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A commercial lease agreement is a legally binding contract. It details the lease obligations between a landlord and tenant and the rights each party enjoys in the lease. Sometimes, a party to the lease fails to uphold their duty, or a disagreement might emerge. When a lease dispute occurs, you must know how best to deal with it. This article will explain key steps to deal with a lease dispute in the UK.
This cheat sheet outlines what you should be aware of in your lease agreement.
Lease Dispute
A lease dispute typically includes a dispute about rent. It can also involve a dispute about dilapidation repair claims or a breach of a lease obligation, such as one concerning:
- subletting;
- repairs;
- signage restrictions; and
- alterations.
The following sections explore the key steps you should undertake if you are a commercial landlord or tenant in a dispute.
Begin Communication
When a dispute arises, a crucial first step is maintaining good communication with the other party to the lease. If you discuss the dispute clearly and calmly and ensure open communication throughout the dispute, this can have the effect of
- maintaining a good working relationship; and
- creating a potential resolution.
Communication in the face of a dispute may also involve engaging a legal advisor. A legal advisor can help explain your rights and how to best proceed. This does not necessarily mean proceeding to court. For instance, a lawyer might communicate with the other party and assist in negotiating a resolution.
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Maintain Records
Another key step is to keep all records relating to and throughout your commercial lease dispute. You should seek to keep the following:
- meeting notes;
- follow-up letters; and
- emails summarising spoken communication.
You should also maintain a record of any incidents that the dispute is about, as well as those that occur throughout the dispute and resolution process. This record should include time and dates, as these can be crucial in understanding and resolving the dispute.
Follow the Remedy Outlined in Your Lease
It is critical that you allow the breaching party a chance to put things right before you take further action. Your lease agreement will often specify the correct remedy when certain disputes arise. You should always follow the dispute resolution process contained in your lease agreement.
Participate in Mediation
Despite ensuring good communication with the other party, this may not be enough to resolve your commercial lease dispute. If this is the case, consider participating in mediation. Mediation is a form of alternative dispute resolution that typically comes before litigation. It involves appointing an impartial mediator to help the parties in a dispute come to an agreeable solution.
Consider Forfeiture
Where parties to a commercial lease cannot resolve a lease dispute, the landlord can serve a forfeiture notice. Forfeiture is where a landlord ‘forfeits’ the lease, and the lease comes to an end. Therefore, the commercial tenant no longer has the right to sole occupation of the commercial premises.
Forfeiting a lease is not always ideal, and you should avoid this step until absolutely necessary. As a landlord, it means you have to find a new tenant to occupy your premises, and you may lose rent for a period of time. As a tenant, this means you no longer have a commercial premise to operate your business, which could also lead to a loss in revenue.
Take Legal Action
The last resort is to take legal action, which can be lengthy and costly. Unfortunately, this is sometimes a final step when dealing with a lease dispute. For example, when dealing with a dispute for rent arrears, a commercial landlord may:
- start county court proceedings;
- issue a statutory demand; or
- start insolvency proceedings.
Key Takeaways
Whether you are a commercial landlord or commercial tenant, you might find yourself in a lease dispute. While arguing in court might be your first thought, you should consider litigation as a last resort. Instead, maintain open and honest communication with the other party and keep records of such discussions. You should also follow any remedies specified in your lease agreement, as well as recommended dispute resolution processes. For example, consider participating in mediation. As a last resort and final step, you may commence legal proceedings, or a landlord may also decide to start the forfeiture process.
If you need help managing a lease dispute, 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 for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A lease dispute is where a commercial landlord and tenant disagree with an issue in the commercial lease, or one party breaches a lease obligation.
A critical step when dealing with a dispute is to seek legal advice from a legal professional at the outset. A legal advisor can inform you of your rights, provide legal advice, recommend the best course of action, and communicate with the other party.
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