Leasehold Remedy: Before Going to Court
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 and 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 prior 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, litigation is likely to be the next step.
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.
WHO OFFERS ADR?
Mediation specifically for retirement housing is provided by Age UK through the Advice, Information and Mediation Service (AIMS).
The IDRS offers a range of dispute resolution services for a number of local authorities dealing with leasehold and tenancy disputes. These include time limited mediation, documents only adjudication and arbitration and adjudication and arbitration including a hearing for all parties.
The Lands Chamber of the Upper Tribunal, is an independent and specialist judicial body set up to resolve certain disputes concerning land. They have entered into an agreement with the RICS DRS (Dispute Resolution Service) whereby RICS act as a mediation provider to users of the Tribunal to encourage the market to consider mediation as an alternative to formal litigation.
LEASEHOLD LIFE’S VIEW
If the parties are prepared to talk then ADR must be the first step. It is not just because it’s less expensive and less time consuming than litigation but that the courts and tribunals prefer it to at least be considered as a viable option before the dispute ends up in front of them. Not only that, but legislative routes to deal with problem freeholders and management such as collective enfranchisement, Right to Manage, compulsory acquisition of the freehold and appointing a manager via the FTT are a) not always viable, b) can be unaffordable and/or criteria can’t be met and c) if the wrong option is used, more problems can be created than were actually solved!
We soon found that ADR wasn’t for us when the managing agents (family members of the freeholder who was in prison for Customs and Excise fraud) refused to deal with not just us but the local council and MP. On contacting a solicitor to see what our options were we had a letter sent out to all leaseholders outlining the main problems and inviting comments and observations. One out of 22 flats responded!
So, if parties are prepared to talk, then try mediation first!