to 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 like property owners, tenants, investors, and developers.
What Are the Most Common Causes of Commercial Leasing Disputes?
The first step in understanding commercial property disputes is to understand what causes them in the first place. The most common causes of commercial leasing disputes include:
- Payment issues
A leading cause of commercial property disputes is when issues with payments such as rent arise. This can include disagreements over rent increases and timings of payments. Furthermore, if your commercial tenant isn’t paying rent, you may seek to evict them through processes such as forfeiture.
- Lease terms
Disagreements over lease clauses can lead to commercial property disputes. For example, breaches could arise from misinterpreting 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.
- Property damage and repairs
Disputes sometimes arise over who is responsible for property repairs, maintenance, and damage. It is sometimes difficult to tell who is responsible for what. For example, damage may occur due to several factors, from tenant negligence to natural causes. Moreover, 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
Tenants might want to modify or renovate the property to suit their business needs. However, if this is not clearly defined in the lease, disputes could arise over what alterations are allowed and who is obliged to pay for them.
- Subleasing
Tenants may want to sublease the commercial property to someone else or even transfer their lease. However, disputes might crop up if the landlord does not agree to the subletting, even if the lease allows it.
What Are the Consequences of Commercial Property Disputes?
The impact of a commercial property dispute can be far-reaching, affecting parties financially and in other ways.
- Financial loss
The most obvious consequence of a commercial property dispute is financial loss. This can include costs related to lost rental income, damage repairs, and legal action.
- Business disruption
Tenants could face operational downtime if they must handle eviction or disputes over property repairs. In turn, this may result in negative effects like a loss of customers or a damaged reputation.
- Relationship deterioration
Ongoing hostilities between landlords and tenants can damage relationships, making future negotiations challenging. This may even result in an early lease termination.
- Legal consequences
If a party is discovered to have violated tenancy laws or property, legal penalties may be brought into play.
4 Best Methods for Commercial Property Dispute Resolution
The most popular informal method for commercial property dispute resolution is:
1. Negotiation
Negotiation is the go-to method for resolving commercial property disputes informally and cost-effectively. This can help maintain business relationships if it works. However, this method does not always result in a resolution, especially if both sides are unyielding in their positions.
If a commercial property dispute cannot be resolved informally, there are various methods available that might be worth pursuing. These are:
2. Mediation
Mediation is a common type of commercial property dispute resolution, where parties meet with a mediator, otherwise known as a neutral party. The mediator will work with the parties to gain an understanding from both sides and move towards a resolution.
This can be particularly useful if an ongoing business relationship is involved, helping preserve amicability and mutually acceptable agreements.
3. Arbitration
In arbitration, disputing parties can resolve matters outside of the Court with a neutral arbitrator. Like in mediation, this third-party listens to both sides. They create a binding decision on the dispute and enable parties to maintain more control over the process than in litigation.
4. Litigation
Litigation can resolve disputes related to commercial real estate through the Courts. Because of its time-consuming and costly nature, litigation tends to be the last resort when all the other methods we’ve mentioned above fail.
During litigation, you must file a claim, present evidence, and have a judge decide the outcome. This is a necessary course of action if the parties fail to reach an agreement through other means.
The best commercial property dispute resolution method depends on the matter at hand. For example, if your commercial property dispute is straightforward, negotiation is typically the cheapest and least time-consuming method. However, taking a legal course of action will be best if the circumstances are more complex.
What Rights Do Commercial Tenants Have in Disputes?
Commercial tenants’ rights will depend on their lease terms and other relevant legislation. For example, they may have protection against unlawful eviction, the right to repair and maintenance, lease renewal rights, and forfeiture protection.
Commercial tenants should seek legal advice from one of our offices to fully understand what rights they have and how they can exercise them.
Can You Sell a Property That’s Involved in a Dispute?
If you’re considering selling a property involved in a dispute, you don’t have to disregard this option altogether. However, some factors may impact the process and possibly the result.
For example, as the seller, you must disclose any property disputes or risk facing a potential legal claim. Unfortunately, sellers must be prepared that this information may put potential buyers off or negatively affect the property’s overall value.
With this in mind, we recommend you seek to settle any commercial property dispute before trying to sell up.
How Legal Advice Can Help in a Commercial Property Dispute
Obtaining business legal advice for commercial property dispute resolution can be crucial, especially because these disputes frequently involve complicated issues with financial and operational business impacts.
Fortunately, our team of solicitors can assist you in navigating these complexities. We can help ensure your rights are protected and work towards a solution that keeps your best interests at heart.
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
If you’re searching for comprehensive legal advice regarding resolving common commercial property disputes, don’t hesitate to get in touch with our specialist team. Our experts have extensive experience guiding clients through commercial property dispute resolution methods and will be more than willing to assist you.
We can also offer advice in other areas of commercial property law, whether you need guidance in agricultural conveyancing or any other field. Please explore the rest of our blog for more commercial property insights, such as our guide to selling land to developers.