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When commercial landlords and tenants enter commercial leases, they make a legally binding commitment, which they must honour. This commitment arises when both parties sign the lease agreement. At this point, both the landlord and the tenant have rights and obligations in the lease. Whilst these should usually be clear, there are times when they are not. Also, where clarity is not an issue, parties to a lease may disagree over the details of lease provisions. If a lease dispute does occur during your commercial lease, you must understand the options open to you. This article will explain how alternative dispute resolution (ADR) processes, such as settlement and mediation, can help you resolve your lease dispute.
Resolving a Dispute
When you have a lease dispute with the other party in a commercial lease, it can be over a number of various issues. A commercial lease dispute can arise, for example, due to:
- rent arrears;
- repair disagreements; or
- a service charge dispute.
Lease disputes generally arise from the lack of clarity of a lease provision. Lease disputes can also arise if the parties disagree on each other’s rights and obligations under the lease.
Why or when a lease dispute occurs is largely of secondary importance. Whether you are a landlord or commercial tenant, it is essential to resolve the dispute. You should resolve the dispute in a timely manner so the commercial lease agreement can continue amicably.
You may think that commercial lease disputes can only be resolved through litigation, though this is not always the case. Whether you are a commercial tenant or landlord, you should view court action as a last resort. Court action is costly, time-consuming and can sour relations between the two parties to the commercial lease. Instead, ADR processes, such as settlement or mediation, could help you achieve a resolution to your lease dispute. You may find either option more effective than legal action and less stressful.
Settlement
The best option for resolving your lease dispute is to discuss the issues surrounding the disagreement with the other party. This is often the cheapest option too. You may find that the Leasehold Advisory Service (LAS) can give you some free advice on issues which include:
- service charges;
- lease extensions
- buying the freehold.
If a commercial landlord and tenant engage in communication, they may be able to negotiate and settle the lease dispute. However, if you can settle the lease dispute, it is advised that you still take legal advice. You are well advised to get legal advice to avoid settling for an agreement which does not benefit you long-term.
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Mediation
Mediation is a form of ADR that can help you achieve a resolution to your lease dispute. Both the landlord and tenant should mutually agree to go to mediation. Mutual acceptance to attend a mediation session will likely lead to a better outcome. The mediator will try to find a resolution for both parties.
Mediators should always be independent of the matter they are attempting to help the parties resolve. These professionals work actively with both parties to come to a mutually beneficial agreement. Throughout the process, mediators will consider the commercial lease’s short, medium and long-term prospects. After considering these prospects, the mediator will guide both parties to a satisfactory resolution. It is not a mediator’s role to decide who is correct and who is wrong regarding the commercial lease dispute.
It is important you know that mediation is a voluntary process. For example, you, as the commercial landlord, may want to engage in mediation but your tenant does not. Your tenant will not be required to attend mediation sessions as they are not legally bound to do so.
Equally, any resolution the mediator suggests for the commercial lease dispute is not legally binding on either party. However, there are exceptions to this rule. For example, your commercial lease agreement may require both parties to attend mediation in the event of a lease dispute. Your lease agreement may also state both parties must adopt the resolution produced at the mediation session. At which point, both parties are obliged to follow the proposed resolution.
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
If you are a commercial landlord or tenant and experience a commercial lease dispute, there are different ways to resolve it. One way to fix it is to settle with the other party to the lease. This involves communication and negotiation. If this does not work, you may try mediation. Mediation involves an independent third party who will listen to the issues concerning the dispute. Notably, the mediator will try to create a resolution that suits both parties. However, you and the other party to the lease are generally under no obligation to adopt the resolution.
If you need help understanding how to resolve a lease dispute via mediation or settlement, 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 tenant disagree on something the lease concerns.
Mediation for a commercial lease dispute is where an independent party tries to resolve the commercial dispute with a resolution that pleases both parties.
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