Commercial property disputes can and will crop up between commercial property landlords and tenants. They can be lengthy, expensive, and time-consuming. They can also sour relationships between landlord and tenants for the remainder of the lease term.
There are flashpoints for disputes during a lease. These include rent reviews, breaches of covenants, dilapidations, rent arrears, forfeiture and many areas caused by lease terms that are open to interpretation.
Dispute resolution and in particular, commercial property dispute resolution, can help resolve a dispute a lot quicker than if it is left to run its course without intervention. rhw Solicitors have a highly experienced commercial property and dispute resolution team who can help both landlords and tenants.
Common causes of commercial property disputes
Commercial property disputes can be caused by numerous triggers.
A large number of disputes can be caused by the tenant breaching the terms of their lease. When this occurs the landlord maybe entitled to exercise their right to forfeit/terminate the lease. Key pieces of legislation that can act as a catalyst for potentially conflict causing interaction between parties include:
- Termination of business tenancies under the Landlord and Tenant Act 1954 . Here, the landlord gives six to twelve months’ notice to the tenant of their intention to terminate a business tenancy.
- Lease renewal applications/objections (section 25/26 notices). In this process the tenant may attempt to renew their lease only for the landlord to refuse to renew.
- Service of section 146 notices under the Law of Property Act 1925. Where there has been a breach the landlord may attempt to take possession of a property, after giving the tenant an agreed time limit to remedy the alleged breach.
- Service of notices, including notices served under the Landlord and Tenant Act 1954. The landlord may serve notice to a tenant, indicating that they must vacate the property by an agreed date.
The consequences of a commercial property dispute:
For both the landlord and tenant, commercial property disputes can be a costly time-consuming process.
Commercial Property Dispute Resolution:
Most parties want to avoid the option of legal action for cost and relationship reasons. As with most relationships and disagreements across business and personal matters, the key way to avoid a steady spiral into an expensive long lasting dispute, is to communicate with each other.
The majority of disputes can be dealt with by repeat contact and understanding the reasons why the dispute has occurred in the first place. Resolution is only possible if both sides are willing to discuss where they stand and if they are willing to try and find a compromise position.
Keep written records of phone calls, meetings and emails with your tenant/landlord. It is useful to be able to refer to these at a later date and to keep negotiations on track. Any events that are relevant to the dispute or contact afterwards should also be noted.
Solicitors, such as rhw, can provide dispute resolution services that will help to resolve your commercial property dispute. This can help you avoid a potentially costly court case in many cases.
Why should you consider the commercial property dispute resolution route?
Commercial property disputes are not always simple issues. There may be more than two parties involved. The risk of getting embroiled in a legal battle is that the losing party can end up paying legal costs associated with the other sides costs and for other parties as well (counsel and experts etc). That can obviously be very expensive.
Because of the number of professional advisers that can be involved in a case, the costs can very quickly escalate. Those parties involved in a dispute can become entrenched and then risk not realising the risks of mounting costs until it is too late.
It obviously makes sense to consider dispute resolution before things get out of hand, or costs start to rise. Experienced dispute lawyers can often bring parties to a mutually acceptable position fairly rapidly. The Courts in England and Wales will usually encourage dispute resolution routed before proceedings are started. This is the approach in civil and family courts and they can penalise litigants by way of costs orders if they do not consider resolution or mediation.
Is legal action ever warranted?
Obviously if all other options have been exhausted then sometime there in not an alternative. Dispute resolution should be tried first if your own attempts at finding an amicable way forward have got nowhere.
Avoidance in better than having to deal with the consequences of a dispute. How do you avoid disputes?
- Get to know your tenants or your landlord.
- Find out who the decision makers are on the other side.
- Contact your tenants (if you are a landlord) regularly to check everything is OK.
- Be reasonable about requests or granting permission.
- Make sure the lease is well drafted to start with.
- Clearly define what is included in the lease and what is not.
- Flag up any major works in the pipeline will in advance.
Landlords should ensure that the lease they use uses clear language, appropriate for the property it is being used for and covers every possible eventuality.
What is an example of commercial property dispute resolution?
A reasonably common occurrence (particularly in 2020) and a good example of a problem faced by landlords, is where a tenant has stopped paying rent. What should a landlord do if they cannot get a response from the tenant directly?
The first task in dispute resolution in this case is to establish why rent has not been paid. If the tenant has a grievance then, depending on the issue, there may be an opportunity to discuss and remedy the problem directly. Sometimes instructing dispute resolution solicitors can be beneficial in terms of providing a third-party sounding board for the tenant to communicate with. There may be longstanding issues that the landlord are not aware of, that come out when the dispute resolution solicitors make contact.
The tenant may reveal grievances with their accommodation, perceived breaches of covenants or a breakdown in lines of communication on other matters. In 2020 there were (and still are) plenty of tenants who are suffering from financial problems. These may just be down to market conditions and so can be overcome or may indicate a bigger problem.
A good dispute resolution solicitor will look to identify the core issues involved and then find a solution that all sides can agree on if they are unable to restore the situation to how it was before there was a problem and, in this case, recover the overdue rent.
However, if negotiations fail to work, the landlord still has a range of legal options to deal with non-payment of rent including forfeiture of commercial leases, possession proceedings, Commercial Rent Arrears Recovery (CRAR), eviction, statutory demand and winding up procedures depending on what the situation is.
Call rhw’s commercial property team on or complete the easy contact form.
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