5 Common Reasons for Commercial Real Estate Claims
Commercial real estate is a complex legal topic no matter how you approach it. When a commercial real estate contract is drafted and signed, it usually involves two large companies, a few lawyers, and plenty of clauses that outline what to do in case of conflict later. Despite all of this planning ahead, commercial real estate claims can and do often arise.
Here are 5 of the most common reasons behind commercial real estate claims, in no particular order:
- Maintenance disputes: Practically everyone has had to go through twists and turns to get their landlord to fix, maintain, or replace an issue on the property that they are renting. Such maintenance issues are only magnified in complexity – and the possible associated costs – when the property involved is used for commercial purposes. For example, a commercial HVAC system is enormous compared to a single system installed in a typical home, so commercial landlords might be hesitant to put in the money to repair and maintain the HVAC system appropriately. The end result could be a renter in an uncomfortable working climate made worse by a landlord who is going to drag the issue into the courtroom.
- CAM charge conflicts: In many commercial real estate contracts, there will be a discussion of Common Area Maintenance (CAM) and associated charges. Lobbies, courtyards, and dining areas are common areas that can be found in most commercial properties. Despite no tenant owning these areas, they can be charged for their maintenance. Disputes can arise when a tenant feels they are being charged too much for CAM services, or if they are paying CAM charges but common areas are poorly maintained, raising the question of where the money is actually being spent.
- Assignment provisions: There are times when a commercial tenant wants to sell their business, but their commercial lease has not yet expired. To conclude the sale and bring a new business into their rented commercial or office space, the landlord often needs to approve the incoming party, which is a power granted to them through assignment provisions in commercial real estate contracts. Assignment provisions can lead to legal conflicts when the provisions are overly restrictive, discriminatory, or one-sided, making it unreasonably difficult for the existing tenant to get out of the lease early by bringing in a new renter.
- Renewal disagreements: Similar to assignment provisions, renewal clauses in commercial real estate contracts can become legally problematic if they make matters overly stressful for commercial tenants. To avoid legal conflicts when it comes time to renew or cease a contract, commercial landlords should work with attorneys whenever drafting a new lease or rental agreement and make certain to include a clearly written renewal clause that outlines when the lease can be renewed, how much rent can increase at that time, and what reasons the landlord can use to refuse a renewal.
- Missing rent: Of course, there is always the age-old problem of tenants refusing to pay rent for one reason or another. Landlords and tenants in both commercial and residential settings have long gone head-to-head over this issue. As a helpful hint for both parties, lands and tenants alike should keep careful records of rental payments to avoid having to rely on the other for information in case rent ever comes up short or late. When rent is missing and the tenant will not pay, commercial real estate litigation is often the only solution, especially since monthly payments on commercial properties can be set at five-figures or higher, meaning the landlord could be out of a significant sum of money in just a few short months.
Have questions about commercial real estate litigation in Austin? Call (512) 430-4844 to connect with Howry, Breen & Herman, LLP. Our attorneys have the experience, insight, and connections to confidently represent landlords and tenants alike, usually for plaintiffs. We have successfully represented ranchers, farmers, small business owners, large corporations, and more throughout the years.