Commercial Lease Disputes

Whenever landlords and tenants enter into agreements for tenancy of commercial property it is imperative that that are well aware of their rights and responsibilities. In the absence of a clear understanding and willingness to abide by these terms there is every likelihood of disputes arising that may turn out to be prolonged, costly and disruptive to smooth business.

It is important to have a clear understanding of some of the most common issues of lease dispute:

Rent Reviews

Almost all long-term tenancy agreements provide for periodic rent reviews (five years being the most common), however surprisingly most agreements allow for an upward revision only and not take into account the increasingly common falling market scenarios of today. Tenants must also be aware that even though the review may not have been conducted at the specified interval, the effect could be backdated and have thus serious cash-flow implications.

It is best to approach a professional valuer prior to the review date to advise you on market trends so that you are prepared to negotiate with the landlord more realistically or even go more prepared into arbitration or litigation for a better defense.

Lease Renewals

Under the Landlord & Tenant Act 1954, leases can continue after their original expiry date and can be terminated by either party only after a statutory notice delivered a minimum of 6 months before. While the tenant has the right of renewal of the lease, he must approach the courts before the expiry of the statutory notice for the grant of renewal. It is thus imperative for the tenant to ensure that his rights to lease renewal are protected. To effectively face disputes arising from the terms of lease renewals the tenant is well-advised to seek the advice of professional valuers at least a year before the lease expiry so as to be well prepared ahead of lease termination.

Service Charges

Another common point of dispute, especially in large commercial properties is service charges. Tenants are advised to comprehend well the terms of the lease, enter into discussion with the landlord about the points of discomfort and seek professional legal advice to prevent complications at a later state. It may be helpful to refer to the code of practice and other information that has been prepared by the Royal Institution of Chartered Surveyors for a better understanding of the subject. While adoption of the code is not compulsory, none will dispute the intention of it attempting “to promote consistency, fairness, transparency and best practice”.

Dilapidations (repairs)

One of the most frequently arising points of commercial property lease disputes is the cost and responsibility of repairs. The situation is made more complicated by the fact that most tenants do not understand their obligations of keeping the property well-maintained and typically they are faced with a huge repair bill after the lease expiry and inspection by the landlord. It is important that tenants realize their obligations and the terms of the lease agreement and arrange for periodic inspections and repairs on the basis of professional surveys and photographic evidence of the state of the premises, especially at the time of lease expiration and key handover. Lessees should comply with the terms of the lease governing the repair and maintenance and have their actions recorded by professional surveyors to minimize disputes.