Renting a commercial space is fundamental to doing a successful business in Florida. Whether you run a small business or manage a large corporation, well-equipped, functional commercial premises are necessary for growing your enterprise. No matter how long, your rental journey starts with a single step – signing a commercial lease agreement.
This article will explain the role of the lease agreement, underscore the consequences of breaching it, and introduce the benefits of mediation in resolving disputes arising from a breach of a commercial lease in Florida. Read on to learn more.
Instead of buying a commercial property, business owners find renting office buildings, warehouses, malls, and other business premises more attractive because of numerous reasons (flexibility, freeing up working capital, maintenance, and repairs benefits, etc.).
A commercial lease agreement (lease) is a starting point in your thriving success story. It is a legal instrument dealing with mutual rights and obligations in a relationship between a tenant (the occupant) and the landlord (the property owner).
A good relationship between the lease parties depends on the degree of compliance with the material terms of the agreement. Failing to honor contractual obligation constitutes a breach of the commercial lease agreement, leading to its termination (forfeiture). There are two categories of termination grounds: monetary and non-monetary.
Breaking a commercial lease is sometimes justified. Under Florida law, tenants have the right to break a lease in case of entering active military duty (Servicemembers Civil Relief Act), if the landlord violates the tenant’s contractual rights, and in case of health and safety concerns (Florida Statute 83.51).
In other instances, lease violations can lead to legal consequences for the breaching party. Here are the most common:
Tenants breaking a commercial lease in Florida can be subject to court fines and penalties. Failing to meet contractual obligations (paying the rent on time, paying taxes and maintenance costs, etc.) gives your landlord the right to seek legal action against you. If the court concludes that your failure to honor agreed-upon terms has no legal justification, you may face fines and penalties.
According to Florida Statute 83.49, the tenant pays the security deposit to the landlord when signing the lease. Its purpose is to protect the landlord from potential damages to the commercial premises or to cover unpaid rent. After the lease expires, the landlord returns the deposit to the tenant. However, if the premises are damaged (or the tenant fails to pay the rent), the landlord can keep the security deposit with prior notification to the tenant about such intention.
Breaching lease provisions can result in tenants paying future rent for the remaining lease term. In other words, despite vacating the commercial space, the tenant can be held liable for the rent payment for the entire lease period – until it expires. However, sometimes tenants cease their business operations (due to losses) and empty the premises while voluntarily continuing to pay the rent for the remaining lease term (the so-called going dark). The landlord must decide whether such behavior constitutes a breach of the lease. Florida courts have determined that unless there is an express covenant of continuous operation in place, the tenant cannot be held liable for breach of the contract (Mayfair Operating Corp., v. Bessemer Properties Inc., 150 Fla. 132, 7 So. 2d 342, Fla. 1942).
Finally, failing to honor lease terms can negatively impact your credit score. Namely, rental payment information is typically part of your credit report sent to credit reporting companies. Missing rent payments and failing to pay penalties resulting from a breach of the lease can make procuring new rental agreements more difficult.
As an adversarial and confrontational process, litigation focuses on enforcing the plaintiff’s rights and punishing the defendant for failure to fulfill obligations.
Unlike the court procedure, mediation is an alternative dispute resolution method that encourages self-reflection, compromise, and reconciliation.
Here are the reasons why you should consider mediation when dealing with the consequences of breaking the commercial lease:
As mentioned, paying future rent is one of the typical consequences of breaching the lease agreement in Florida. Instead of enforcing the right to future payments in court, the parties can opt for more creative solutions. As an out-of-court method, mediation offers a neutral platform for amicable negotiations. With the assistance of the neutral intermediary, the parties can agree on a mutually beneficial payment plan for unpaid rent. That includes prolonged payment deadlines and other benefits for the tenant, on the one hand, and better payment guarantees for the landlord, on the other. Furthermore, the tenant can agree to perform repairs in exchange for a reduction in rent. Simply put, mediator-facilitated negotiations emerge as a better platform for achieving positive outcomes than the courtroom.
Keeping parties out of court saves everyone’s time and money. Both parties prosper by avoiding hefty court filing and attorney fees. Instead of paying substantial sums to court and attorneys for each litigation stage, parties can save significant money by entrusting their dispute to a neutral mediator. There are no rigid litigation rules and financially exhausting processes (discovery, witness hearing, expert-witness testimonies, etc.) in which costs pile up with each stage. The mediator’s fees are considerably lower, and the parties can divide them equally, easing the financial burden for everyone. In addition to spending less money, parties save precious time mediating their commercial lease dispute. Given the court backlog, you can wait several months for an initial court hearing date. It can take years until the court issues the final judgment. In contrast to litigation, mediation lasts several months or even weeks.
Resolving commercial lease disputes in court means entrusting your faith to state-appointed judges and randomly selected jurors. The parties have zero control over the outcome. In addition to waiting for years for the final resolution, their relationship depends on the binding decision of outside decision-making centers. Unlike the court process, mediation puts the parties behind the steering wheel and makes them responsible for the outcome. They can change the mediator or abandon the negotiation process at any time. Because of the flexibility of mediation, disputed parties are more likely to abide by the agreement. Instead of a court-imposed decision, they have a deal reached freely through negotiations.
Commercial lease relationships are a foundation for thriving businesses. Any disagreement leading to a dispute can harm reputations and result in operational losses. Litigating lease disputes opens the door to the public, enabling everyone (including the competition) to learn about your business strategy and other confidential information. Mediation is different. Nothing shared during mediation sessions can ever become part of the public record. Confidentiality extends to potential future litigation, meaning the parties cannot use information revealed during mediation as evidence in court.
Florida commercial leases can be short-term (three to five years) and long-term (over five years). In either case, you enter a business relationship with a prospect of lasting several years. Litigating potential disputes results in ruined relationships and lost business opportunities. Conversely, resolving the conflict in non-adversarial mediation saves thriving businesses and promotes stronger cooperation. Mediation is non-confrontational, informal, flexible, and confidential. As such, it enables a free flow of information, better understanding, and finding common ground. In mediation, the dispute is not a plateau but a launch pad for your business relationships.
Mediation Clause
To make mediation mandatory in potential commercial lease disputes, parties can draft the mediation clause or enter a separate mediation agreement.
If you wish to mediate any potential dispute arising from the commercial lease, you can insert the mediation clause in the original lease.
Alternatively, disputed parties can enter into a separate mediation agreement in case of a dispute arises after signing the lease.
A certified Florida mediator, David L. John, has over three decades of hands-on business experience.
Mr. John understands how vital commercial lease relationships are to any prosperous business. Being involved in countless disputes involving lease violations, he has witnessed the detrimental effects of litigation on once-thriving relationships.
Instead of letting the fate of your business go down the drain during years of expensive court hearings, entrust commercial lease disputes to a top-tier expert mediator such as David.
With unmatched subject-matter expertise and sophisticated negotiation skills, he can help parties bridge the divide through meaningful conversations. His utmost dedication and pursuit of perfection will lead you to an agreement that will serve as a new, stronger foundation for your business relationship.
Please call us today at 954-444-2900 or email us at ddjohnnz@gmail.com to schedule your free consultation.
