As New Jersey commercial lease attorneys, we see all kinds of disputes arising from commercial lease agreements gone awry. Here are a few of the most common commercial lease disputes that we see, and tips for landlords to mitigate them. Of course, as most of these same issues also apply to commercial tenants, we are always happy to consult with potential commercial tenants as well.
Failure to Pay Rent
One of the most common issues we encounter—not surprisingly—are tenants that just are not paying their rent. Although a landlord may take legal action to collect the unpaid rent, we often also see landlords that allow their tenants to accrue months of unpaid rent and related expenses. These “grace periods” may often seem like the right thing to do, but they can create issues down the road in collecting the months of unpaid rent or expenses. A landlord may also have certain rights against guarantors of any such commercial lease, which they also must consider. If you have a commercial tenant who is failing to pay, you should consider immediately consulting an attorney to review your rights under your commercial lease agreement, help secure your owed funds as efficiently as possible, and to avoid any waiver of those payments.
Oftentimes, one party or another desires to terminate a commercial lease. Leases, like all contracts, are often broken and the specific contours of the agreement—as well as the relevant governing law—will dictate the options and remedies going forward. If you or your tenant is seeking to break a lease, you may consider consulting with an attorney to determine your best course going forward. Although there are generally consequences to breaking a lease, it is best to know your rights and liabilities—and perhaps to even negotiate an amicable outcome. Working with an experienced attorney can help you see this through.
Disputes Over Maintenance and Utilities
Unlike residential leases, commercial leases often involve terms allocating responsibility for utilities, maintenance, and improvements. Indeed, unlike renting an apartment, a commercial tenant—such as a factory or a retail store—may need to make substantial improvements to the site, install machinery, require unusual or significant utilities, and will involve substantial commercial foot traffic. This is an area in which preparation is key. Engaging an attorney to draft or review your commercial contract can ensure that problem areas are identified and settled before they occur. Our experience in drafting commercial lease and site agreements can help you identify these problems before they start, and also how to troubleshoot issues as they arise on an ongoing basis.
Disputes Over Habitability and Suitability
As we have seen with recent widespread flooding here in New Jersey, and with other unprecedented global events such as the COVID-19 pandemic, it is becoming more and more common that commercial tenants to complain that their leased site is no longer suitable for their purposes. Whether this comes in the context of frustration of purpose, impossibility, or a question of habitability or suitability, the fundamental legal principles are largely the same: does the change in circumstances boil down to something that truly disrupts the very assumptions underlying the original lease agreement? This area of law can be complicated, fact-specific, and is evolving. We certainly recommend consulting with a sophisticated commercial law attorney before arriving at any decisions.
Things simply go wrong from time to time, and accidents will happen on a commercial site. The allocation of responsibility for any such damages will largely turn upon the terms of the contract, as well as provisions requiring insurance or indemnification. We highly recommend that commercial parties think through these circumstances before they occur, and consult with an attorney who can present them with the difficult “what if” scenarios.
Indeed, as evident from above, many of the problems we see in commercial lease agreements are foreseeable, and to the extent, commercial lease disputes are to some degree unavoidable at points, it is crucial that your commercial lease agreement is designed to put you on the best and clearest footing in the eyes of the law. Consulting with an experienced commercial attorney, such as Dressel/Malikschmitt, can help put you in that position of strength.