LEASE AGREEMENT REFERENCE GUIDE 720: ARBITRATION IN COMMERCIAL LEASE DISPUTES $49.95
ARBITRATION IN COMMERCIAL LEASE DISPUTES
This LARG considers the proper role of arbitration as a device to resolve landlord tenant disputes. The first section weighs the pros and cons of arbitrating disputes under commercial leases. The second section contains a check list for the contents of arbitration clauses in leases. Finally, the Lease Clause Critique looks at two arbitration clauses that take radically different approaches. One is brief to a fault; the other is comprehensive, detailed and very selective in the disputes it commits to arbitration.
The Pros and Cons of Arbitrating Lease Disputes
If a landlord and tenant have a serious dispute that they cannot resolve between themselves, there are really only two choices available to them to resolve the controversy. They can litigate (i.e., sue one another) in the civil courts, or they can arbitrate the dispute.
Arbitration of lease disputes seems like a smart thing to do, at least in theory. Arbitration can be fast, cheap, run by experts, and can be private (see the discussion of arbitration's advantages below). And it is a simple matter for a landlord and a tenant to agree to arbitrate disputes under the lease. All the parties need to do is include a clause in the lease requiring that some or all disputes between the landlord and the tenant be resolved by arbitration. The precise content of such clauses is subject to negotiation, like any other issue in the lease.
On the other hand, if the parties want to litigate lease disputes, they must deal with a glutted court system. Criminal cases are increasingly crowding out civil cases in the courts, and it can take years to get a trial date, depending upon the jurisdiction involved. The war on drugs has generated a huge mass of new criminal cases subject to speedy trial statutes which requires them to be tried quickly. And the courts were glutted before the war on drugs began. As a result, the civil court calendar is more congested than ever, and the time required for the resolution of landlord tenant disputes in civil courts will continue to increase.
What's the Fight About?
Arbitration is not a bed of roses either (see the notable disadvantages discussed below), and it may not be appropriate for some types of disputes between landlords and tenants. This, of course, means that the parties to the lease need to give substantial thought to the scope of any arbitration clause they deign to include in the lease. Do the landlord and the tenant really want to say that all disputes arising under the lease will be subject to arbitration? For example, arbitration may be a poor choice for:
Advantages of Arbitration
The advantages of arbitration (especially when compared to litigation) are generally thought to include the following: