An Alternative Dispute Resolution (ADR) is the term used to describe a way to settle a dispute without having to take it to court. This is the most common way disputes regarding dilapidations are resolved.
When should you use an Alternative Dispute Resolution?
Dilapidations is a process that almost every landlord or occupant will have to endure at some point. Most leases will have covenants, which are clauses stating what state a property should be left in. Should a tenant break these clauses, the landlord is then able to claim compensation for any damages or alterations based on how much work needs to be done to get it back to the agreed state.
This is when the dilapidations process starts. The landlord will issue a schedule of dilapidations and quantified demands, listing all breaches and the costs to fix them. The tenant can then respond, either agreeing or with a ‘Scott schedule’ which lists their disagreements to the quantified demands. (A more in-depth look at the dilapidations process is available in our previous blog post)
Should the landlord and the tenant not be able to come to an agreeable outcome, the dilapidations protocol states that they must attempt an Alternative Dispute Resolution before the issue is taken to court. A judge will expect to see some attempt at ADR and will take into account any unreasonable refusals when the award of costs are considered. On top of this, legal fees can be very expensive for both parties if taken to court, so an ADR is a much more favourable outcome for everyone. This is generally very successful, with only 1% of claims being taken into legal proceedings in the courts. ADRs can take a few different forms; mediation, arbitration and using expert determination.
The mediation process is the most used ADR as it is the least formal out of the three. Unlike in court, mediation does not provide a judgement or an award. This means you still have more control and are about to resolve the dispute without being forced to accept an outcome you are not happy with. Mediation is also a lot quicker and cheaper than going to court. It can realistically be arranged to happen within a month and 85% of mediations are completed in just one day. The claimant and defendant pay half of the mediator’s fee each and either side can also bring along professionals who would incur their own fees.
The expert mediator is there to help with negotiations between both parties to aid in resolving the dispute. They will be a bi-partisan third-party who will not have an invested interest in either side of the argument. This allows them to be a lot more reasonable, ignoring any bias. The mediator can work with the parties together in the same room or separately, coming to a settlement that both parties can live with. This is much more preferable than going to an expensive trial, which is full of risk and can lead to delays.
Anything and everything discussed with the mediator will stay completely confidential, whereas going through the courts can be a very public ordeal. Court proceedings can also be very adversarial, adding a lot of pressure on both parties and the relationship between them. Mediation allows for focussed, effective communication and relationships often end amicably.
Arbitration is another form of private dispute resolution. This is very similar to litigation but is governed by the Arbitration Act instead. This is a quasi-judicial process in which both parties will supply documents and evidence throughout the process to the arbitrator (or arbitration panel).
The arbitrator will consider each party’s case and prepare the Award (a reasoned decision including setting out the findings of fact, interpretation of the relevant law and any remedy provided). The decision is final and binding on the parties. The Award will include the management of costs and parties will be invited to provide their views before the arbitrator makes the final costs Award.
The benefit to arbitration over going to court is that you maintain privacy and it should be a faster process. As long as both parties agree going into the process, the ruling can still be legally binding.
Expert determination is a similar process to arbitration, although it is often faster and cheaper. Again, documents and evidence are submitted to the expert (or experts) and they come to an independent conclusion. Similarly to the other methods, this can also be binding if both parties agree in advance.
The biggest benefit to this option, along with the cost and speed, is that you are using an expert in dilapidations and building surveying, so you know that the result is most likely to be the correct one.
What happens if it goes to court?
Should an ADR not be used in this process, or if an ADR is used but for whatever reason an agreement is not achieved, then dilapidations claims will end up in court. As mentioned previously, this is similar to the process of arbitration, although it is a litigious process and the details of the case will be made public. You are not guaranteed any privacy.
The courts will expect to see an ADR to be sought out. Following the Dilapidations Protocol is law, not just a suggestion. If either side rejects these, or is difficult in the process, the judge will take this into account when regarding the award of costs.
The judge will then analyse the case, looking at any evidence provided, which would include the lease agreement, Schedule of Dilapidations, the Quantified Demands and the Scott Schedule, along with anything else they deem to be relevant. This can be a long, drawn-out process, with many visits to court.
Once the judge has made their decision, the result is final. In most cases, both sides will have lost out in some way, either financially or through wasting a lot of time to get the same result as an ADR.
Alternative Dispute Resolutions are the best way to avoid dilapidations claims going to court. For information on how Munday + Cramer can help in this process, or if you’d like to find out more about our building surveying services, operating in Essex, London, Kent, Norfolk and Suffolk, then get in touch! Contact Munday + Cramer today on 01245 326 200.