What Are Your Options When a Commercial Property Dispute Arises?

Key Points

● Commercial property disputes cover rent arrears, dilapidations, lease renewals, break clauses, and service charges, each governed by distinct legal rules and offering different options for landlords and tenants.

● If your landlord forfeits your lease by changing the locks, you can apply to the court for relief from forfeiture under section 139(2) of the County Courts Act 1984. Still, the court will require full payment of arrears, interest, and costs as a condition.

● Dilapidations claims are subject to a statutory damages cap under section 18(1) of the Landlord and Tenant Act 1927: the landlord cannot recover more than the actual reduction in the property's value caused by the disrepair.

● Exercising Commercial Rent Arrears Recovery waives the landlord's right to forfeit for those arrears, as confirmed by the Court of Appeal in Brar v Thirunavukkrasu [2019] EWCA Civ 2032, so the sequence of enforcement steps matters to both sides.

● Negotiation, mediation, and expert determination resolve most commercial property disputes before trial, and courts increasingly penalise parties who refuse to engage with alternative dispute resolution without good reason.

Commercial property disputes range from a single quarter of unpaid rent to a six-figure dilapidations claim served on the day you hand back the keys. The options available to you depend on the type of dispute, the specific lease terms, and whether you sought legal advice early enough to keep those options open.

Both landlords and tenants have legally protected rights in England and Wales. The legislation includes the Landlord and Tenant Act 1954, the Landlord and Tenant Act 1927, and the Tribunals, Courts and Enforcement Act 2007. Knowing how those rights interact, and where they conflict, is what separates a well-managed dispute from one that slides into expensive, avoidable litigation.

This article explains the most common categories of commercial property disputes, the current legal position on the issues that arise most frequently, and the practical steps distressed tenants and buyers can take to protect their position. For landlords, it identifies where enforcement choices can close off other routes.

The Main Types of Commercial Property Disputes

The type of dispute determines which legal rules apply and which remedies are available. A rent arrears situation calls for a very different response from a dilapidations claim, and treating all commercial landlord tenant disputes the same is one of the most common early errors.

The disputes that most frequently come before commercial property solicitors fall into distinct categories:

Rent arrears and enforcement: the landlord has unpaid rent and is considering CRAR, forfeiture, or proceedings; the tenant needs time to pay or wants to challenge the amount claimed.

Dilapidations: typically served at or after lease end, alleging that the tenant has failed to comply with repairing, decorating, or reinstatement obligations under the lease.

Lease renewals and terminations: disputes about whether the tenant has a right to a new lease under the Landlord and Tenant Act 1954, and on what terms, including rent and length of term.

Break clause disputes: whether the conditions attached to a break notice have been satisfied and whether the notice was validly served.

Service charge disputes: challenges to the scope, reasonableness, or allocation of costs charged to tenants under a service charge provision.

Boundaries, access, and easements: disagreements about rights of way, car parking, loading, or other shared rights forming part of the commercial arrangement.

Each category has its own pre-action protocol requirements, limitation periods, and evidential demands. Getting advice at the earliest stage gives you the widest range of options and prevents accidental loss of rights.

Commercial Rent Arrears and the Enforcement Trap

Rent arrears create immediate pressure on both sides. For landlords, the income gap is real and compounds each quarter. For tenants, the risk of losing the premises can threaten the business's viability entirely. The legal rules around enforcement are technical enough that a wrong step by either party can foreclose previously available choices.

The principal enforcement tool available to commercial landlords without a court order is Commercial Rent Arrears Recovery (CRAR), introduced by the Tribunals, Courts and Enforcement Act 2007. CRAR allows enforcement agents to seize and sell the tenant's goods to recover outstanding principal rent. It is subject to strict procedural requirements, including a minimum of seven days' advance notice before goods are taken.

The critical limitation is that exercising CRAR waives the landlord's right to forfeit for those arrears. In Brar v Thirunavukkrasu [2019] EWCA Civ 2032, the Court of Appeal confirmed that CRAR, like the pre-2014 remedy of distress, treats the lease as continuing. A landlord who sends enforcement agents to seize goods one day and then changes the locks the next has already given up the right to forfeit for that debt. The sequence of steps must be planned before any action is taken.

