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A commercial lease agreement is legally binding, so you must adhere to its terms. However, sometimes, a commercial lease dispute can arise. Unfortunately, your commercial lease agreement may only provide little detail about handling certain issues. Knowing how to resolve a dispute quickly and effectively is crucial. This article will help you understand commercial leasing disputes in the UK.
How Can a Leasing Dispute Arise?
A leasing dispute is where parties to a lease, the commercial landlord and tenant, disagree on an aspect of the lease and find it difficult to reach an agreement. This could be due to not seeing eye to eye about the meaning of a lease provision or either party not complying with a lease covenant.
A commercial lease dispute can occur due to several reasons in a commercial lease. For example, a commercial lease dispute may take place as a result of the following:
- a commercial tenant in rent arrears;
- a disagreement over repair obligations in the lease;
- dilapidation claims;
- an incorrect notice procedure;
- forfeiture of the lease;
- breach of the lease;
- right of way;
- service charges; or
- contested rent reviews.
Best Approach to Take
Firstly, both parties to a lease should make every effort to avoid a leasing dispute. Since the agreement benefits both parties – a landlord receives rent, and a tenant can occupy the property – maintaining good relations is paramount. Where small disagreements arise, parties should communicate openly and in good faith to resolve them. Proactively working together to avoid leasing disputes is crucial for maintaining the lease agreement.
Additionally, both parties should understand the lease agreement and all the obligations it creates. Reviewing the agreement thoroughly, with the assistance of a qualified solicitor, can help avoid misunderstandings and stop disagreements from escalating.
When a lease dispute arises, a beneficial approach is to keep a record of all communication and evidence surrounding the issue in dispute. Where possible, you should keep written copies of all letters, emails, text messages and other correspondence. Ensuring you log incidents with a date and time can be essential if the lease disagreement develops into a commercial leasing dispute.
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Options to Take
If you face a commercial lease dispute in your commercial lease, you must understand the potential ways you can resolve the lease dispute. We briefly explain some of these below.
Mutual Arrangement
The first option for dealing with a commercial lease dispute is to try to reach a mutual agreement. This will involve clear communication and negotiation between the two parties. A commercial landlord must try to understand the situation their commercial tenant is in, as this can affect what they can agree to.
Alternative Dispute Resolution
Where a commercial tenant and landlord cannot resolve a lease dispute, they may conduct alternative dispute resolution (ADR), such as mediation, arbitration or negotiation. An independent third party will help them to resolve the dispute.
ADR is usually optional unless the commercial lease agreement says it is an option the parties must take before they can pursue court action.
Forfeiture
There will be times when a commercial lease dispute occurs that the commercial lease no longer seems possible to move forward with. In this instance, you may choose the option of forfeiture and end your commercial lease.
Legal Action
You should always view legal action as a last resort to resolve a lease dispute. This is because going to court can be costly and time-consuming.
Cost Considerations
When a leasing dispute arises between a commercial landlord and their tenant, dispute resolution usually involves a cost. This is important to understand in commercial lease disputes. Avoiding a dispute will avoid extra costs. The costs involved in a commercial lease dispute depend predominantly on the nature of the dispute and the method of resolution parties choose.
This guide outlines how to resolve commercial disputes.
Key Takeaways
If you are party to a commercial lease, there may be times when a dispute arises. Being honest and communicative with the other side can help prevent disputes from escalating. It is best practice to consider alternative dispute resolution methods, such as negotiation, mediation or arbitration. Failing this, you might pursue legal action. Notably, there are costs associated with commercial lease disputes, depending on the action you decide to take.
If you need help understanding leasing disputes, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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