Who Pays in a Commercial Lease Dispute in the UK?

When you enter a commercial lease, you enter with good intentions. By signing the lease agreement, you bind yourself to a legal contract which you must honour. This means you must abide by your lease obligations as the agreement details. In some circumstances, a commercial lease will run smoothly, where the commercial landlord and tenant will have a good relationship. However, in others, a lease dispute may arise regarding the commercial lease. When a lease dispute arises, you will need to resolve it. This usually incurs costs that the commercial tenant, landlord, or both will have to pay. This article will discuss who pays in a commercial lease dispute in the UK.

Lease Disputes

A commercial lease dispute is where a commercial landlord and tenant disagree on an issue relating to their commercial lease. Common problems that can occur in a commercial lease and cause a dispute include:

• dilapidation disputes;
• rent arrears;
• forfeiture;
• occupation of the commercial property when it should no longer occur;
• responsibilities for repairs.
• property damage; and
• service charges.

When a commercial lease dispute arises, it can be a time-consuming and costly process to resolve it. It can also be a damaging process for both parties in the commercial lease as it can impact their relationship. Therefore, it is essential that, as a commercial landlord or tenant, you do what you can to avoid a commercial lease dispute from arising in the first place. You can do this through clear and frequent communication about lease issues before a dispute arises. 

In addition, if you are a commercial landlord, ensuring that the commercial lease is clear from the outset is a crucial factor in avoiding a lease dispute.

Costs Involved

Despite any efforts to avoid a commercial lease dispute in your commercial lease, you may still end up facing a lease dispute. It is recommended that you seek legal advice to help you choose how to deal with your commercial lease dispute. The cost of a commercial lease dispute and who pays will depend on the process you take to resolve the dispute.

The following section explores different avenues you can take to resolve a lease dispute.

Alternative Dispute Resolution (ADR)

ADR is an encouraged method to resolve commercial lease disputes and avoid litigation. 

Mediation is a method of ADR to resolve a lease dispute. It is a relatively cheap and quick process to come to an agreement on a lease dispute. Mediation is where an independent party will facilitate communication for a commercial landlord or tenant to solve a commercial lease dispute. The aim is to reach a voluntary agreement between the two parties to a lease. When a commercial landlord and tenant choose mediation to resolve the commercial lease dispute, they will usually share the costs between them. 

Commercial Rent Arrears Recovery der (CRAR)

If a commercial lease dispute concerns rent arrears, a commercial landlord may exercise the CRAR process. This is a quick and low-cost way of collecting rent arrears. Whilst the commercial landlord initially pays for this, they can then recover the enforcement costs from their commercial tenant. A commercial landlord can use this process where the amount of unpaid rent equals seven days’ worth. 

Court

The most expensive way to deal with commercial rent disputes is to take legal action through the courts. A commercial landlord may carry out the debt recovery process through the courts. Whilst a landlord will have to pay for the initial costs of this process, they can recover them from their commercial tenant once the case is complete.  

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Key Takeaways

A lease dispute can occur for various reasons, such as dilapidation issues or service charge costs. It is good practice to avoid a dispute by maintaining good communication between the parties to the lease. Where a dispute does arise, this might involve costs, which can vary depending on the circumstances and the dispute resolution method you adopt. This also affects who pays in a commercial lease dispute. For example, if a commercial landlord assumes the CRAR process to try to resolve a rent arrears dispute, they will pay the initial costs but recover these from the commercial tenant. 

If you need help understanding who pays in a commercial lease dispute in the UK, 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.

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