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Commercial tenants enter into commercial lease agreements to occupy a commercial property as their business premises. A landlord allows a business owner to have the sole occupation of the commercial property in return for rent payments. This contract is legally binding and is a commercial lease agreement. Once they sign a commercial lease agreement, parties must honour their obligations under the lease. However, this is not always a smooth process, and unfortunately, sometimes, lease disputes can arise in a commercial lease. Where lease disputes occur, the parties must do their best to resolve them. This can sometimes result in legal action, which could incur damages. This article will explain all about damages when you try to resolve a commercial lease dispute.
Lease Dispute
A lease dispute can arise in a commercial lease at different stages of the commercial lease term. It could happen, for example:
- soon after the commercial lease begins;
- several years into the lease, such as when a rent review is due;
- when the tenant occupies the property beyond the lease term end date; or
- when the tenant falls into rent arrears.
Lease disputes can occur for a variety of reasons. Although, lease disputes generally occur when tenancy agreement provisions are ambiguous. Consequently, the landlord and tenant will likely disagree on each other’s interpretation of the lease terms. For example, a lease dispute may arise in a commercial lease because:
- a tenant has rent arrears;
- a party carries out the wrong procedure for an action in the lease;
- the parties to a lease disagree on necessary repairs; or
- where a tenant raises a query about service charges they refuse to pay.
Damages
Damages are a legal remedy and apply to property law and other areas of law. A court orders a person to pay damages typically when this person has committed a wrong against another. Naturally, then, a court only awards damages after a court case. Damages serve to compensate the claimant (the person who suffers a wrong). The defendant (the person who has committed the wrong against the claimant) will be ordered to pay damages.
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Lease Dispute Damages
A lease dispute occurs when a commercial landlord or tenant breaches a term of the tenancy agreement. One option to resolve this dispute is to raise it with the courts. Taking a lease dispute to court is an option both the landlord and tenant should view as a last resort. Often, alternative dispute resolution mechanisms are more effective. For instance, a letter from one of the parties’ solicitors will likely prompt the other party to act. Thereby removing the aggrieved party’s need to rely on the court.
What are Damages?
Damages for a lease provide the wronged party with a redress mechanism. The wronged party can receive compensation for the loss they experienced due to the lease dispute. A cap on the damages a claimant can claim does not apply to certain lease disputes. For example, say that a claimant suffers losses due to a lease dispute where the landlord has failed to make necessary repairs to the property. In this situation, there is no cap on the amount of damages a claimant could claim.
Commercial tenants who incur costs due to the landlord’s breach of the lease often find damages a suitable remedy.
Losses could be in the form of, for example:
- financial losses through business disruption;
- general enjoyment of the commercial premises; or
- any loss of use of the commercial rental property.
How Do Damages Work?
Obtaining damages for a party’s breach of the tenancy agreement is not a simple request. Instead, the party asserting they are owed damages needs to prove the following:
- that they did suffer a loss; and
- their loss resulted from the other party in terms of the lease dispute.
The link between the loss and fault of the other party to the lease must be clear. If it is too remote, the claim for damages will fail. Tenants who are awarded damages due to their landlord’s breach of the lease agreement may receive damages through their rent. If your landlord agrees, you may not be obligated to pay rent until the full damages amount is paid.
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
If you experience a commercial lease dispute and take legal action, one possibility may be a claim for damages. You should be wary of court action, though, as it can be costly and time-consuming. Alternative dispute resolution avenues as such are more advisable.
Damages compensate the party who experiences losses due to the acts of the party to the dispute. Although, the claimant will need to prove two elements to the court’s satisfaction. Firstly, the claimant must prove the loss took place. Secondly, the claimant’s loss resulted from the lease dispute. Loss can include numerous things, such as disruption to business.
If you need help understanding damages as part of the resolution of a commercial lease dispute in a commercial lease, contact our experienced leasing lawyers 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.
Frequently Asked Questions
A commercial lease dispute is where a commercial landlord and commercial tenant disagree with an issue within the commercial lease and cannot initially find a way to resolve it.
Damages in a lease dispute are the compensation a party to the lease claims due to the actions or non-action of the other. For example, a breach of the lease leads to a commercial lease dispute.
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