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3 issues that can lead to commercial lease disputes

On Behalf of | Apr 14, 2024 | Business And Commercial Litigation

A commercial lease is a contract between a party that owns a building and a party that wants to operate a business there. Commercial leases give entrepreneurs or established business executives access to new facilities while providing rental income for the property owner.

These mutually-beneficial arrangements often involve minimal direct interactions, as tenants send payments to landlords and have few other reasons to communicate. However, sometimes issues arise during a commercial tenancy that lead to disputes. Both parties may feel wronged by each other, and the situation could rapidly worsen. For example, the following issues related to commercial leases sometimes lead to conflicts between landlords and business tenants.

A change in business function

Sometimes, the professionals operating businesses eventually realize that the current model isn’t effective or profitable. They might try to rework the business by using their equipment and expertise for another purpose. However, commercial leases frequently limit what tenants can do with a property. Any substantial change in company functions might potentially violate the lease. Landlords might interfere with an attempt by a business tenant to change the company instead of defaulting on their lease because the business failed.

An issue with the property

Business leases often include clauses that pass some maintenance responsibilities to the landlord. Especially if a tenant only occupies one unit in a large shared space, landlords may charge fees for common areas and maintenance services. If a landlord doesn’t properly maintain those facilities, tenants may become frustrated and may even want to withhold rent. Other times, the dispute may be that a tenant wasn’t aware that they had maintenance obligations. A landlord might refuse to make certain repairs and could assert that responsibility for doing so falls to the tenant. Disputes about having a tenant cover maintenance and repair costs could lead to litigation or claims against security deposits.

Early termination of the lease

Perhaps a company has proven unprofitable or encountered other operational challenges. The owner might want to shut the company down entirely. Maybe the company has proven successful in other locations, but this facility has not been profitable. A business tenant might want to end a lease early to seek out better facilities elsewhere. The early termination of the lease either due to business failure or issues with the property can lead to conflict, as landlords often want payment for the entire duration of the lease whenever possible.

The best way to avoid such conflicts is to very carefully negotiate the terms of a commercial lease before signing it. Reviewing a lease may help commercial landlords or tenants determine what options they have available during a conflict about a rented commercial space.