Commercial landlord and tenant disputes can be tricky to navigate – and without expert legal advice, you risk leaving issues unresolved or taking action that could lead you to fall foul of the law.
The law is designed to protect both parties – and as a landlord, you must be aware of your obligations within the tenancy.
Failing to comply with these can lead to serious financial and sometimes even criminal penalties.
But what happens if your tenants fail to pay their rent or breach their obligations in the lease?
Commercial leases can be complex and if the terms of the lease are broken, by either the landlord or the tenant, this can lead to a protracted dispute which can be both stressful and costly and damaging to your business if taken to court.
That’s why it is important to explore alternative ways of resolving a dispute before taking legal action.
Alternative dispute resolution
Alternative dispute resolution (ADR) is a simpler and effective way to resolve problems and disputes where parties cannot reach agreement but wish to avoid Court proceedings.
ADR is increasing in popularity and the Civil Procedure Rules 1998, require parties to attempt to engage in ADR before proceedings are commenced or be ready to justify failure to do so, or be at receiving end of an adverse order to pay penalty costs for non-compliance.
ADR processes
There are two main categories of ADR:
- Imposed: The imposed ADR procedures occur when parties have agreed to resolve issues by ADR under the contract or because of membership of an organisation where there is a binding requirement for ADR resolution procedures.
- Voluntary: Voluntary procedures are where parties agree, often after finding themselves in a dispute, to use the process of ADR to explore opportunities to achieve a resolution.
The simplest form of ADR is usually ‘Without Prejudice’ negotiations between the parties. ‘Without Prejudice’ means that the parties can discuss the issues in dispute openly and freely with each other, in the knowledge that whatever they have discussed, is not disclosable to other parties and/or the Court and cannot be used against them to support or undermine either party’s position. It normally involves parties making offers of settlement.
Types of ADR procedures:
- Conciliation or mediation: Conciliation identifies what each party wants to achieve from a solution and helps them to achieve that aim by agreement. If successful, this process results in a solution acceptable to all parties. Mediation focuses on the problem and proposes alternatives for resolving the problem. Both are undertaken on a ‘Without Prejudice’ basis and involve the same privilege from disclosure as above. They are confidential and cannot be discussed openly. With both mediation and conciliation, a neutral third party will use skills to assist the parties to find an outcome to help them resolve the dispute and avoid Court proceedings. If either method is unsuccessful and agreement not reached, this does not prevent Court proceedings being commenced.
- Adjudication: An independent person examines the evidence of each party and makes a decision that will normally be binding on the parties. There may be an appeal process but this is subject to the type of adjudication used and will have limitations.
- Arbitration: Arbitration is a formal written only procedure. Most arbitration awards bind all parties. Overturning or altering an arbitration award may be limited to proving certain facts and grounds. The purpose is to achieve a commercial and swift resolution to the dispute to allow the parties to continue with their business.
An experienced solicitor can advise you on which ADR procedures are best for your specific circumstances.
Advantages of ADR
ADR presents several benefits to resolving the problem, for both you and your tenant.
Most importantly, ADR can be a lot less confrontational than Court proceedings. This helps to preserve a non-volatile, professional relationship between landlord and tenant once the dispute is resolved.
The process may be sufficient to resolve the entire dispute or certain aspects of it, reducing any later Court proceedings and making them less costly.
Additionally, most ADR is investigatory – the root of the problem is identified and the focus is on settlement rather than apportioning blame.
The ADR process discloses facts and evidence from each party, meaning all concerned have a greater understanding of the issues involved. This means any subsequent Court proceedings may be simpler, shorter and less costly.
The ADR procedure can also ensure confidentiality by preventing any party from referring to anything disclosed in the ADR that might be sensitive or damaging to either party.
Other benefits include:
- Privacy: ADR is private, thus avoiding adverse publicity that could damage your reputation.
- Affordability: The cost may be cheaper than Court proceedings.
- Determined process: The procedure for resolving the dispute, and the timescale for the procedure, can be fixed by reference to what the parties find convenient.
- Speed: it is a much quicker and faster process.
Finally, the range of achievable solutions from ADR is wider than Court proceedings.
Through ADR, you can reach a specific type of solution that both you and your tenant find acceptable, but which may not be possible from Court proceedings.
Disadvantages of ADR
While there are several benefits to pursuing ADR, there are risks that must be considered.
Crucially, ADR depends on co-operation. All parties have to participate.
If the time limit for making a Court claim is about to expire, ADR may not be appropriate. Unless proceedings are stayed or an agreement reached between the parties to extend the time for ADR to take place, the Court time limit will apply and the parties are forced to adhere to these strict deadlines.
A decision or award, if not complied with by either party, may still have to be enforced through the Courts once the ADR process is complete.
ADR will not be appropriate if you require immediate action to protect your property consisting of an injunction.
Applying for an interim injunction through the Court, might help you to temporarily ringfence your business interests while the substantive dispute awaits determination at trial or by settlement.
At Palmers, we can assist with different types of urgent injunctions which you may need to stop or prevent an action from occurring or to force another party to do something.
Commercial landlord-tenant dispute resolution with Palmers Solicitors
If you are facing a commercial leasehold dispute, it is important to seek legal advice as soon as possible. It is easy to carry out an act that might unwittingly prejudice your position and reduce options that might otherwise have been available to you.
At Palmers Solicitors, our property litigation experts can provide advice and practical support for commercial landlords involved in disputes with their tenants.
We will provide you with clear advice, specific to your situation, to help you understand your options and enable you to resolve the issue in a quick and cost-effective manner.
If you are facing a dispute with your tenant, it is important to act quickly. Contact us today for expert advice and guidance.