COVID-19 commercial lease negotiations are deeply emotional, mediator saysFor many landlords and tenants, mediation might be preferable to facing lengthy legal proceedings. Photo: Supplied

Six questions for a commercial tenancy mediator during the coronavirus crisis

Brisbane-based commercial mediator Dr Claudine Kasselis has been running mediation sessions for commercial landlords and tenants who have been forced to renegotiate their rental arrangements during the COVID-19 pandemic.

Commercial Real Estate  spoke to Dr Kasselis about the trends she has been observing during the commercial leasing fallout, what she thinks will happen once the pandemic has passed and the advice she would give to landlords and tenants who are currently struggling.

claudine-kasselis
Dr Claudine Kasselis is a Brisbane-based commercial mediator. Photo: Supplied

How is business right now? 

Across my family law and commercial mediation business, I would say it has probably at least doubled since the pandemic started. There’s a lot of disputes between commercial landlords and tenants, there’s also people trying to break up joint ventures and other business agreements.

What’s your advice for tenants and landlords entering mediation? 

Before the mediation even starts there are tips for tenants to take onboard. The tenant should familiarise themselves with the contract, review and really understand their business’ trading figures.

The landlord also needs to know how much they can give, understand how much relief he or she can actually provide the tenant. It’s all about walking into the mediation and knowing what is your range to negotiate with the tenant.

It’s all about compromise. It’s not wise for the landlord to hold an attitude that the lease is a signed document that can’t be deviated from during COVID-19. In a lot of cases, had the tenant known about COVID-19, they probably would never have entered into the lease in the first place. The landlord also needs to understand that having a tenant paying something is probably better than having no tenant at all. It’s about negotiating so that money comes in rather than having to start a search for a new tenant.

Landlords and tenants should also be aware of what can happen if they don’t come to an agreement. I often find parties are very motivated to resolve their disputes when they are aware that the alternative is expensive litigation and huge delays.

What’s the one thing that has surprised you about the negotiations you’ve overseen?  

As a barrister I’m split between doing family law and commercial negotiations. Obviously family law mediations are very emotional and the emotions really run high when you compare it to commercial negotiations. But during these times the emotions are also running very high. There’s never been a time where I’ve noticed as much similarity between the family law mediation and commercial mediation. I’m not just the third party, I’m also having to handle the emotional side of negotiations.

What would you say to someone who is hesitant to try mediation?

What I would say about mediation is it’s efficient – it’s one process and it’s a relatively quick way to get people back on track.  It might be half a day to a day and that’s it. It’s inexpensive. A whole-day mediation is about $3000, which is split between parties at $1500 each. You can spend up to six figures going through the courts and we’re in unprecedented times where there are long delays in court.

It’s also not like a courtroom where your fate is the hands of a judge. If you come prepared with your figures, if you come prepared by familiarising yourself with your situation, then you’re able to have control over the outcome and that’s something you can’t do in a court because you hand it over to others to decide.

I act as third party and I don’t have sway over decisions. A mediator is unbiased, independent and keeps parties focused on the task, preventing them from going off on tangents. But what they can do is rephrase things and put them in a different light to defuse situations. Parties don’t even have to be in the same room during negotiations – the mediator can go back and forth between two different rooms.

When two parties are negotiating for hours at a time, you can really find your energy waning out and you can lose track of what has been discussed.  It’s really important to have a document written at the end of negotiations tracking everything that’s been agreed, and that’s something that the mediator can handle.

What’s the single biggest thing people are concerned about right now?

Money! People are fixated on what is the dollar amount reduction – that’s why I go back to “know your figures”.

You’ve spoke of an impending “second wave” of commercial tenancy negotiations. Why do you think the demand for mediation will continue post-pandemic? 

I think post-COVID-19 law firms and other types of white-collar businesses who are renting huge offices in the CBD of major cities will say, “Do we need all of this commercial space that’s costing so much?” Working from home has really opened mindsets up to the concept of working from different spaces. I think there’s going to be a lot of renegotiating on those big leases in the months and years to come which will require mediation.

Dr Claudine Kasselis is a Queensland barrister and accredited mediator with an extensive practice specialising in family law, commercial law, alternative dispute resolution and succession law.

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