Landlord & Tenant Commercial Lease Disputes

In this blog we discuss the implications of commercial lease disputes, common issues that arise and how best to solve disputes to keep the relationship between the Landlord and Tenant intact.

Conflicts can arise in any commercial relationship which may become protracted and result in considerable time and expense to both the Landlord and the Tenant in resolving the issues.

We discuss some of the common reasons why commercial disputes occur and their implication and how best to solve them to avoid future disputes.

Breaches of Lease Obligations

Commercial leases contain obligations for tenants to use the property in specific ways, such as upkeep, subletting restrictions, signage rules, and business type. If a tenant breaches a remediable obligation, the landlord must give them a chance to remedy it. If the breach is irremediable or not remedied, the landlord can forfeit the lease and evict the tenant. Landlords also have obligations, and if they breach them, the tenant can enforce their rights against their Landlord.

Break clauses

A break clause is contractual terms written into the lease, usually at one or more fixed point in time , such as three or five years that allows a landlord or tenant early termination of the lease.

Conflicts may arise where one party seeks to exercise or disputes the break clause allowing early termination in relation to negotiation of the break terms, exercising the right to the clause and complying with clause conditions.

A landlord will want to minimise any risk by ensuring the tenant complies with any pre conditions to exercise a break clause, for example, the tenant is up to date with the rents due, compliance of the tenants covenants, and conditions of the break clause being met by the tenant, failure to do so may result is costs risks to the tenant.

Dilapidations

Dilapidations refer to disrepair covered by repairing and maintenance covenants under the lease. They can be superficial (decoration) or major (structural repairs). If the tenant fails to address dilapidations they are responsible for, the landlord can force them to make repairs and  seek compensation against the tenant. When a lease ends, the tenant should reinstate the property to its original state, and failure to do so can lead to potential disputes over the extent or cost of dilapidations and the landlord may bring a claim for compensation against the tenant if they are forced to carry out the repairs on the expiry of the lease.

Rent and Service Charges

Unlike residential tenants, business tenants have fewer rights if they fall behind on rent or service charge payments. Landlords can forfeit the lease, send bailiffs to seize assets for rent arrears recovery, draw down on deposits, pursue guarantors, or issue court proceedings without a court order. Tenants have little recourse if facing financial difficulties but can try negotiating payment plans or settlements with the landlord.

Terminating or Renewal of a business tenancy

When a business lease expires, the tenant can vacate or seek a new lease. Under the Landlord and Tenant Act 1954, if the landlord doesn’t follow strict protocols to terminate the lease before expiration, it automatically continues under the same terms. If the landlord agrees to a new lease, they must serve notice to the tenant before negotiations can begin. Going to court can be expensive, so negotiation or mediation is preferable for resolving disputes if both parties are willing. If private negotiations fail, seeking mediation is advisable. Tenants or landlords in disputes should seek legal advice from experienced dispute resolution solicitors to find solutions without going to court.

Conclusion

In conclusion, navigating these conflicts between the Landlord and Tenant through effective strategies involves an understanding of the relationship between the parties to help protect both the landlord and tenants rights requiring a proactive approach to mitigate risks to both to help maintain a commercially beneficial relationship and minimise financial losses.

*Disclaimer: This blog post is for informational purposes only and should not be construed as legal advice.