Under a typical commercial lease, the landlord has fewer obligations than the tenant, but they are significant: maintaining and insuring the building, providing services and not interfering with the tenant’s right to occupy. Any breach could affect a commercial tenant’s business and cause problems for staff, customers and suppliers.
A commercial tenant’s main priority will be to keep the business running without interference. If the landlord fails to maintain the building properly when required by the lease to do so, or blocks the tenant’s access, the tenant will want to sort things out as quickly as possible.
Faced with a landlord in breach, there are a range of options. The first step will be to try to make the landlord act, by highlighting the alleged breach and threatening further action if the landlord does not put things right. If the tenant has to go to court later, it is important that this initial approach is made in the right way, so you should get your solicitor involved at this stage.
If this does not work, the tenant may be able to do the work and deduct the cost from money due to the landlord. This is not always possible because a commercial lease will often restrict the tenant’s right to withhold money in this way. The tenant also runs the risk of the landlord challenging the standard of work or the amount withheld.
Alternative dispute resolution
Public policy has, for some time, encouraged alternative ways to resolve disputes by using professional mediation, arbitration, or expert determination. Each has advantages and disadvantages, which your solicitor will be able to explain. If a dispute ends up in court, the judge will usually look at whether the parties tried alternative dispute resolution first. Parties who refuse to try this route may find a judge less willing to order that damages and costs are paid to them, so this can be an expensive mistake.
If there is a dispute over whether the landlord is in breach and what action is required, or what the tenant can do by way of self-help, the tenant can ask the court to make a declaration. This may be enough to get the landlord to act but it can also be combined with a court application for a specific performance to make the landlord comply with its covenants; or a damages claim, to compensate the tenant for the landlord’s failure.
The court may make an order for specific performance, if it is clear that damages will not be an adequate remedy. In a high-profile case from 2019 a landlord was ordered to carry out expensive repairs to the glazed exterior of a distinctive tower block in Manchester, because the cheaper temporary fix the landlord had preferred was adversely affecting the tenant’s hotel business. Orders for specific performance on this scale are relatively unusual, but tenants can succeed in cases where the landlord’s obligation and the impact of the breach on the tenant are clear.
The tenant’s other key remedy for landlord breach is a claim for damages. The aim here is to get compensation for loss the tenant has suffered as a result of the landlord’s breach. To be successful, the tenant will have to prove their loss and establish that this was caused by the landlord’s action (or failure to act). If the link between the breach and the loss is too remote, the claim will fail.
Going to court can prove expensive and will inevitably take time. A commercial tenant’s best course of action is to get legal advice as soon as possible. A timely solicitor’s letter could be enough to prompt the landlord to act. If not, the tenant will have paved the way for alternative dispute resolution and, if all else fails, court proceedings.
For further information, please contact the dispute resolution team at Forrester Sylvester Mackett on 01225 755621.