Commercial Lease Dispute? Step-by-Step Guide for Business Tenants

When your commercial landlord and your business disagree, start with the lease. Read the provisions covering rent, repairs, maintenance, alterations, defaults, notice, and termination. Then document what happened and follow any procedures the lease requires before you decide to withhold rent, make repairs yourself, modify the property, or take other action. A decision that seems reasonable from a business standpoint can still create a lease violation if you skip the fine print.

For legal help, speak with a business litigation lawyer who can explain your rights and obligations under the lease.

What Can Trigger a Commercial Lease Dispute?

Commercial lease disputes can start over money, maintenance, or property use. Common issues include rent increases, CAM charges, operating expenses, property taxes, insurance, repairs, maintenance, alterations, permitted uses, assignment, subletting, lease renewals, early termination, and holdover.

Before assuming the landlord or tenant is in the wrong, review the lease terms governing the disputed issue, including any notice deadlines or calculation requirements. A seemingly minor disagreement can become more serious when one party claims the other has breached the lease and seeks damages, attorneys’ fees, or other contractual remedies.

Step 1: Read the Entire Lease

The lease agreement is the starting point. Read the entire original lease along with every amendment, addendum, exhibit, guaranty, renewal document, assignment or sublease agreement, and rule or regulation incorporated into the contract.

Pay particular attention to lease terms concerning rent and additional rent, defaults, notice requirements, cure periods, repairs and maintenance, insurance, alterations, permitted uses, assignment and subletting, termination, remedies, attorneys’ fees, and dispute resolution.

Do not overlook the lease’s definitions section. Defined terms can affect how an entire provision is interpreted and may matter most when the parties disagree about their respective obligations.

Step 2: Gather Evidence and Document

Claims need to be supported by documentation. A tenant should save all related documents when addressing an issue with the landlord. This could include the lease, lease amendments, invoices, notices, communication, and contractor estimates.

Use this documentation to create a timeline of events. Additionally, document how the breach impacts the business. This information will be essential when establishing damages.

Step 3: Check the Lease’s Notice and Cure Requirements

Commercial leases typically include notice and cure requirements. A tenant should review the lease to ensure they follow the lease terms while addressing the landlord’s actions. The other party’s lease violation does not give the tenant an automatic right to violate it, too.

The lease may require the tenant to send the landlord written notice. These terms typically specify who must send the notice, what it must include, where to send it, and when it is due. Applicable state law may impose additional requirements.

Step 4: Resolve the Dispute Before Litigation

Resolving the dispute before it reaches legal action can save both parties time, money, and the business relationship. Clearly explain the problem, relevant lease terms, and desired resolution in writing. This is called a formal demand letter.

Explore possible alternative dispute resolution (ADR) options. Many commercial leases include dispute resolution terms that require mediation or arbitration. Depending on the process used, the parties will negotiate to find an acceptable outcome. The parties will sign the agreement, and it will be enforced going forward.

Some commercial leases specifically provide for early lease termination when certain breach requirements are met. Early termination is often combined with a claim of constructive eviction.

Under applicable law, the landlord’s substantial interference with a tenant’s ability to use the premises may support a constructive eviction claim. State law varies on the requirements for a successful claim.

Step 5: Understand Your Legal Remedies

If ADR methods aren’t an option or the parties can’t agree, legal remedies may be an option. A breach of contract claim may be possible if the party violated the lease terms. A lease is a type of contract, enabling this legal claim.

If the landlord is taking an action the tenant wants stopped, they may be able to seek an injunction. The court issues an order that prevents certain conduct.

What Defenses May a Commercial Landlord Raise?

When a tenant makes claims, the landlord may have certain defenses available. The most obvious is that the tenant failed to comply with the lease terms. This could be anything from past-due rent to improper use or failure to maintain insurance.

In a commercial lease, it’s common to restrict the type of business that can operate in the space. An improper use violation could involve operating a business the parties didn’t agree to or subleasing to an unauthorized business. A landlord may seek an eviction for unpaid rent that the tenant refuses to pay.

The landlord could start eviction proceedings because the tenant failed to follow lease provisions for notice or cure requirements. Another option is to argue that the claimed damages are unproven or excessive. The lease terms may also limit the tenant’s potential remedy.

What Defenses May a Commercial Tenant Raise?

Depending on the circumstances, a tenant may be able to raise legal defenses against the landlord’s claims. One common argument is that the landlord breached the lease first. This would require providing documented proof of specific actions that violated lease obligations.

The breach must connect to the tenant’s claimed defense or remedy. It’s also common for landlords to fail to follow required procedures. These could be procedures outlined in the lease or the state’s statutes.

Another potential argument is that the landlord interfered with the tenant’s use of the premises. A tenant has a right to quiet enjoyment of the property during the lease term. Depending on the landlord’s actions, a tenant may be able to argue for constructive eviction. The landlord’s actions effectively forced the tenant to lose access to or use of the property, such as changing the locks.

A tenant may argue that the landlord’s claimed damages are incorrect. Finally, the tenant may defend their actions by showing that the landlord waived or modified certain rights. The parties’ conduct, written modifications, amendments, or course of dealing may indicate a change in the lease agreement.

Understand the Risks of Letting a Commercial Lease Dispute Escalate

Sometimes, litigation is the only option to resolve commercial landlord-tenant disputes. However, this can increase the tenant’s risk. A tenant’s financial obligations could include unpaid rent, late fees, interest, repair costs, or other contractual damages.  

Ignoring the landlord could lead to an eviction filing. This could mean disrupting operations by removing access for employees, customers, inventory, and equipment. Relocation costs could also arise if the business moves to another location.

Depending on the type of commercial lease, the business owner may have agreed to personal liability. Some states allow the parties to seek attorneys’ fees. The longer a dispute continues, the greater legal costs are likely to be.

When Should a Business Tenant Hire a Commercial Real Estate Litigator?

Speaking with a lawyer before taking any action is always a smart move. This gives tenants an opportunity to get reliable legal advice.

For example, tenants may have specific situations in which they can withhold rent. However, each state has different qualifying circumstances and specific procedures for doing so. A lawyer can explain if and how a tenant may do so. If the landlord has already taken legal steps, a lawyer can explain the tenant’s legal responsibility when responding to a default, cure, or eviction notice.

A lawyer can also assist in the more pressing situation of a landlord threatening lockout or termination. If the tenant decides to pursue legal action, a lawyer can evaluate available remedies, potential defenses, litigation costs, and potential damages.

Protect Your Business Before a Lease Dispute Starts

A commercial lease dispute can start with a disagreement over rent or repairs and end with an eviction threat, a damages claim, or a serious disruption to your business. An attorney can review the lease and evidence, identify potential claims and defenses, and help you protect your business operations and assets while you work toward a resolution.

If you are dealing with a commercial lease dispute, use the Super Lawyers directory to find a business litigation lawyer who can help you determine your next step.