Arbitrating Commercial Real Estate Lease Disputes - Chapter 9 - AAA Handbook on Construction Arbitration and ADR - Third Edition
Susanna S. Fodor
Steven C. Bennett
Susan F. Fodor is a former Partner at Jones Day in New York City.
Steven C. Bennett is a Partner at Park Jensen Bennett LLP in New York City. He teaches (as an adjunct) at Hofstra and the New York Law School. He is a commercial arbitrator for the American Arbitration Association, and the author of Arbitration: Essential Concepts.
Why provide for arbitration in commercial leases? Proponents of arbitration cite its efficiency, privacy, cost savings, control, flexibility and less adversarial approach as virtues. They also point to the relative ease with which victors may enforce arbitration awards and the limited right to review such awards. 1 Landlords and tenants need an effective way to manage the risks associated with disputes. Arbitration can provide what landlords and tenants need at less cost and time than litigation, particularly for smaller disputes that arise during the lease term. For this reason, some landlords insist on having an arbitration clause in commercial leases. However, given the wide range of disputes that may arise over the course of a lease term, commercial landlords and their attorneys should carefully consider the kinds of disputes for which the advantages of arbitration are most likely to be realized, and identify those for which litigation may be preferred. This article explores some landlord-tenant disputes that are well suited to arbitration, including “baseball arbitration,” and offers some suggestions for modifying standard arbitration provisions.
I. Optional versus Mandatory Arbitration
The right to compel arbitration is rooted in the contractual relationship between the parties; as a result, parties to commercial contracts, including