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How to resolve a commercial property dispute
Commercial landlords are not usually liable for the costs associated with the running costs of the building; they are typically covered by tenants.
However, disputes can crop up between commercial landlords and tenants and they are often costly and time-consuming. Common reasons include dilapidation disputes, rent arrears, forfeiture and more.
This guide will explain why commercial property disputes occur, the consequences of these disputes, how you can solve a dispute and the best way to avoid commercial property disputes in the future.
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What are the common causes of commercial property disputes?
Commercial property disputes can be caused by a number of factors. One that occurs regularly is when a tenant fails to pay rent and falls into rent arrears. Recovering this money can be very difficult for landlords and can result in a costly legal process.
Dilapidations, the maintenance of the property, are another serious cause of disputes. If an area either inside or around the property needs maintenance there may be difficulty in establishing whether this is the responsibility of the landlord or tenant if this has not been clearly established from the onset.
When a tenant breaches the terms of their lease, the landlord is entitled to exercise their right to forfeit and may enter the property and terminate the lease. Breaches fall under the following acts:
- Termination of business tenancies under the Landlord and Tenant Act 1954 – the landlord gives six to twelve months’ notice to terminate a business tenancy.
- Lease renewal applications/objections (section 25/26 notices) – 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 – the landlord may attempt to take possession of a property following a breach, after giving the tenant an agreed time limit to remedy the 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.
What are the common consequences of a commercial property dispute?
The possible consequences of a commercial property dispute have the potential to be damaging for both the landlord and the tenant. For the landlord, commercial property disputes can be a costly time-consuming process. The tenant will have to accept the costs associated with some aspects of a commercial dispute, and the dispute can have a very negative impact.
Resolving commercial property disputes
There are a number of pathways available prior to legal action.
The key focus should be good communication. Constructive discussions about the situation can be beneficial, not only to resolve the dispute but to keep your relationship with the other party intact. It is advised to keep in continual contact to ensure the matter doesn’t breakdown without resolution. A written record should be kept of all meetings and dealings including writing follow-up letters or emails following face-to-face meetings so that any meetings or conversations can be referenced later on.
It is also advised that you should also keep a log of any incidents that occur that may have relevance to the dispute. Remember to make a note of the date and location - this can prove to be useful during mediation.
If you choose the mediation route to resolve the dispute, Giambrone can provide a mediation service and help you to avoid a lengthy and potentially costly court case. Choosing to take this route may prove to be a quicker and less costly option than resorting to legal action,
Should you take legal action?
If, after every attempt has been made to resolve the situation by pursuing alternative dispute resolution, mediation and arbitration, and there is not amicable settlement you will then have to consider taking legal action.
Contact Giambrone for support
Our strong team of experienced commercial real estate lawyers are on hand to help you solve your commercial property dispute, whether you are a landlord or a tenant. We can help with both alternative dispute resolution and any legal action that may arise. Our robust litigators and real estate lawyers, have considerable experience in a wide range of commercial property conflicts and will be able to advise and assist you. Find out more about our dispute resolution service here.
How to avoid commercial tenancy disputes
In order to limit the potential for a commercial property dispute to arise it is important that the lines of communication are kept open so that should there be an issue between landlord and tenant it can be resolved at an early stage before it becomes too advanced and is difficult to easily deal with. You should always be open to reasonable solutions and compromise in order to avoid disputes escalating or becoming impossible to resolve.
Landlords should ensure, from the beginning, that commercial lease is clear and covers every possible eventuality. The commercial lease should ensure that everyone, tenants and landlords, know where they stand from the outset. As a landlord, you need to ensure that your tenant fully understands what to expect from their lease and does not expect things that are not included in the transaction that you can’t or won’t provide later on.
Frequently asked questions
What options do landlords have if a tenant does not pay rent on a commercial property?
In the first instance landlords should communicate with the tenant and establish why the rent has not been paid. If the tenant has a grievance then, depending on the issue, there is an opportunity to discuss and remedy the problem. If the tenant is suffering from financial problems that are transient you may be able to offer them a reduced rent for a limited period of time. However, if negotiations between the parties fail to work the landlord has a range of legal options to deal with the problem of non-payment of rent, from forfeiture of commercial leases, possession proceedings, commercial rent arrears recovery (CRAR), eviction, statutory demand and winding up are some of the actions that can be taken.
Contact the Giambrone real estate team to discuss.
How do you know who is responsible for the upkeep of a leased property?
The responsibility regarding the upkeep of a leased property should be stated clearly on the lease.
How can you regain vacant possession of a commercial property?
Regaining vacant possession of a commercial property will often involve taking the tenant to court in order to evict them on an agreed date.
Why do you need a solicitor for a commercial lease?
A solicitor can advise on the legal risks and liabilities associated with personally guaranteeing a commercial lease, and advise whether or not these risks are greater than the reward.
How do you get your name taken off the lease of the business premises?
Initially, speak to your landlord to get your name taken off the lease. It is advisable to also ask a real estate solicitor as well to ensure that this has been done correctly and absolves you from any further responsibility.
*It should be noted that during the current coronavirus pandemic, the government has enacted Code of Practice for commercial property relationships during the COVID-19 pandemic. This prevents a wide range of legal actions against defaulting tenants in light of the unprecedented situation.
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