Disputes Relating to Leases of Commercial Property
Many businesses lease their working premises from a commercial landlord but, unfortunately, some don’t plan for what might happen in the event of a dispute relating to the property.
We help both landlords and tenants to resolve a wide range of issues including those that arise about payment of the rent, the state of the premises, termination or the terms of the lease. Often we can analyse the legal issues involved and take swift action to resolve the problem using negotiation. It is, therefore, always better to seek legal advice straight away.
Here are a few examples of the issues that we regularly deal with.
The law relating to landlords and tenants is wide-ranging and complex. There is plenty of scope for arguments even between parties who have taken their time and sought legal advice /support in drafting an appropriate lease.
It is good practice to review the terms of your leases regularly to ensure they are still in keeping with your business plans. If you need advice on the terms of your lease or think the terms are no longer appropriate for your business, get in touch with our Specialist Commercial Property team who will guide you on your options.
A lease is a contract between two parties under which one party (the tenant) agrees to pay for the right to use another party’s (the landlord) property for a certain time and at a certain rate. Leases can be entered into for a short or long term. They can be complex documents and impose onerous obligations on both the tenant and the landlord. It is important to obtain legal advice about those obligations and ensure that the terms of the lease are appropriate for your business and support your business plans.
Unfortunately, leases can be a source of contention between landlords and tenants. Disputes often arise on a wide range of issues such as: paying rent, who is responsible for repairs to the building, break clauses and so on.
If you have an issue arising in relation to your lease, don’t let it fester. Speak to us and we can advise you of your options.
Tenants usually have obligations to keep the condition of the leased property in a certain state of repair. Should they not do so, they risk being in breach of their lease and if those breaches / repairs – known as “dilapidations” – have not been carried out at the end of the lease, the landlord can take certain remedial action. This action includes making a schedule of the work that needs doing and serving it on the tenant, assessing the landlord’s likely loss and requiring the tenant to respond.
- The government have issued a dilapidations protocol which is used in relation to claims for damages for dilapidations against tenants at the termination of a tenancy.
- RICS 7th editions of its guidance note on Dilapidations in England and Wales
- You might also be interested in reading the RICS Guide to Lease-end dilapidations in commercial property.
If a commercial tenant remains in a commercial property at the end of a lease, a Landlord can take action to recover the property under section 25 of the Landlord and Tenant Act 1954, (the LTA). The grounds for terminating a business lease are as follows:
- Breach of repairing covenant
- Persistent delay in paying rent
- Breaches of other obligations
- Availability of alternative accommodation
- Sub-tenant – possession required for letting or disposing of whole property
- Landlord intends to demolish or reconstruct
- Landlord intends to occupy the premises himself
The landlord can also use these grounds to oppose a tenant’s application to extend the lease.
Note that it is possible for landlords and tenants to agree that the relevant provisions of the LPA will not apply.
If the landlord is successful, compensation may be payable in some cases to the tenant.
It is important for the landlord to choose the most appropriate, strongest ground on which to make the application, to follow the LPA procedure carefully, supply detailed evidence and to meet its time limits. We can help with the process. Contact Christopher Burke to find out how or make an enquiry.
What options do landlords have if a tenant does not pay rent on a commercial property?
A few years ago, Landlords were able to exercise “distress” on a tenant’s goods. This was a common law form of ‘self-help’ that enabled the landlord to seize a tenant’s goods when rent was unpaid. It was a widely used remedy because there was no need for the landlord to obtain a court order. However, this remedy of distress was abolished by the Tribunals, Courts and Enforcement Act 2007 which introduced “commercial rent arrears recovery” (CRAR).
Landlords can still seize goods under the new regime, but must now fulfil a number of conditions before they can use the CRAR regime:
- there must be “net unpaid rent” equal to seven days rent; – the net unpaid rent is calculated less tax and interest;
- CRAR only applies to the principal rent;
- CRAR only applies to commercial premises (and not domestic or mixed use premises);
- the landlord must give at least seven clear days’ advance notice to the tenant;
- CRAR can only be effected within set times of the day;
- certain of the tenant’s goods cannot be seized (such as their trade tools); and
- enforcement agents taking control of a tenant’s goods can either: secure the goods where found, secure the goods elsewhere or enter a controlled goods agreement with the tenant.
Tenants can appeal to the court to stop the landlord taking any further action without a court order.
Whether you are a landlord seeking to use the CRAR regime or a tenant resisting a landlord’s claims for payment of arrears, we can advise you on what action to take. The CRAR regime can be a complex process and the earlier you speak to us, the more likely you are to obtain an early resolution of the situation. (Make an enquiry here.)
The Sheriff’s Office have produced a free guide to evicting tenants and recovering rent arrears from commercial property without a court order: Guide to CRAR & Forfeiture
Service charges are payable to landlords to cover the costs of the services they provide to the building. The terms of the lease will set out what the service charge is and which services it covers. It could include, for example, maintenance and repairs to the building, cleaning insurance or heating. A management company may provide the services on the landlord’s behalf.
Most service charges are based on the actual costs of the services provided and must be reasonable. The lease will set out when and how often they are payable.
The payment of a service charge is a contractual arrangement between the landlord and the tenant. If the lease does not contain a term providing for payment of a service charge – no payment is payable. In the same way, if the lease does not require the landlord to provide a service, the landlord has no obligation to provide it.
We advise landlords on whether they have a contractual right to receive payment for service charges and tenants on whether they have a right under the contract to a particular service from the landlord. If disputes arise about the service charge, and the matter goes to a tribunal, we help landlords and tenants with the tribunal process, which involves making an application to the First-tier Tribunal (Property) (or responding to such an application).
For further information, contact 0161 785 3500 or make an enquiry.
All businesses hope they will never experience property disputes. If such disputes do arise, we aim to resolve matters as swiftly and with as little cost to you and your business as possible.
We can also help you to avoid disputes with your lease in the future. We do this by reviewing the terms of your current leases, advising on potential issues, and how you can reduce the risk of problems materializing.
Contact our property team on 0161 785 3500 to organise a review.
- Advising commercial landlords and tenants on all aspects, including obtaining possession of property, service of Section 25 Notices, recovery of rent arrears and damages for breach of covenant.
- Acting in relation to a dispute over a right of way and access to business premises.
- Acting for landlords/tenants in relation to dilapidation claims.
- Acting for commercial client in respect of urgent removal of trespassers from car park on three occasions. Obtained order for possession within days on each occasion forcing the removal of those trespassers until site secured.
- Acting for a commercial landlord against former tenant in claim for damages for alleged misrepresentation on service of a Section 25 Notice.
- Successfully pursuing claim for damages for nuisance for commercial property owner against neighbouring property owner due to water ingress.