How to prevent and resolve tenant disputes

Maintaining positive relationships with your tenants is key for the success of your investment.

However, even with the best intentions, disputes can arise. If not handled properly, these disagreements can lead to strained relationships, financial losses, or even vacant properties.

In this blog, we’ll explore these common areas of dispute and provide practical strategies for prevention and resolution. We’ll discuss the importance of clear communication, proactive management, and the value of well-defined processes. You’ll also learn about formal dispute resolution methods like mediation and arbitration, which can be valuable tools when direct negotiation fails.

Rent reviews

Rent reviews are an important part of commercial lease agreements. They ensure that the rent being paid reflects the property’s current market value. They can also be an opportunity to strengthen tenant-landlord relationships.

While the review meant is to reach a mutually satisfactory agreement, the process can sometimes be challenging. However, with the right approach, landlords can navigate this process smoothly and maintain positive tenant relations.

Here are some important steps to take ahead of a rent review:

• Have a clear, transparent process outlined in your lease agreement
• Provide a notice detailing the proposed new rent and the factors contributing to this decision
• Be prepared for negotiations and consider your tenant’s perspective.

Understanding that a rent review is an opportunity to engage with your tenant and understand their perspective is important in avoiding disputes.

Remember, your tenant has the right to query the proposed rent and negotiate, and this discussion can often lead to a fair outcome for both parties.

Repairs and maintenance

Repairs and maintenance issues frequently spark disputes between commercial landlords and tenants, given their critical impact on both property value and business operations. However, there are steps landlords can take to avoid it.

It’s important to understand that there are different levels of ‘repair’:

• Minor repairs
• Damage caused by natural disasters

It’s important to note that no matter the level of damage, tenants are obligated to report these issues straightaway.

When it comes to minor repairs (interior breakages, etc.), the landlord is responsible for them and may be able to recover the costs from the tenant.

For damage caused by extreme weather events (Auckland floods, for example), the responsibility falls on the landlord. In these cases, insurance claims should be made as soon as possible, and you should communicate with your tenants so they clearly understand the steps you are taking to restore the property.

However, any damage, whether minor or major, needs to be addressed quickly in order to avoid disputes. This is where performing regular maintenance becomes key.

While there aren’t any legal requirements for landlords to conduct regular commercial property inspections, this still is an important step that safeguards your investment and helps preempt potential disputes. In these inspections, you’ll be able to identify any issues, uncover areas needing repair, and check the quality of work performed during any previous repairs done on the property.

Other tenants

Managing a multi-tenanted property presents unique challenges, particularly when preventing and resolving disputes between tenants. Keeping the peace among different types of businesses in the same building, like an office next to a busy café or shops below apartments, requires careful planning and ongoing management.

One key way to avoid tenant disputes is to select the right mix of businesses. It’s about creating an environment where different types of tenants can coexist peacefully, benefiting all parties involved.

Achieving this balance requires thoroughly understanding each potential tenant’s needs, operating style, and impact on the property’s overall dynamics. Businesses that generate significant noise, heavy traffic, or operate late into the night should be vetted with care. Their presence could potentially disrupt other tenants, leading to conflicts and tension.

A good mix of tenants might include different types of businesses like shops, offices, and shared workspaces. For instance, a café can get customers from a nearby office, while a shop might get more visitors because of the café. This way, all businesses support each other’s success.

Mediation v Arbitration

When tenant disputes arise, and direct negotiation fails, it’s crucial to have a structured approach to a resolution. Your lease agreement should include a clause outlining how disputes will be resolved, whether through mediation or arbitration.

Understanding these processes can help you navigate conflicts more effectively and maintain positive tenant relationships.

Mediation

Mediation is often the first step in formal dispute resolution. In this process, you and your tenant meet with a neutral, trained mediator who facilitates a discussion to reach a mutually agreeable solution. The mediator doesn’t take sides or make decisions but helps both parties:

• Clearly communicate their concerns
• Identify the core issues of the dispute
• Explore potential solutions
• Work towards a resolution that satisfies both parties

Mediation is generally less formal, less expensive, and quicker than arbitration or litigation. It also allows for more creative solutions that can preserve the landlord-tenant relationship.

Arbitration

Arbitration is often the next step if mediation doesn’t resolve the dispute. Arbitration is more formal than mediation but still less rigid than a court proceeding.

Here’s how it works:

• An independent arbitrator (or panel) is chosen, often mutually agreed upon by both parties
• Both sides present their case, which may include witnesses and evidence
• The arbitrator considers all information and makes a binding decision, called an “award”

Arbitration is typically faster and less expensive than going to court, but it involves costs usually shared between the landlord and tenant.

Azure can help

While understanding mediation and arbitration is important, the ideal scenario is to avoid escalating disputes to these formal processes. Better yet, preventing disputes altogether is the most effective way to maintain long-lasting landlord-tenant relationships and protect your investment.

This is where partnering with a professional commercial property manager like Azure can make a significant difference.

Azure brings a wealth of experience and expertise to the table, offering proactive strategies to minimise the risk of dispute.

Having a successful commercial property is about more than just collecting rent – it’s about creating an environment where your tenants can thrive, and your investment can grow. With Azure by your side, you can focus on your core business while we handle tenant relations and dispute prevention.

Get in touch with our team to see how we can help.