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Can commercial tenants hold rent in escrow over property issues?

On Behalf of | Apr 29, 2024 | Landlord And Tenant Law |

Landlords receive rent in exchange for providing a space for a tenant to occupy. Both residential and commercial landlords typically have some degree of maintenance responsibility for rented properties. In commercial leases, it is common for landlords to divide maintenance and upkeep responsibilities between themselves and their tenants.

Unfortunately, even when a certain repair is clearly the responsibility of the landlord, they may refuse to invest in the property appropriately. If the same situation were to occur in a residential rental situation, the tenant could potentially hold their rent in escrow. They deposit the funds in an account instead of paying the landlord until the landlord makes the repairs. They could also use those funds to hire professionals to make repairs if the landlord consistently refuses.

Is a similar solution possible for commercial tenants?

Commercial tenants cannot withhold rent

The reason that residential tenants can hold their rent in escrow due to property conditions is that landlords have a legal responsibility to provide a habitable space. When the property does not meet certain conditions, withholding rent is reasonable for those who may feel unsafe in their rental unit.

A commercial tenant dealing with maintenance issues, such as potholes in a parking lot, does not have the same safety concerns that a residential tenant might. If they fail to pay rent, they could very well end up facing eviction or a lawsuit brought by their landlord for their failure to uphold their commercial lease.

The commercial tenant might have the option of pursuing a breach of contract lawsuit instead. Provided that someone can document property issues that are clearly in violation of the terms of the lease, that might warrant taking legal action against the landlord. A judge could award a tenant damages if the property conditions have affected business operations and revenue. They could also issue an order of specific performance demanding that a landlord repair the property.

Real estate professionals, including those managing properties and agents representing the parties who have signed a lease, may need to learn about how to handle disputes that relate to facility maintenance and repairs. Using a thoughtful approach to a conflict related to a leased commercial property can result in an amicable solution with minimal negative consequences for either party. However, due to the complexities and high stakes of such matters, both commercial tenants and landlords may require support when dealing with a property-related dispute.