A commercial lease agreement is a legally binding contract between a landlord and a tenant that outlines the terms and conditions of renting a commercial property. Thus, commercial lease disputes are disagreements or conflicts that arise between the two parties over the commercial lease terms. These disputes can occur for various reasons, such as rent payment issues, lease violations, maintenance and repair disputes, and termination of the lease agreement.
Commercial lease disputes can significantly impact businesses, landlords, and tenants, and can often result in legal action if not resolved amicably. It is essential that both parties understand and abide by the legal contract. If a dispute does arise, you must follow appropriate procedures to resolve the issue before it escalates. It will be important to familiarize yourself with the types of commercial leases that exist in order to both act and react accordingly.
Understanding Commercial Lease Terms
If you are dealing with issues regarding your commercial lease contract, you should first review the agreement to ensure you are fulfilling your obligations as the tenant or landlord. The contract should clearly outline the rights and responsibilities of all parties involved and shed some light on your concern.
It is worth mentioning that if you are operating under a verbal contract, you should consider the validity of a verbal contract before moving forward with legal action against the other party. It is crucial to review and understand your contract because the terms and clauses will significantly impact the dispute and eventual outcome of the situation.
Although there are different types of commercial lease terms and agreements, some of the common types include:
- Net lease: The tenant pays rent along with all or part of the taxes, insurance, or maintenance costs of the property.
- Double net lease: The tenant pays taxes, insurance, and rent.
- Triple net lease: The tenant pays taxes, insurance, maintenance, and rent.
- Absolute net lease: The tenant pays all expenses, including structural repairs and maintenance.
- Full-service lease: The tenant’s rental rate includes all property operating expenses.
- Modified gross lease: A combination of gross and net leases.
- Percentage lease: The tenant pays a base rent plus a percentage of their sales revenue.
If a dispute arises regarding any of these issues, the lease terms will form the basis of the resolution process. Thus, knowing the types of commercial leases and which applies to you can help you identify potential areas of conflict. Take necessary measures to avoid disputes, and make informed decisions on how to move forward with the issue if necessary.
Establish Communication Channels
Once you have carefully reviewed your lease terms, you should contact the other party and clarify any misconceptions about the agreement. Some common misunderstandings in a commercial lease agreement can include:
- Not reading the lease agreement: If you do not thoroughly review the content of your lease agreement, it may result in potential issues later. Some of these include the rent payment schedule, lease renewal terms, permitted use of the property, and responsibilities for maintenance, utilities, or other expenses.
- Inadequate property description: Having incomplete or incorrect information about the property can produce a lot of confusion between both parties, disrupting the landlord-tenant relationship and creating space for disputes to arise later.
- Not negotiating favorable modifications: Both parties should negotiate the terms of the agreement before signing it. You can avoid many potential disputes by simply negotiating the terms of the contract before finalizing it.
- Not seeking legal advice: Commercial lease agreements are complex and can be confusing even after you have reviewed the contract. You should hire an attorney to review its terms and protect your interests.
- Not understanding the consequences of breach of contract: In addition to understanding your commercial lease agreement, you should also inform yourself of the consequences that result from violating these terms. It affects both parties and can result in an unfavorable outcome.
- Not naming parties accurately: If an error is made in writing the accurate legal name of any of the parties, there can be serious and long-lasting repercussions that affect the transaction going forward.
- Not understanding eviction terms: Every lease agreement differs, but common violations can force eviction. These may include renovating the building without approval, not paying rent, subletting without permission, not carrying required insurance, failing to maintain the condition of the property, or negatively affecting other commercial tenants in a shared building.
- Not understanding payment terms: The commercial lease agreement should clearly define the payment terms, conditions, and method of the transaction to avoid overpaying rent or losing the lease.
So, rather than acting on assumptions about the lease agreement, be sure to ask questions and clarify misconceptions before they become serious legal disputes. Establishing open communication in this way can be as simple as a phone call or an email to ensure all parties involved are on the same page. Then, do your best to follow through with your commitment.
Documenting Lease Violations
After you review your lease agreement and clarify its terms with all parties involved, but a dispute still arises, you should be aware of the significance of documenting these violations with corresponding evidence.
