Commercial Leases: Resolving Disputes

Most commercial leases contain a dispute resolution clause to address problems that may arise during the term of the lease. The dispute methods agreed to by both the landlord and the tenant in the lease dictate the dispute resolution method that the parties must use to resolve their differences.  The parties should try and resolve the matter in a friendly way.  However, it is not unusual for commercial lease landlord/tenant disputes to end up in court.  It is recommended that you seek the advice of a commercial real estate attorney immediately if you are involved in a commercial lease dispute.

Typical Disputes

Typical disputes arise over the following items:

• Rent
• Rent escalation clauses
• The term of the lease
• Assignment and sublet
• Maintenance and repairs
• Use restrictions
• Relocation
• Redevelopment
• Lease commencement and termination   
• Lease Dispute Resolution Clauses

Most commercial leases provide for the following methods of dispute resolution:

• Mediation.  Mediation provides a voluntary opportunity for the parties to compromise and decide their own disputes instead of having an arbitrator or judge make decisions.  Both parties must agree to mediation, and each pays their share of the mediator’s fee.  A mediator acts as a neutral third party to help the parties come to a resolution.  The parties can choose a mediator that is an experienced professional in the field of commercial real estate.  Mediation is quicker than litigation, and costs much less.  Unlike litigation, the results of the mediation are confidential and not part of public records like court decisions.  Your attorney cannot argue your case.  Mediation is a preferred method for dispute resolution.  
• Arbitration.  Arbitration is also a voluntary decision by both parties to participate. They each pay half of the arbitrator's fee.  The parties can choose an arbitrator who is experienced in commercial real estate leases.  Arbitration is quicker than litigation and also costs less.  Arbitration is private.  The arbitrator listens to both parties present their cases, and then makes a decision. The arbitrator’s decision can be binding, which means the decision is final, or non-binding, which means if either party is unhappy with the ruling, they can litigate the matter.  The type of evidence you can use to support your case is limited though.  Also, your attorney cannot argue your case.  To determine which type of arbitration decision applies to your dispute matter, you must check your lease.     
• Litigation.  Some disputes do end up in litigation. The costs are much higher, and it takes longer to get a court date because the courts are backed up with so many other types of cases.  However, you do get the opportunity to have an attorney defend you and argue your case, and you are not as restricted as to what kind of evidence you can present in support of your case.  You can appeal the decision.  In a binding arbitration, you cannot. 

Consult with an Attorney 

A commercial real estate attorney is experienced in resolving landlord/tenant commercial lease disputes.  The attorney can represent you in court.  Also, the attorney can advise you of how to strategize your case if you decide to use mediation or arbitration to resolve the matter.