Is the COVID-19 pandemic affecting your ability to pay
or receive rent in a commercial lease?

ACHIEVE CERTAINTY IN

YOUR NEXT MEDIATION SESSION

TNS Lawyers can help you hammer out a dispute resolution

that is both realistic and sustainable.

TEMPORARILY REDUCED MEDIATION FEES AT:

$1,200 + GST for Half-day Mediation (up to 4 hours)

$2,400 + GST for Full-day Mediation (up to 8 hours)

Get certainty for what you pay under your lease agreement.

Mediations are temporarily conducted via online video conference for everyone’s safety.

In light of the coronavirus pandemic, the national government has agreed on a mandatory code for commercial tenancies.

The Code aims to guide both landlords and tenants in seeking temporary arrangements that respect both sides’ interests basically until such time when normal trading activities can resume and recover from the effects of the COVID-19 pandemic.

The government is asking for tenants and landlords to negotiate in good faith. But, what does that mean when you cannot come to an agreement with the landlord or tenant when you negotiate with them directly? One way to go about the recent pandemic is to get the help from a neutral third party and go through the process of mediation.

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WHAT IS MEDIATION?

Mediation is the process by which two or more parties engage a mediator to help them resolve a dispute. The mediator’s job is to facilitate discussions for the parties involved to identify their issues and come up with pragmatic solutions which both parties can agree on.

Mediation is an alternative to litigation and other formal dispute resolution processes. Given that it is not a traditional court procedure, mediation provides for a relaxed environment and facilitates negotiations by both parties to come to a resolution on the dispute.

WHAT ARE THE CURRENT COMMON

COMMERCIAL TENANCY DISPUTES WE'VE HEARD?

Given the nature of real estate and the unique variables of every transaction, there are different disputes that could arise from a commercial tenancy. Some common issues are as follows:

● Rent and outgoing payments

    • Paying rent on time
    • Failure to pay rent
    • Rent review increases
    • Paying outgoings

● Early termination or forfeiture of the lease

    • Termination of the lease agreement
    • Abandonment by the Tenant
    • Repudiation of lease agreement

● Responsibility for property repairs

When damages happen, it can be easy to find yourself in a dispute trying to determine who is responsible for paying for the repairs and/or maintenance costs.

● Recovery of security deposits

A security deposit or bond is an amount of money paid by a tenant and held by the landlord as a guarantee. It is also common for this to be in the form of a bank guarantee.

What happens when you exit the lease but the landlord withholds your security deposit? Alternatively, what happens when the tenant exits the lease and there is not enough money to cover damages/unpaid rent?

WHY YOU SHOULD TRY MEDIATION FOR

COMMERCIAL TENANCY DISPUTES​

First, you should negotiate directly with the tenant or landlord. If you cannot agree with your landlord or tenant having regard to the current pandemic and code of conduct, do not “just leave it”. Although there is a temporary moratorium on evictions, it is important to note that this will not last forever. Further, the rent that you do not pay now may potentially accrue and issues will arise once this pandemic is over particularly given many leases hold personal guarantees. ​

Having regard to a Landlord’s perspective, coming down hard on your tenant may leave you “tenant-less” before the end of this pandemic. Given our current situation and the uncertainty of what the future holds, it could be extremely difficult to replace a tenant of good standing.

In mediation, the respective interests and circumstances of the parties come out and are generally taken into consideration. You have an expert who facilitates discussions to allow for each side to come to a compromise should they wish.

1. Less time, less money, less stress, less formality

Mediation is an informal dispute resolution process. This reduces the time, money, formalities, and stress that usually comes with litigation. The parties involved do not generally need to abide by strict rules on how to discuss their case, nor will they strictly need to have someone legally represent them. You will not be forced to come to an agreement although this is strongly encouraged.

2. Pragmatic solutions to complex issues

In mediation, both parties directly engage in the negotiation process. A good mediator is able to bring out each parties’ perspective to really allow the other party see it in “their shoes.” This paves the way for a more realistic solution.

Getting the help of a mediator who specialises in real estate matters, particularly commercial tenancies, also increases the possibility of finding a practical solution that benefits all parties.

3. Parties control the outcome

While there’s a mediator present during negotiation, the mediator’s role is purely to facilitate discussions and ensure that all parties are heard. However, the parties make the final decision.

If you fail to settle, then you fail to settle. There is no judgment imposed on you and a mediator will not impose on you something that you do not agree with.

4. Confidentiality

Mediation can be likened to a closed-door meeting. With this setup, parties can speak freely and comfortably about their concerns.

5. Preservation of relationship

Unlike litigation where a decision is imposed on you based on facts and the applicable law, mediation provides for an invaluable opportunity for both parties to sit down, explain their circumstances and work together to come up with a final resolution. If a decision is made against you, you might often feel hatred towards the other party.

In mediation, since the parties have a hand in the process and you only agree to settle if you’re entirely comfortable, it is more likely that you preserve the relationship with the other party.

FREQUENTLY ASKED QUESTIONS ABOUT MEDIATION

Do you have to go to mediation before going to court?

Mediation is not mandatory so you can just skip it and go straight to court. However, the court generally directs parties to mediate anyway.​

Do you have to mediate if you fail to reach an agreement between the landlord or tenant?

You are not compelled to mediate if you fail to reach an agreement. The government, however, is encouraging this for various reasons, one being that it creates certainty for all parties in the near future.

What happens if we do not reach an agreement at mediation?

Again, the decision is yours. All parties should negotiate in good faith, but they do not need to reach an agreement. Failing to reach an agreement will result in the current policies or agreements continuing to govern the relationship and obligations between the parties.

Tenants will need to consider:

  • the continuity of their business
  • needs to consider the risks of being evicted after this moratorium is over
  • paying all the unpaid rent that was not paid during this pandemic
  • personal guarantees
  • loss of security deposits
  • loss of goodwill of business and ability to recover after the pandemic

Landlords will need to consider:

  • the costs in acquiring a new tenant - whether that is commercially viable
  • the quality of their tenant now and if it is only due to this pandemic that their tenant is struggling
  • how much do Landlords help?
  • loss in value of the commercial property given decrease in rent/ vacated premises etc
  • mortgage issues
  • refinancing issues if the premises is vacated.

Is a mediation agreement binding?

In short, yes it can be.

Generally, an agreement is difficult to enforce if you do not put it down on paper and have it signed by all parties. Do not just rely on your oral discussion of the terms and conditions. It’s recommended to have your mediator or lawyer to draw and sign terms of settlement to make it easier to enforce!

How long does mediation take?

There is no clear answer on how long mediation processes generally take. Depending on the needs of the parties and other factors, a mediation can last half a day, a day, or sometimes longer.

For commercial tenancy and landlord issues, we recommend that a half-day mediation will suffice for most people.

HOW TNS LAWYERS CAN ASSIST YOU

Mediation is about making sure all issues are explored so that the parties can come to an agreement on their own. Let our team help! We can:

ASSESS

We conduct an objective analysis of your situation and identify the strengths and weaknesses of your case. We won’t just look at the legal issues but also take into consideration your relationship as landlord and tenant.

ASSIST

We facilitate the discussion, making sure it stays non-confrontational and each party’s argument is heard and understood.

ADVISE

Based on the initial assessment and the needs and interests uncovered during the sit-down meeting, we can suggest various potential settlement options that all parties will most likely agree on.

When we say we want to help, we mean it! Given the unfortunate circumstances caused by the COVID-19 pandemic, TNS Lawyers has decided to reduce mediation costs until such time as the pandemic is over. Connect with our mediator today by filling in the contact form below.