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Types of Commercial Real Estate Disputes

Different types of Commercial Real Estate Disputes

Lease Disputes

By signing a lease (a rental agreement), a landlord agrees to rent their commercial property while a tenant obliges themselves to pay the rent. In Florida, Residential Landlord Tenant Act (Florida Statutes at Part II, Chapter 83) deals with landlord-tenant relationships. The provisions of the lease agreement must comply with the Act. The rental contract can be oral, meaning the law does not require a written form. The exception is an eviction notice, which has to be in writing. Otherwise, it does not have a legal effect.

The landlord has multiple responsibilities, including maintaining the property, performing regular repairs, and complying with housing, building, and health regulations. On the other hand, a tenant has the right to peaceful possession of the property. In return, they must pay the rent on time (including a security deposit, if required).

Lease disputes arise between a landlord and a tenant when a disagreement occurs regarding their mutual rights and obligations defined by the lease. For example, damaging the property or violating housing rules and regulations leads to a dispute. Similarly, failure to pay the rent on time or serve an eviction notice within the specified period (defined by Florida Statute 83.57) constitutes a rental agreement breach.

When the lease dispute occurs, the most effective way to resolve it is to entrust it to a neutral third person called the mediator. Mediation is an out-of-court method that offers multiple advantages over traditional litigation. The mediator does not have decision-making authority, nor can they impose solutions or give legal advice. Instead, they facilitate negotiations in a peaceful and neutral environment, motivating the parties to settle their disagreement.

Boundary Disputes

Boundary disputes involve disagreements about boundary fences. The boundary fence is a line that divides two neighboring properties. The boundary falls in the middle of the line dividing the two properties. According to local ordinances, both neighbors own the fence equally, meaning they share responsibility for its maintenance.

The most common cause for boundary disputes is a conflict regarding the boundary location. Neighbors disagree about whether the boundary fence falls in the middle of the division line or lies at one property. If it lies on one property, the other owner can claim ownership over the parts of that property, leading to encroachment disputes. In addition to the location, boundary disputes can arise because of the construction material. If one neighbor used prohibited materials (for example, electrically charged walls), the other could point to local ordinances violations. Next, maintaining the boundary fence is another reason for a dispute. Since both neighbors own the boundary, they must equally contribute to its maintenance. Otherwise, conflicts arise. In the end, neighbors can disagree about the height of the boundary fence (preventing the sunlight or blocking the view), which can lead to a dispute.

Boundary disputes involve neighbors disagreeing about the location and other aspects of the boundary fence dividing their properties. Resolving these disputes in vindictive litigation can only make things worse, ruining the relationships between people living next to each other. Instead of engaging in an adversarial court process, neighbors should utilize the benefits of mediation, negotiating their way through disagreement with the help of a neutral mediator.

Easement Disputes

An easement is a right to use the property belonging to someone else without owning it. In Florida, there are two broad categories of easement: easement appurtenant and easement in gross.

An easement appurtenant deals with the relation between two properties – the servient and the dominant estate. The servient estate is land that has an easement on it. Each owner of the servient estate must acknowledge the easement and let each owner of the dominant estate benefit from the easement. Changing owners of the servient or dominant estate do not affect an easement – it stays with the land.

On the other hand, an easement in gross benefits a person (not a land). That means an easement follows the individual who benefits from it – if the person changes, the easement does not transfer to another individual.

In addition to an easement appurtenant and an easement in gross, the common law also recognizes the so-called prescriptive easements. That is an easement constituting after 20 years of continued use without objection.

Other types of easements include easements by way of necessity, access easements, and solar easements.

Depending on the easement type, disputes arise between the owners of the servient and dominant estate or between the person benefiting from the easement and the property owner. Disagreements occur due to different understandings of the period needed to constitute an easement, the scope of use (limited area or route), access restriction, overuse, relocation, transfer of the right, etc.

Resolving easement disputes in litigation is time-consuming, costly, and ineffective. As a vindictive process, it often generates new disagreements and hostilities. Instead of wasting time and money in an adversarial process that cannot bring true reconciliation, disputed parties should turn to mediation. As an alternative dispute resolution method, it offers various benefits over litigation. The mediator facilitates negotiations in a neutral and friendly atmosphere, stimulating the parties to settle.

Construction Defects

Construction projects involve complex and long-term relationships between different parties. With so many participants coordinating their activities, construction projects often result in defects.

Florida Statutes Chapter 558 deals with construction defects ensuing from work performed by various construction actors (contractor, subcontractor, architect, engineer, geologist, etc.). A construction defect is a deficiency in the construction process, causing damage to a property owner.

Three main types of construction defects are the following:

  1. Design defects. These defects occur due to architects’ failure to create accurate construction design documents.
  1. Material defects. If the defects arise from inadequate building material, the damage can occur after the owner starts using the property, often causing health and safety hazards.
  1. Professional defects. Defects resulting from failure to build a structure according to construction design are called professional defects. Professional negligence can result in significant damage.

Florida law mandates a pre-suit procedure for building owners experiencing construction defects. That involves serving a notice containing the claims about each deficiency (location, description, and the associated damage). After sending the letter, the parties have 60 days to resolve the dispute internally. If successful, the process allows the parties to avoid costly and time-consuming litigation.

Mediation is another way to resolve construction defect disputes out of court. It emerges as the most effective tool for achieving mutually beneficial outcomes, allowing the parties to settle their differences at a negotiation table, on time, and at a lower cost. Unlike state-appointed judges, mediators cannot resolve disputes by issuing binding decisions. Instead, they facilitate negotiations, motivating the parties to bring offers and counteroffers. If successful, mediation results in an agreement enforceable as a court judgment.

David John

David L. John

My experience of over 30 years of actual hands-on business experience in manufacturing, professional engineering consulting, construction, commercial & residential real-estate transactions and general business.

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