How to resolve a commercial tenant dispute

Learning how to deal with tenancy disputes swiftly is vital for all commercial landlords, but call the Commercial Property team at Foys if you have questions.

Being a commercial landlord has a number of great benefits and the chief motivation is to earn an income while your property continues to accrue value. But when disputes happen, you need to resolve them quickly and efficiently so they won’t escalate to something that will cost you more time and money. In this guide, we aim to highlight how you can resolve a commercial tenancy dispute, but for further information and sound legal advice based on years in successfully resolving tenancy disputes, please contact our Commercial Property team at Foys Solicitors.

Common types of commercial tenancy disputes

When a dispute happens between a tenant and a landlord, it is almost always as a result of a clear or perceived breach of the tenancy agreement. A tenancy agreement is a written contract between the landlord and the tenant that details the rights of both parties in regards to the occupancy of a property. An agreement will include details as to the obligations of the landlord and of the tenant. The agreement also covers arrangements such as who has the right to occupy the accommodation during the tenancy, how much rent a landlord is expected to receive from a tenant and how long the tenancy will last.

A tenancy agreement can be breached for a variety of reasons, of which the most common are as follows:

1. Unpaid rent (rent arrears)

When a tenant fails to pay their landlord the agreed rental fee on time, it’s called rent arrears and is always a cause for concern. There may be a number of reasons as to why the tenant has not made a payment, so it is best practice to notify the tenant and give them the chance to rectify it. However, if the tenant still doesn’t pay, the next step would be to send a formal letter outlining that they are in rent arrears and that you expect payment by a certain date.

Should you not receive the payment by this date, it is best to give our team a call at your local Foys office, as the next few steps involve formal letters to the tenants and also the guarantor (if any). One of these letters will confirm your intention to take legal action if the rent isn’t paid.
If the tenant continues to ignore you, we will help you take action to reclaim possession of your property, before going to court.

2. Sublets

An increasingly pervasive problem (particularly within cities) is subletting. A sublet is when a tenant rents out a room within a property that they themselves have rented from their landlord. The sub-tenant has no legal relationship with you the owner/landlord and will pay their rent to the tenant. While not necessarily an illegal act in of itself, subletting is something that can be a breach of the tenancy if the agreement expressly forbids any sublets.

Subletting can lead to complicated issues. For example, a sub-tenant may damage the property and the tenant is ill-prepared to remedy the issue with you the landlord. Don’t put yourself in this situation, talk to one of the expert commercial property solicitors in our team so we can help you create a tenancy agreement that makes your position on subletting clear.

3. Dilapidations

In every commercial tenancy agreement, dilapidations outline which party is responsible for maintaining and repairing the property. Disputes surrounding dilapidations are common as most commercial tenants tend to make alterations which are unwanted by the landlord.

If your tenant doesn’t believe that it is their responsibility and won’t cooperate with you on this matter, talk to us as we have experience in handling disputes relating to dilapidations.

Resolving a dispute

No matter what the nature of your dispute with the tenant, it is always wise to resolve the dispute quickly and efficiently so it won’t escalate to something that will cost you more time and money. Here are four common ways which you can use to resolve the dispute.

1. Get in touch and talk it through

The most important first step is to get in touch with the tenant regarding the problem. Try to talk through the issue and see if it’s possible to reach some sort of agreement or compromise over the issue. If no such agreement can be made, draft a letter that covers the problem, what it would take for you to reach a resolution with the tenant and invite them to respond (in writing) by also stating their respective position.

The letter should be professional and must not sound aggressive or contain threats, regardless of how unreasonable you feel the tenant is being. Once the letter is sent and you have (or haven’t) received a response, you should now decide your next step and how you want to exit from the dispute.

2. Mediation or arbitration

If reaching out to your tenant has not worked, the next sensible step is to involve an independent and impartial professional who is trained and qualified in conflict resolution. This person, also known as a mediator, offers a cheaper and faster alternative to going through the courts.

Mediation can take place face-to-face or via a conference call so the mediator can facilitate conversation and resolution from both parties. If an agreement is reached, the mediator will note this agreement in writing before sending this on to both parties for signature to make it legally-binding.

Instead of mediation, some tenancy agreements may state that certain tenancy disputes should be dealt with by arbitration, involving an independent person (known as an arbitrator). The arbitrator will listen to both sides, review the evidence, decide who should be responsible for the breach and who should be liable for any costs. The decision made by the arbitrator is called an award and it is legally binding. Once the decision is reached, you cannot take the case to court to get the decision changed.

Before going down the route of independent mediation or arbitration, it is essential that you have one of our experienced commercial property solicitors working with you to ensure that your rights as a landlord are respected and the clauses in your tenancy agreement are interpreted correctly.

3. Moneyclaim.gov.uk

If the dispute concerns rent arrears and you know the fixed amount, you can apply for a court order on moneyclaim.gov.uk, a portal designed to facilitate the claim process. After submission, the court will issue a claim pack to the tenant (now known as the defendant) within two days. And after five working days, the claim pack will count as served on the defendant. Once the claim pack is counted as served, the defendant has 14 calendar days to respond, which can be extended to 28 days if they file an acknowledgement of service.

If the time elapses and the tenant continues to ignore you, you may now request a judgement in default on the moneyclaim website. If you are in this situation, get in touch with a solicitor like Foys as you must choose your options carefully before proceeding to enforce judgements. We will review the case with you before advising on the moves that aim to maximise your chance of success while minimising your costs.

4. Eviction

If you are thinking about eviction, talk to a solicitor first as eviction may or may not be suitable. To an extent, what you can do depends on the tenancy agreement too.

Foys can help to resolve your tenancy dispute

Since 1972, Foys has provided a valued service to commercial landlords across South Yorkshire, North Nottinghamshire and Derbyshire. We have a highly skilled, professional commercial property team who takes pride in their ability to understand the complex laws surrounding commercial property ownership and leasing. We use our knowledge and expertise to help our clients to make better decisions for themselves.

If you have an unresolved issue with your tenants, or if you need to draft a commercial tenancy agreement that protects your interests, speak to one of our experienced commercial property solicitors today.

This post is not legal advice and should not replace professional advice tailored to your specific circumstances. It is intended to provide information of general interest about current legal issues. Also, please note that although we may use the word solicitor, your case could be carried out by a legal advisor, legal executive or paralegal depending on the nature of the case.

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