Strategies For Resolving Disputes In Commercial Real Estate

Strategies For Resolving Disputes In Commercial Real Estate

Real estate disagreements are a common occurrence for those who develop, occupy, or own commercial property, ranging from ownership or partnership altercations, project changes, and payment disputes to contractual, employee, or supply chain issues, which can result in lengthy legal battles that drain resources and delay progress. However, by adopting a suitable approach and understanding what commercial property dispute resolution involves, it is possible to efficiently manage and resolve these conflicts, enabling companies to concentrate on meeting their financial and business goals.

Understanding Commercial Real Estate

In basic terms commercial property refers to property utilized for business reasons or to offer workspaces instead of living spaces. Owners of this type of property typically lease it to tenants to generate income; in addition to property leasing, commercial property helps create revenue through its construction, management, and marketing. Various types of commercial property exist, ranging from office spaces, retail outlets, resorts, and hotels to restaurants, healthcare facilities, and shopping malls.

What Are the Different Types of Commercial Property Disputes?

Commercial property disagreements usually involve a combination of multiple parties. These parties often include landlords, tenants, investors, commercial property developers, construction companies, and other individuals or entities involved in commercial property transactions.

Disputes related to commercial property can arise in a number of scenarios with varying degrees of complexity, such as disagreements between tenants and landlords or licensees or licensors, real estate or construction contractual breaches, and property encroachments or boundaries. The following are some other examples of these types of disputes:

●?????? Fraud or misrepresentation: Instances of fraud, which, according to the Department of Justice (DOJ), also encompasses deceit, dishonesty, and false representations, can result in disputes linked to a real estate agreement’s validity and degree of liability.

●?????? Project requirement/scope changes: Commercial property disagreements might take place when a construction project’s requirements or scope changes since it can lead to additional responsibilities, timelines, or costs.

●?????? Payment disputes: These disputes concern payment amounts and terms, as well as when a party fails to make any payment for a provided good or service.

●?????? Contract terminations: If a party ends a contract early without providing a valid reason, this usually leads to disagreements concerning each participant’s obligations and legal rights.

●?????? Supply chain disruptions: Interruptions in a supply chain, such as transportation delays, logistical issues, or raw material shortages, may lead to contractual obligation delays, financial losses, and confusion over responsibilities, giving rise to commercial property disputes.

●?????? Employee issues: Disagreements between employees and employers, including those linked to wages, termination processes, or working conditions, can give rise to commercial disputes.

●?????? Partnership or ownership disagreements: These disputes relate to disagreements between real estate business partners or owners concerning their decision-making ability, ownership rights, exit strategies, or profit sharing.

●?????? International disputes: Per the International Monetary Fund (IMF), the United States has the largest commercial property market, making it an attractive place for cross-border real estate transactions. These disagreements, often related to contractual breaches or payment issues, involve conflicts between the parties involved in commercial property transactions operating in different jurisdictions.

●?????? Regulatory compliance issues: If a company does not comply with health and safety or environmental regulations, this can cause disputes and may potentially result in penalties, fines, and other legal consequences.

What is Involved in a Successful Commercial Dispute Resolution?

Commercial dispute resolution often includes various strategies and techniques focusing on resolving disagreements between companies or individuals and businesses. These resolution methods include negotiation, arbitration, mediation, and litigation, which all offer different benefits and drawbacks. Ultimately, the goal is to obtain an agreement that all parties can accept while minimizing the reputational and financial implications experienced by those involved in the conflict.

What Are the Different Methods of Solving Commercial Legal Disputes?

The main methods of solving commercial legal disputes include negotiation, mediation, arbitration, and litigation.

Negotiation, which is usually the starting point for resolving these disputes, is the cheapest and easiest route to solving disputes since it typically involves coming to an agreement without external help (although attorneys may facilitate this process), but it relies on the parties’ willingness to reach a solution.

Mediation and arbitration are effective options for when an unbiased opinion is necessary to resolve a dispute, which also tends to be more efficient and economical than traditional court proceedings.? Mediation involves bringing in an unbiased third party to help the parties reach a mutually agreeable solution without making a ruling themselves, offering all parties control of the entire process, whereas arbitration entails seeking an enforceable ruling made by an impartial third party, known as an arbitrator, to solve a dispute. Most standard commercial lease agreements will include a mandatory Alternative Dispute Resolution (ADR) clause that requires the parties to engage, at a minimum, in mediation before arbitration or litigation is allowed.? Some clauses go a step further and mandate any dispute utilize arbitration instead of litigation.

If the above methods fail to make an impact, and it is allowed per the contract between them, the parties can turn to litigation, a thorough and complex procedure, where a court of law makes a legally binding ruling to end the conflict.

How To Efficiently Resolve Commercial Real Estate Disputes

When looking to resolve commercial disputes, be sure to adopt a collaborative and communicative approach, and be willing to find common ground. Below are several strategies that can help the parties involved in commercial property transactions to overcome disputes.

Intervene Early

Try to identify and address disputes as early as possible. This helps stop these disagreements from worsening and potentially resulting in an expensive legal battle.

Communicate Openly

Communicate with other parties clearly to facilitate commercial dispute resolution. Additionally, encourage the other parties to openly express their interests and concerns to foster collaboration and trust.

Be Flexible

Due to the uniqueness of commercial disputes, it is worth being open to various resolution options. Whether the conflicting entities opt for informal negotiations or a more structured procedure such as arbitration or mediation, flexibility can help parties find an appropriate way of overcoming the disagreement.

Preserve Relationships

Many dispute resolution methods can achieve results while also maintaining business relationships, which is vital for companies seeking sustainable levels of growth. As such, the conflicting parties may benefit from addressing immediate disputes but also seeking solutions that encourage mutual advantages and long-term collaboration.

Consider Professional Help

The parties involved in commercial property disputes could consider consulting with legal professionals to gain support and insights during the dispute resolution process. This may enable these parties to obtain unbiased analysis, seek assistance with understanding the financial and legal implications of the dispute, and identify possible risks.

Conclusion

Resolving commercial disputes related to real estate involves communicating effectively, prudent planning, adopting proactive measures, adapting where necessary, and being willing to source mutually beneficial resolutions, which results in protected relationships, successfully managing conflicts, and reduced operational disruptions. Securing resolutions in this area often requires a tailored strategy that varies depending on the parties involved and the particular case.