When to make a claim related to a defect in the leased property?

Experience / 24.10.2018

The Law Firm successfully represented the Client, which is the owner of shopping malls, in processes related to the settlement of the lease relationship after its termination.

The subject of the dispute, on the one hand, were claims for payment of overdue rent and service charges, while on the other hand, counterclaims and set-offs included claims by tenants for the return of overpaid amounts of rent and service charges and compensation for improper performance of the contract. All these issues were resolved in connection with the landlord’s termination of the lease agreement without notice.

In the litigation, the Law Firm’s lawyers demonstrated that the landlord had the right to terminate the contracts immediately, without notice, due to the tenants’ arrears in paying rent and other fees.

The second issue, which was also definitively resolved, concerned the landlord’s liability for damages to the tenants in connection with renovation of the facility in the common parts of the mall. As the evidence showed, there were actually renovation and extension works carried out in the common parts of the mall, however, the related activities were generally carried out at night, on public holidays, and partially during the mall’s operating hours. The construction works involved inconvenience for the tenants, yet during the course of the lease relationship, none of them requested reduction of rent.

In this regard, the court also agreed with the position of the Law Firm’s lawyers that the mall, in connection with its renovation and extension works, was not closed, so the tenants were conducting business during this time, so they were obliged to pay rent. Another issue was, taking into account the principle of equivalence of benefits, to show that in connection with the renovation and extension works, the subject of the lease had a defect, which justified filing a claim for a reduction of rent. This notification, however, should have been made in a timely manner and drafted in an appropriate manner. Formulating it only in the counterclaim was late, as a period of one year from the termination of the contract and delivery of the premises to the landlord at the end of the lease had already lapsed.

As the tedious settlement process between the landlord and tenants has shown, certain legal issues should be articulated and made while still at the pre-court stage.