From the tenant's side, early engagement is the most effective lever available. A landlord still at the negotiation stage has not yet committed to an enforcement route. Structured proposals for staged repayment, temporary rent concessions, or a lease re-gear, extending the term in exchange for a period of reduced rent, are all worth exploring at that point, and become much harder to raise once enforcement has begun.

Forfeiture, Re-Entry, and Relief

Forfeiture is the mechanism by which a landlord brings a commercial lease to an end when the tenant breaches its terms, most commonly by failing to pay rent. It can be exercised by peaceable re-entry (changing the locks where this can be done without force) or by issuing court proceedings. For most other types of breach, a section 146 notice under the Law of Property Act 1925 must first be served, allowing the tenant to remedy the breach.

A tenant whose lease has been forfeited by peaceable re-entry is not necessarily without options. The court has the power to grant relief from forfeiture, thereby reinstating the lease. Under section 139(2) of the County Courts Act 1984, the application must generally be made within six months of the landlord taking possession. The decision in Sik v Malik [2025] EWHC 383 (Ch) clarifies the conditions. The High Court overturned a county court decision that had permitted the tenant to pay only 50% of the arrears as a condition of relief. Payment of the entire rent from the date of re-entry to the date of relief, plus interest on that sum, plus the costs of peaceable re-entry and the forfeiture proceedings, is required. There is no discretion to reduce the arrears themselves.

Tenants who want to apply for relief must act promptly and be able to fund the full arrears, not just the amount outstanding when the locks were changed. Delay, or the assumption that a partial payment will do, leads to lease loss. In my experience, getting specialist legal advice as soon as the lock is changed determines whether the business keeps its premises.

Pearcelegal's commercial repossession and forfeiture solicitors advise both sides, landlords planning re-entry and tenants facing it.

Dilapidations Claims and the Section 18 Cap

A schedule of dilapidations is a document served by a landlord, usually through a building surveyor, identifying alleged breaches of the tenant's repairing, decorating, and reinstatement obligations under the lease. It arrives either during the final years of the tenancy or, more commonly, at or after lease end. For tenants who have not actively managed their obligations throughout the term, the figures can be a serious shock.

The starting point for any landlord's claim is the cost of the works needed to remedy the alleged breaches. That figure, however, is not the upper limit of recovery. Section 18(1) of the Landlord and Tenant Act 1927 imposes a statutory damages cap: the landlord cannot recover more than the amount by which the disrepair has reduced the value of the landlord's reversionary interest. If the surveyor's schedule puts the works at £300,000 but the property's market value has only fallen by £150,000 as a result of the disrepair, the recoverable sum is £150,000.

A second limb of section 18(1) provides that no damages are recoverable at all where, at or shortly after lease end, the premises are to be demolished or structurally altered in a way that would render the repairs valueless. Whether this applies depends on evidence of the landlord's genuine plans for the property. Both limbs were in issue in Peachside Limited v Lee & Keung [2024] EWHC 921 (TCC), one of the few recent cases to put both provisions under judicial scrutiny together. The Technology and Construction Court found the first limb applied but the second did not on the facts, and awarded the landlord £542,671. The judgment confirms that a theoretical possibility of redevelopment, raised in proceedings but unsupported by concrete plans and funding, will not engage the supersession limb.

For tenants defending a large claim, independent valuation evidence and early input from a building surveyor are the most reliable routes to a more defensible figure. Tenants who manage their repairing obligations throughout the term, keep records of all maintenance work, and redecorate at the intervals specified in the lease are in a stronger position when the schedule arrives.

Lease Renewal Disputes Under the Landlord and Tenant Act 1954

Most commercial tenants in England and Wales whose leases were granted under the Landlord and Tenant Act 1954 have a statutory right to renew their leases at the end of the term. The tenancy does not automatically end at contractual expiry; it continues until formally brought to an end by notice. A landlord wanting vacant possession must serve a section 25 notice and establish one of the statutory grounds of opposition in section 30(1) of the Act.

The most frequently invoked grounds include persistent delay in paying rent, substantial breach of other lease obligations, and the landlord's genuine intention to demolish or reconstruct the premises. The word 'genuine' carries real weight in court. Judges look at whether the landlord has concrete plans, sufficient funding in place, and a planning position that supports the proposed works. A vaguely expressed intention without supporting evidence will not suffice.

