Alternative Dispute Resolution
When it comes to dealing with leasehold disputes, it is usually the First Tier Tribunal (Property Chamber) that is first thought of.
There is however an alternative which is the use of mediation through Alternative Dispute Resolution (ADR) which is highly recommended before a situation gets taken to tribunal.
This is where the ADR process starts. Parties are encouraged to sit down together to try to reach a mutually acceptable solution. At such discussions it should always be stated they are ‘without prejudice’ which means is that if no agreement is reached and the situation does eventually reach court, then these earlier negotiations can’t be used by either side.
Note: this also applies if letters are written during the process.
If the negotiations do lead to a settlement then a document is signed stating that the terms of the agreement are accepted. However, once signed, the dispute can’t be re-opened at a later date.
If an agreement can’t be reached by conciliation then there are other forms of ADR that can be used or the dispute can go straight to litigation.
There is no legal requirement to seek mediation, but because it is often quick, simple, and less expensive than litigation, the courts and Tribunals actively encourage it. They can also impose a financial penalty on those who unreasonably refuse to use it. A mediator can either be chosen by the parties or a court will appoint one on their behalf.
Mediators act as a go-between, assisting both parties in putting their cases in front of each other but they don’t act as arbitrators. This means they cannot force either side to do anything. So if no agreement is reached then again, the leaseholder is then entitled to make an application to the First-tier Tribunal (FTT) asking them to determine whether the charge is payable. If the service charges are paid but the leaseholders wants to make a challenge later, they can do so providing they have not specifically admitted or agreed that the charges are payable.
Arbitration is an informal court hearing, where the parties choose an arbitrator and accept its decision as final and binding. A hearing is not required as decisions are often reached on written representation but it is important to note that arbitration doesn’t ask either party for clarification after the papers have been read.
Whilst arbitration can be faster, cheaper, and less formal than litigation and with arbitrators being more familiar with the issues than jurors, there is less chance to investigate a case through discovery. This is the uncovering of information from the other side through written questions or depositions and, if the decision reached is a bad one, there is no appeal process, unlike litigation.
Check The Lease
It is also important to check the lease when this route is being considered because it might contain an arbitration clause that says that all disputes with the freeholder must go to arbitration not negotiation or mediation. Even if the freeholder agrees to an alternative and will set out the mechanism for appointing one, it is the arbitration clause that must be adhered to.
Note: The rules and procedures governing arbitration are laid down by the Arbitration Act 1996 and post-dispute arbitration agreements must abide by them.
4: INDEPENDENT ADJUDICATOR
This is where the parties to a dispute refer to an independent adjudicator. An adjudicator (who is often a trained arbitrator or mediator) will read the relevant papers and will ask the parties for clarification. The adjudicators decision is not as final and binding as that of an arbitrator but is taken into account should the dispute go to court. It is also less expensive and more consumer-friendly than arbitration and has a higher success rate.
5: THIRD PARTY DETERMINATION
This is where an independent expert is asked to decide a technical point(s). In order to use this mechanism both parties need to agree on:
- What needs to be determined;
- Who should do it;
- Who should pay the third party’s fees.
The agreement needs to be in a letter signed by both sides and the decision reached by the third party will be final, with usually no appeal.
There should however be no undue delay in pursuing any challenge, particularly in the light of the decision of the Upper Tribunal in the case of Cain v Islington Borough Council  UKUT 542 (LC) as to whether service charges were reasonable, (including those dating from twelve years ago). In summary a tribunal could infer from a series of payments made without protest that the tenant had agreed that the amount claimed was the amount properly payable. The longer the period over which payments had been made, the more readily a tribunal would find that the tenant agreed that which had been demanded. The tenant was barred by s.27a(4) of the Landlord and Tenant Act 1985 (liability to pay service charges: jurisdiction) from proceeding with the application.