Documenting evidence of a lease violation is significant because it serves as proof if you need to take legal action. By documenting evidence of the violation, you can support your claims and ensure that you have a compelling case. You can accomplish this by:
- Documenting physical evidence: Take photos and videos whenever possible before and after a violation. For example, if a tenant damages the property, the landlord should take pictures or videos as proof of the violation. Conversely, if a landlord damages the property or fails to maintain a habitable environment, the tenant can collect physical evidence of the violation to make their case.
- Documenting communicative evidence: Keep a record of any communication between the tenant and the landlord regarding the violation. For example, if a landlord sends their tenant a written warning, they should keep a copy of the notice for their records. Similarly, if a tenant and a landlord make a written agreement through text messages or emails, and the landlord breaks the agreement, then the tenant may retain the evidence of written communication as proof of a violation.
You should not overlook the significance of proper documentation. It supports the resolution process by providing clear evidence of the lease violation and helps avoid landlord-tenant disputes. Even if a conflict has not yet occurred, keeping a paper trail of every transaction or communication between you and the other party will be the best defense for your case if the situation escalates.
Navigating Legal Framework
The next step in dealing with commercial lease agreement disputes is to understand the importance of local laws and regulations and how legal requirements might impact the resolution of lease violations. In other words, understanding how the legal framework of your lease agreement affects the terms and conditions of the contract and the rights and responsibilities of both parties can help you make informed decisions about how to proceed with the dispute.
Local laws can have a significant impact on your commercial lease agreement, particularly regarding issues such as zoning laws, building codes, and environmental regulations. For example, zoning laws may restrict the type of business that can operate in a particular area, while building codes may require certain safety measures to be in place. Similarly, environmental regulations may require landlords to take steps to protect the environment, such as properly disposing of hazardous waste.
It is essential to understand how local laws affect your commercial lease agreement because failure to comply with these laws can result in legal action, fines, and penalties. You should consult with a local attorney who specializes in commercial real estate to ensure that your lease agreement complies with all applicable laws and regulations.
Moreover, if a dispute arises, local laws are used to resolve the issue. Therefore, it is crucial to have a comprehensive understanding of the local laws to avoid potential issues and protect your rights as a tenant or landlord.
Exploring Available Solutions
Next, you will want to consider the potential consequences and remedies for commercial lease violations. Remember that these can differ based on various factors, such as the various types of commercial leases that exist, so you should consult an attorney before taking legal action against the other party. Generally, however, the common types of tenant violations and the corresponding consequences are as follows:
- Violation: Failure to pay rent on time
- Consequence: Accrue late fee charges, if applicable; face eviction.
- Remedy: Understand how to navigate unpaid rent disputes. Pay your overdue rent and other debts that may have accrued.
- Violation: Excessive noise or disturbances
- Consequence: Receive a Noise Complaint or a Cure or Quit Notice.
- Remedy: Negotiate the terms of the contract, cease to cause any disturbances to the property and surrounding neighbors, vacate the property, or eventually face eviction.
- Violation: Failure to maintain the property
- Consequence: Lose your security deposit, be charged additional fees for damages; Receive a notice of a violation of rental maintenance.
- Remedy: Negotiate the terms of the contract, pay to restore the condition of the property, vacate the property, or eventually face eviction.
Other, more complex violations, such as a tenant making unauthorized modifications to the rental property or subletting the lease without permission, require professional legal assistance to move forward with the legal matter.
Overall, promptly addressing violations can help resolve the issue before it worsens; however, because consequences and remedies for lease violations can differ based on various factors, you should consult with an attorney before moving forward with your claims.
Mediation & Legal Recourse
In general, you can avoid lease disputes if both parties understand and abide by the lease agreement. Also, to maintain open communication with one another. That way, rather than making decisions based on misunderstandings of the lease agreement, a simple text or phone call can resolve a potential issue before it surfaces, saving both parties a lot of money, time, and stress about the concern.
If a dispute does occur, you should protect yourself and your investments by consistently and accurately documenting evidence of the violation to make your case. Remember—even if a conflict has not yet occurred, keeping a paper trail of every transaction or communication that takes place between you and the other party will be the best possible defense for your case if the situation escalates.
Finally, if reaching an amicable solution is not possible, you can resolve the dispute by seeking an attorney who can help you navigate the legal framework of the issue and achieve the best possible outcome for your case.