For tenants at risk of losing premises on renewal, the procedural timetable matters. Notices carry strict response deadlines. Missing them can waive the right to renewal or restrict the grounds available to challenge the landlord's opposition. Taking advice twelve months before lease expiry, rather than three months, leaves time to assess the strength of any opposition grounds and to negotiate terms without the pressure of an approaching deadline.

Dispute Resolution Options for Commercial Lease Disputes

Litigation is rarely the fastest or most economical route through a commercial property dispute, and courts expect parties to have genuinely considered alternatives before issuing a claim. Under the Pre-Action Protocol for Dilapidations and the general Civil Procedure Rules, parties must exchange their positions, disclose relevant documents, and attempt to narrow the issues before proceedings begin. Refusing to engage without good reason can result in cost penalties, even if the refusing party ultimately wins on the substantive point.

For most commercial landlord-tenant disputes, the realistic options are negotiation, mediation, expert determination, and arbitration. Negotiation is the cheapest and most flexible route. Mediation introduces a neutral third party who works with both sides towards a settlement without imposing one. CEDR's published data puts settlement rates at around 93% for commercial mediations. Expert determination suits disputes turning on a technical question (a surveying or valuation point, for example) where the parties agree to be bound by the expert's answer. Arbitration produces a binding award and is closer in formality to court proceedings, though it remains private.

For tenants under financial pressure, the choice of route should reflect urgency, the financial stakes, and whether the landlord relationship needs to be preserved for future trading. More on how these processes work in practice is covered in our article on what dispute resolution means for businesses.

Policy Direction and Forthcoming Changes

The law around commercial landlord and tenant has been relatively stable in recent years, but there are areas where change is on the horizon. The Law Commission published an interim statement on its review of the Landlord and Tenant Act 1954 in 2025, provisionally concluding that the existing security of tenure model should be retained, with changes to the scope threshold for short leases rather than any fundamental restructuring. A second consultation paper is expected to address the details. Existing leases are unaffected until any reform is brought into force.

Courts have also continued to press parties to engage earlier and more meaningfully with alternative dispute resolution. Parties who document their positions clearly, respond promptly to correspondence, and engage in without-prejudice negotiations are better placed, both in the dispute itself and in any costs argument that follows, than those who wait for proceedings to force the issue.

Frequently Asked Questions

What counts as a commercial property dispute?

A commercial property dispute is any disagreement about the rights and obligations of landlords, tenants, buyers, or sellers in relation to premises used for business. The most common types involve rent, repairing obligations, lease renewals, break clauses, service charges, and dilapidations. Disputes can also arise from property boundaries, easements, and rights associated with the property, such as parking or shared access.

Can my landlord change the locks if I fall behind on rent?

Yes, a landlord with a forfeiture clause in the lease may forfeit for non-payment of rent by peaceable re-entry, provided there is no residential element and no force is used. Once the locks are changed, the lease is forfeited unless the tenant obtains court relief. Under section 139(2) of the County Courts Act 1984, the tenant must apply within six months and will need to pay all arrears, interest, and the landlord's associated costs in full as a condition of the lease being reinstated, as confirmed in Sik v Malik [2025] EWHC 383 (Ch).

How is a dilapidations claim calculated?

Dilapidations claims begin with the cost of works required to remedy the tenant's alleged breaches of the repairing covenant. That figure is then subject to the statutory cap in section 18(1) of the Landlord and Tenant Act 1927, which limits recovery to the diminution in value of the landlord's reversionary interest. Where the landlord intends to demolish or substantially alter the property, the supersession limb of section 18(1) may reduce or extinguish the claim entirely.

Does using CRAR affect a landlord's right to forfeit?

Yes, exercising CRAR amounts to treating the lease as continuing. It waives the right to forfeit for those arrears, as confirmed by the Court of Appeal in Brar v Thirunavukkrasu [2019] EWCA Civ 2032. Landlords who want to preserve the option of forfeiture for a specific breach must not exercise CRAR in respect of that same breach first. The order of enforcement steps needs to be planned with legal advice before any action is taken.

Do I have to go to court to resolve a commercial lease dispute?

No, the majority of commercial property disputes are resolved through negotiation, mediation, or expert determination without a hearing. Courts expect parties to have genuinely considered alternative dispute resolution before proceedings are issued, and costs penalties can follow where a party refuses without good reason. Mediation in particular has consistently high settlement rates in commercial property disputes and can produce a binding outcome far more quickly than litigation.