To Use or Not to Use Alternative Dispute Resolution
Alternative Dispute Resolution are different methods of communication used in the hope that disagreements can be resolved instead of ending up in court with the Courts and the First Tier Tribunal actively encouraging it.
The first one to try is that of conciliation where the parties are encouraged to sit down together to try to reach a mutually acceptable solution. it should always be stated these discussions (and any letters written during the process) are ‘without prejudice’ which means that if no agreement is reached and the situation does eventually reach court, then these earlier negotiations can’t be used by either side. If this leads 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 through conciliation then another form other of ADR is that of mediation. There is no legal requirement to use it but it is often quick, simple, and less expensive than litigation. Courts and the FTT can also impose a financial penalty on those who unreasonably refuse to use it. 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.
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 (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.
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.
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 as well as having a higher success rate.
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.
If ADR fails then leaseholders are entitled to make an application to the First-tier Tribunal (FTT) asking them to determine whether the charge is payable. However, no application may be made where the issue has been:
- Agreed or admitted by the leaseholder;
- Determined by a court;
- Has been (or is due to be) referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party;
- Any reference to arbitration must be with the leaseholder’s agreement following the dispute arising; or
- The dispute has been the subject of determination by arbitration as a result of an agreement after the dispute has arisen.
Now, this is all very well and good and with reasonable people it is likely that one of these options may well work. The biggest battle we have at the moment is that of two leaseholders (husband and wife subletting two flats) who just stopped paying their service charges. We ended up in front of the FTT where one of the first things it does is offer a mediation service. Although we had had some monumental difficulties with one of the parties in the past (for whom the phrase ‘rogue landlord’ could have been invented) we still agreed to try. It failed, as we thought it would, in part due to the constant referal of matters which were well outside of the issues being mediated upon.