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Seven Strategies for Minimizing Legal Costs in Commercial Landlord-Tenant Disputes
Property owners can often take practical steps to avoid disagreements turning into litigation.
Engaging a landlord-tenant attorney is often a distressing necessity for property owners. It typically signifies a deterioration in the landlord-tenant relationship, whether due to nonpayment of rent, improper use of the premises or other disagreements. These issues often stem from unmet expectations — perhaps a tenant’s business is underperforming or unforeseen complications have arisen during property build-outs.
Regardless of the cause, resolving such disputes invariably incurs costs. This article outlines seven strategies property owners can adopt to minimize expenses when conflicts with commercial tenants arise.
1. Prioritize Lease Clarity During Drafting.
A well-drafted lease is the foundation for preventing disputes. Effective leases incentivize compliance and dissuade breaches by clearly delineating consequences for nonperformance. For instance, provisions addressing late payments should specify legally enforceable penalties.
Advanced lease drafting can also mitigate conflicts over variable charges, such as real estate taxes or operating expenses. Clear mechanisms for calculating and communicating these charges reduce the likelihood of disputes stemming from unexpected financial obligations. Additionally, enforceable liquidated damages clauses can deter tenants from breaching leases for financial gain. However, care must be taken to ensure such clauses are reasonable and not deemed unenforceable penalties by a court.
2. Maintain Accurate and Comprehensive Records.
Meticulous record-keeping is essential in litigation. In most cases, the trier of fact will be a judge, as many commercial leases include jury waiver clauses. Judges, who often manage heavy caseloads, appreciate clear, error-free documentation. Ensure that financial records and tenant notices are accurate and internally consistent. Avoid altering claims during litigation, as such changes necessitate additional explanations, increasing legal fees and the risk of disputes over accounting accuracy. Strong, comprehensible records bolster credibility and minimize opportunities for tenants to contest claims.
3. Communicate Effectively and Proactively.
Open, honest communication fosters better outcomes. Inform tenants promptly of necessary repairs or any inability to address their requests, and ensure that all communications are documented in writing. Even if clear communication does not resolve the issue, it establishes the landlord as the reasonable party in the eyes of the court, which can reduce legal costs.
4. Adhere to Professional Advice.
Engaging experts such as architects or engineers demonstrates due diligence. Following their recommendations provides a strong defense, showcasing the landlord’s commitment to maintaining the property responsibly. Ignoring expert advice, however, exposes landlords to scrutiny and undermines their credibility. If professionals are retained, their guidance should be followed to avoid unnecessary complications in litigation.
5. Implement Standardized Policies and Procedures.
Uniform policies and procedures streamline operations and mitigate potential legal challenges. Standardized approaches serve as checklists, ensuring critical steps are not overlooked, and demonstrate consistency in tenant treatment. This reduces the risk of allegations of disparate treatment, which can complicate litigation and increase legal costs.
6. Invest in Staff Training.
Property management often involves a team responsible for operations, accounting and tenant interactions. Comprehensive training equips staff to handle disputes effectively and avoid errors that could escalate conflicts. A well-trained team minimizes weak links, ensuring the property owner’s interests are consistently upheld.
7. Balance Reasonableness With Firmness.
When negotiating dispute resolutions, landlords should aim for practical solutions that enable tenant compliance without creating untenable obligations. Unrealistic demands may exacerbate disputes, increasing damages and prolonging resolution. At the same time, landlords must enforce lease obligations consistently to prevent tenants from disregarding contractual responsibilities. Striking this balance fosters respect and mitigates the risk of disputes escalating.
Taking a Proactive Approach
Legal disputes are an unwelcome but sometimes unavoidable aspect of property ownership. By proactively addressing potential issues through clear leases, thorough documentation, effective communication and consistent enforcement, landlords can reduce the likelihood of conflicts escalating into costly litigation. When disputes do arise, adhering to these strategies can help contain legal expenses while protecting the landlord’s interests.
Howard Koh is a partner and commercial litigator at Meister Seelig & Fein.
