Opinions.

Opinion: Clive Gillingwater

Arbitration offers a fresh approach to lease renewals.

Our antiquated court system is under enormous strain, a crisis only compounded by Covid. As lease renewals become more frequent, resolving disputes is costing the property industry an inordinate amount of time and money. It is time to turn away from judges to Arbitrators for a more effective and efficient approach to dispute resolution.

There was a time when a lease renewal was little more than an infrequent inconvenience. Yet as lease terms shorten and court delays compound an already arduous process, they are on everyone’s radar. I have cases that have taken more than 2 years to be resolved, incurring considerable cost and frustration. Suddenly both landlords and tenants are waking up to just how complicated and costly these renewals have become.

I have always been a passionate supporter of Arbitration and it seems there has never been a better time to remove an unnecessary burden from our under-resourced courts and let property experts resolve our issues. The property industry is already accustomed to having rent reviews handled through Arbitration, so why not extend that to lease renewals?

There is a system ready to take the strain. PACT (Professional Arbitration on Court Terms) is a procedure whereby both parties agree that the determination of the terms of the new lease will be delegated to a specified independent third party or, failing this, refer the dispute to the RICS. That will involve using a specialist surveyor and potentially a legal assessor.

There will always be a minority of people desperate to have their day in court, no matter what the cost. Yet arbitration is the most appropriate route in most cases. Whether you are a landlord keen to sell your asset, or a tenant wanting to get on with a refit, delays to lease renewals impact directly on business planning. It is in nobody’s interest to clog up the courts with a dispute that can be resolved far more easily and cheaply by an independent surveyor.

The beauty of the PACT system is its flexibility. Parties agree on who they appoint to arbitrate and then set their own parameters. It is far easier to control costs and timeframes by providing a clear remit. Also, rather than having your case decided by an inexperienced judge, the surveyor involved has the expertise and market knowledge to make informed decisions. They focus on the specific issues outstanding and their decision is legally enforceable. Courts increasingly take a dim view of parties who have refused to consider Alternative Dispute Resolution (ADR) options such as PACT and this is sometimes reflected in costs awards.

At GCW we have built a reputation as experts in property Arbitration. We are comfortable with all aspects of the PACT process, whether acting for clients as expert witnesses or carrying out the role of PACT Arbitrator. We see first-hand the time and hassle clients save by avoiding the courts and have witnessed a growing appetite for better forms of dispute resolution. We’re in the midst of the greatest period of change within the property sector and the onus is on everyone to find better ways of doing business.