A commercial lease is a legally binding contract made between a landlord and a business tenant. It is an important document for both the landlord and tenant to protect their rights and avoid issues, but even with one in place, disputes can arise. 


As a small business owner, commercial lease disputes can negatively impact your business and cost you a lot of money.


Understanding the common types of commercial lease disputes can help you navigate your lease to avoid costly disputes and interruptions in your business.

Common types of commercial lease disputes

Most lease disputes arise due to a contract issue, usually because the clauses in the contract are missing, vague or disproportionately favour one party. Contract issues often fall into one of the following categories: 


1. Property damage

A dispute may arise if the leased premises are damaged and the tenant wishes to terminate the lease. Typically, damage clauses in lease agreements will state that only the landlord has the right to terminate the lease in the event of property damage.


2. Repairs to the property

There can be disagreements over who is responsible to repair and maintain the property: the tenant or the landlord.  It is important to review your lease to determine which part of the premises are your responsibility to maintain, especially if you are leasing a stand-alone building where you might be responsible for the exterior as well as the interior.


3. Lease deposits

A dispute may arise over a lease deposit and whether a business should receive this amount in full on lease termination, or if the landlord has the right to keep some or all of the deposit.  Most commercial leases will outline the condition that the premises must be left in following termination, and what items you can and cannot remove.


4. Operating expenses and fees

Make sure to review your lease for any additional costs and fees that will be charged over and above the base rent amount. These fees may be the cost to repair the premises, or the landlord’s legal, accounting and management fees, among other things.  While these are standard charges, you’ll want to ensure that they are reasonable and fall within fair market value.


5. Subleasing the property

If a lease agreement does not have clear guidance regarding sub-leasing or assigning the lease, use caution before you arrange for someone to rent a portion or all of your premises.  If sub-leasing is permitted, confirm if there are restrictions on the type of business that can operate out of the premises to ensure that the new tenant falls will be entitled to use the space.


6. Violating lease terms

A dispute may arise if various terms of the contract are unclear. This could include terms on who can use the property, the time period of the lease and the terms of the monthly payments.  A typical commercial lease will include dispute resolution provisions to guide you through the resolution process.


7. Failure to pay rent

Failing to pay rent is probably the most common source of dispute between landlords and tenants. Recently, a lot of businesses and landlords experienced this issue due to COVID-19 and the government mandated closures. While the pandemic has created some alternative resolutions, these will not always be in force so make sure to read your lease to find out what penalties may be applicable if you fail to pay rent or pay it late.

How to avoid a commercial lease dispute

The best first step is to have a clear commercial lease agreement in place. Lease agreements can contain hidden pitfalls for tenants, so it is important to review your lease thoroughly before signing. 


Before you enter into a commercial lease agreement, it’s important to negotiate, understand the terms of your lease, get everything in writing, be ready to walk away and seek legal advice before signing. A small business lawyer can help protect your interests and help you avoid commercial lease violations and disputes in the future.

What to do if you are involved in a lease dispute

Due to the intricacies of a commercial lease, finding a reasonable resolution in a dispute can be complicated. Getting legal help is often the best route for settling these disputes as it can help save time and money, maintain confidentiality and potentially save the business relationship. 


If you’re facing a dispute over a commercial lease and require legal representation, Benchmark Law’s Business Dispute Lawyers can help.