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How can alternative dispute resolution help resolve a Commercial Lease conflict?

Alternative dispute resolution (ADR) is what it sounds like. It is the general legal term to refer to different ways to resolve legal disputes without a court’s involvement. Sometimes, however, it occurs after filing a lawsuit. ADR generally takes less time and costs less in legal fees than going through the full eviction process.

The two most common types of ADR include:

  • Mediation: Mediation brings in a neutral person, called a mediator, to help work out a settlement. The mediator does not make any decisions about the case. Instead, they help the different sides communicate and may ask questions that can help everyone better understand each other's position or how a judge might see the case.
  • Arbitration: Arbitration is when the two sides agree to bring in a neutral person, called an arbitrator, who will decide the case like a judge. Arbitration is a bit like a trial, but is less formal and moves faster. The arbitrator is often an experienced attorney, a retired judge, or someone else with specialized training. Arbitrators may be asked to decide some or all of the issues in the case. They usually also agree in advance about whether the arbitrator's decision will be final (binding) or not.

There are also other forms of ADR, such as a mini-trial, summary jury trial, or early neutral evaluation. These typically use different parts of mediation, arbitration, or normal trial processes. The type of ADR used may vary based on the issues involved and local availability.

It may often seem like a commercial eviction involves clear-cut issues, especially when a Commercial Lease describes the consequences for breaching the agreement. However, ADR can be useful in several ways, including:

  • Agreeing about how the tenant can catch up on past-due rent.
  • Figuring out how much rent the tenant actually owes, such as when the lease is based on a percentage of sales.
  • Deciding whether the landlord or tenant is responsible for maintenance and improvements.
  • Deciding whether certain tenant activities are allowed under the lease.
  • Agreeing about amounts due for maintenance, utilities, or other charges under a Triple Net Lease.
  • Keeping legal costs down.

Can I mediate or arbitrate a commercial lease dispute?

You can almost always mediate or arbitrate a commercial lease dispute. You can usually begin mediation or arbitration if the tenant agrees to do so in writing, or the Commercial Lease requires it. Many lawyers also suggest trying mediation or arbitration if they cannot quickly negotiate a settlement with the other side.

Many leases require trying mediation or arbitration before filing a lawsuit. Both landlords and tenants may prefer ADR to avoid going to court, which can be costly and take a long time. Requiring ADR is generally allowed in a Commercial Lease, but it is wise to check your local laws for any restrictions.

If you have already started taking legal steps, such as filing for eviction, you might still be able to use mediation or arbitration. Most judges will delay a case if both sides ask for time to use ADR. In some places, local rules may require or strongly suggest that the parties to a lawsuit try ADR.

One thing to keep in mind is that you may lose legal rights if you wait to file your case and pursue ADR instead. If you cannot solve all of your issues through ADR, finding out that you can no longer bring them to court may leave you with no solution. It is a good idea to talk to a lawyer about the best way to solve the problem and how much time you have to file your claim in court.

What is the difference between mediation and arbitration in commercial lease disputes?

In a commercial lease dispute, mediation is basically a stronger effort at coming to an agreement. There are a few reasons why the discussion may break down early. There may be personal issues or frustration. One side may be acting in a stubborn way and refuse to even try to understand the other’s position. A mediator helps to break down the reasons so each side can hopefully understand each other.

Arbitration is typically more formal than mediation, like a quicker form of a trial. In mediation, everyone involved works together to solve the problem with a neutral person. But, in arbitration, the neutral person makes the decision. In arbitration, the parties might ask the arbitrator to decide the entire case or only part of it. For example, they might get the arbitrator to decide the facts of the dispute, then ask a court to decide the legal issue.

What is binding arbitration?

Arbitration, and ADR in general, can be binding or non-binding. Binding means the decision of the arbitrator or other neutral person is final. This means the arbitrator's decision is enforceable like a court’s ruling. Unless the arbitrator was clearly unfair or made a significant legal error, a court cannot change the outcome. Before beginning ADR, everyone usually signs an agreement describing what will be resolved, which rules will apply, and whether anyone can appeal the decision.

Non-binding ADR can still help resolve a conflict faster. Once everyone sees how a neutral person decides the case, they may be more motivated to settle. This may be due to the decision reflecting what a judge would do, or from learning about the strengths of the other side’s case.

When should I mediate or arbitrate a commercial lease dispute?

Mediation and arbitration often happen after the first attempts to work out a move-out or settlement fail. This might be before or after the landlord has sent an Eviction Notice or started a lawsuit.

For mediation and arbitration to work, there generally needs to be one or more disputed issues, and everyone needs to want to settle. For example, if a tenant is being uncooperative to delay an eviction due to not paying rent, ADR may not be an effective option. If the parties do not agree on the amount owed, mediation or arbitration can help them decide what the tenant has to pay and when.

Mediation and arbitration can also help with non-financial disagreements, such as over maintenance, use of common areas, or activities that affect other tenants.

Mediation has the distinct advantage of allowing for more flexible and creative solutions. Courts are limited in the type of relief they may provide. During mediation, creative solutions can be crafted that a court would not be able to make happen, such as a simple payment plan.

How much does ADR cost?

There are usually two basic costs for ADR. One is each party's own legal fees, and the other is the fees for the ADR service.

It is generally a good idea for each party to have a lawyer because they may be giving up important legal rights by using ADR. A lawyer can help protect each party by making sure the legal parts are done right and the outcome is fair. Because ADR is generally faster and less formal than going to trial, the legal fees are usually significantly lower than for a trial.

The parties also need to pay a mediator, arbitrator, or other third party. Some courts may have programs that provide discounts, or free services, but those generally require filing a lawsuit first. There may also be low cost or free community mediation services in some areas, but those are generally designed to resolve personal legal conflicts rather than business disputes. ADR services generally have a set minimum fee to start, then charge by the hour. The typical fees are often close to the cost of hiring a lawyer for the same amount of time. Notably, however, the costs of hiring an ADR service are often higher than a court’s filing fees.

To learn more about how to handle a commercial eviction or to understand your ADR options, reach out to a Rocket Lawyer On Call® attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.


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