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Commercial Leases- When Things Can Go Wrong

Commercial leases can become problematic when tenants or landlords experience difficulties. This can include personal mishaps, technical or mechanical failures, natural disasters, health-related issues, or public service failures. In the event of recessions, these difficulties and financial troubles will likely become more frequent.

In each of these situations, it’s essential to respond effectively, learn from the experience, and take steps to prevent similar problems in the future. Problem-solving, resilience, adaptability, and learning from mistakes are essential skills and approaches to handling situations and recovering when things go wrong. When you cannot resolve conflicts in good faith, it may be time to speak to a legal professional.

Ways That Commercial Leases Can Go Bad

Commercial leases can go wrong for various reasons, often leading to conflicts and negative consequences for both the tenant and the landlord. Here are some common circumstances that can present commercial lease issues:

Non-Payment or Late Payment of Rent

One of the most significant problems that can arise is when the tenant fails to pay rent or consistently pays late. This can create financial difficulties for the landlord, who relies on rental income to cover expenses and generate profits. It can also strain the relationship between the tenant and the landlord, potentially leading to legal actions, eviction proceedings, or lease termination.

Lease Violations

Conflicts can arise when tenants do not adhere to the terms and conditions outlined in the lease agreement. Violations may include unauthorized alterations to the property, subleasing without permission, exceeding occupancy limits, or using the premises for illegal activities. These breaches can lead to disputes, legal actions, or lease termination.

Maintenance and Repairs

If the landlord fails to fulfill their obligations to maintain and repair the property as specified in the lease agreement, it can create frustration and inconvenience for the tenant. Issues such as plumbing problems, electrical failures, or unaddressed structural issues can disrupt the tenant’s business operations, potentially leading to financial losses or a breach of contract claim.

Confrontations About Lease Terms

Differences in interpretation or disputes about lease terms and conditions can lead to conflicts. For instance, disagreements may arise regarding rent escalations, lease renewal options, responsibilities for property improvements, or provisions related to common areas or shared utilities. Suppose there is a lack of clarity or transparency regarding lease terms, property management responsibilities, or any changes in the lease agreement. In that case, it can create tensions and strain the landlord-tenant relationship. Also, tenants may believe that landlords are taking too long to conduct repairs or not doing a good enough job. These disputes may require legal intervention or negotiation to find a resolution.

Changes in Business Circumstances

If the tenant’s business experiences financial difficulties, downsizing, or closure, they may struggle to meet their lease obligations. This can result in missed rent payments, lease abandonment, or substandard operations. Such situations can be challenging for both the tenant and the landlord, as finding a new tenant or renegotiating lease terms may become necessary.

Unforeseen Events or Force Majeure

Events like natural disasters, government actions, or unforeseen circumstances beyond the control of either party (force majeure events) can disrupt the tenant’s ability to operate or the landlord’s ability to provide the premises. These events may lead to disputes over lease suspension, termination, or rent reduction, particularly if the lease agreement does not have explicit provisions addressing such situations.

Using Counsel to Prevent and Resolve Conflicts

To reduce the chance the risk of commercial leases going off the rails, it is crucial for both landlords and tenants to carefully negotiate and draft lease agreements and clearly outline rights, responsibilities, and dispute resolution mechanisms. Regular communication, prompt response to maintenance issues, and open dialogue can help prevent conflicts and foster a healthier lease relationship. However, when communication breaks down, enlisting legal assistance may be more effective before relationships and behaviors spiral out of control.

Modern Commercial Lease Issues

In response to the COVID-19 pandemic, many jurisdictions implemented temporary eviction moratoriums to protect commercial tenants from eviction due to financial hardships. These measures aimed to provide relief during times of economic uncertainty. Many prognosticators are predicting a recession, and some governments and organizations have looked towards implementing or extending rent relief and assistance programs to help commercial tenants facing financial difficulties. These programs may provide financial aid or offer rental assistance to eligible companies and tenants.

Preventing and Dealing Effectively With Commercial Lease Disputes

Differences of opinion are inevitable, but litigation is not. We hope to help you avoid expensive and distracting litigation while protecting your rights and financial interests. At the same time, if someone is threatening you with litigation, we will defend you with determined negotiation and effective litigation tactics.

Our knowledgeable attorneys have counseled many clients who have had commercial lease issues. If you or your business are confronted with these issues, we are happy to answer your questions and provide legal advice. We will step up and get involved to protect you from threats to your property rights.

Call the trusted attorneys at Lowthorp Richards at (805) 981-8555 or fill out our online contact form. We operate primarily in the Tri-Counties area  – Ventura, Santa Barbara, and San Luis Obispo.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Cristian R. Arrieta, Lowthorp Richards McMillan Miller & Templeman, A Professional Corporation, 300 E. Esplanade Drive Suite 850, Oxnard, CA 93036