Mediation offers a productive way for commercial property owners to address issues with unhappy tenants.
THE SITUATION IS familiar to every commercial property owner: The lease was signed with great optimism and without extensive negotiation, except for some discussion of the rent and other charges. But now, several years into the lease, the tenant is unhappy about something. The landlord is still collecting rent, but the tenant is grumbling and discontented. Maybe they think that they’re not getting enough customer traffic. Maybe they feel that they’re paying too much in common charges. Maybe they now believe that they didn’t strike the best bargain when they negotiated the lease. The lease document itself doesn’t provide any answers. It was drafted with an eye to specifying the payments due and protecting the owner from incurring losses in any number of situations.
What should a landlord do with an unhappy tenant? Unfortunately, the property owner’s first instinct often is to ignore them. That can lead to unfortunate outcomes for both parties. Landlords and tenants have a relationship that goes beyond the terms of the lease. For example, most tenants want to know that landlords care about their well-being and don’t simply view them as a monthly rent payment. Both parties need to find solutions that fit within the context of that relationship. First, while the landlord’s initial instinct might be to brush the issue aside and hope it goes away, this approach will not improve the landlord-tenant relationship.
Louise Phipps Senft
A second option involves asking both parties’ lawyers to address the problem. However, several issues may arise when such disputes are handled through attorneys. They tend to look at the relationship through a legal lens, and will refer to the lease for answers. Often the lease doesn’t provide an answer, or the answer is one that is not helpful in the context of the business relationship. Attorneys also often have little incentive to resolve the conflict. In fact, their incentives and instincts may result in their escalating it.
Another option is for the landlord to sit down with the tenant and engage with them directly to fully hear what their issues are. Engaging in a dialogue generally leads to better outcomes. The conversation might be complex and difficult, however, and it may have legal implications, since any agreements made in discussions with the tenant might need to be documented. The difficulties and risks associated with talking to the tenant directly often make property owners reluctant to do so, even though, intuitively, it is the common-sense thing to do.
This is where a mediator can be helpful, even when the property owner has the upper hand legally and has no obligation to do anything to accommodate the tenant. A transformative mediator — one who does not force compromise, respects the abilities of businesspeople to come up with the best solutions and knows how to facilitate high-quality dialogue — can be a landlord’s best option. This is not a mediator looking to “split the baby” or make a decision, but rather one who provides a “safe place” where landlord and tenant can discuss possible solutions, one who recognizes that “no decision” can be an acceptable outcome, as long as both parties gain a better understanding of each other’s perspectives. A mediator can also offer complete confidentiality, through a process where everyone can speak freely and know that their words won’t be used against them later. Mediation can improve communication and strengthen the relationship between landlord and tenant, even when the tenant doesn’t get everything they want. In fact, mediators see this outcome all the time.