How best to resolve disputes with your landlord
Leases often include a clause saying that in a dispute such items as operating costs, electricity, and real estate taxes, the tenant must pay but can take the landlord to court. This is a bad deal for you. It gives you nothing you didn’t already have, and the landlord has no incentive to settle. Time-consuming and costly litigation may leave you without an answer for years. Meanwhile, the landlord has your money even if the court eventually finds it wrong and orders repayment.
Provide for dispute resolution in the lease. Here are a few guiding principles:
- Arbitration may be the best method to resolve disputes like disagreement over the fair market rent or whether a tenant’s use of space has caused more damage than normal wear and tear. Real estate experts are more qualified than the lay public to say who’s right.
- In certain disputes the tenant should have the right to withhold operating expenses – for instance, if the landlord fails to provide essential utilities or repair services.
- The tenant should have convenient access to documentation supporting the landlord’s bills and should be given reasonable time to audit the operating expenses. An independent CPA, not the landlord’s nephew, should prepare the statement.
- The landlord should share certain audit costs with the tenant.
- If it prevails in a dispute, the tenant should get a prompt refund with interest, plus reimbursement for out-of-pocket expenses and attorney’s fees.
An obvious but essential reminder: once you agree on a way to resolve disputes, follow the procedure to the letter. Paine, Webber, Jackson & Curtis, Inc. (the financial services company that was Paine-Webber’s predecessor) took its landlord to court over a dispute about operating expenses, but the case was tossed out by a judge without even a hearing. The company had neglected to start the proceeding within 30 days, as the lease required.