As a consequence of the shortening length of leases granted following the credit crunch, we are now at a point in the economic cycle where both leases granted at the peak of the market and those granted in less buoyant conditions are falling for renewal at the same time. With the market itself having started to show signs of recovery, both landlords and tenants are faced with the prospect of negotiating terms of new leases for premises which may be either over or under rented.

Whilst genuine differences of opinion are frequently encountered between parties negotiating rents under new leases, it is surprising, particularly given the rental levels of many secondary properties in the south west which do not readily justify the expense of being determined by a court at a formal hearing, that more parties where only the rent or a small number of other lease terms are in dispute are not opting for the question of rent to be decided under the PACT Scheme (Professional Arbitration on Court Terms). PACT offers a process whereby the matters under dispute are simply identified and referred, subject to both parties’ agreement and a consent order from the court along with the draft lease (which has otherwise been agreed), to an Arbitrator or Independent Expert to be decided. If the parties agree the principle of an appointment but cannot themselves reach a consensus on who should be appointed this can be addressed by applying to the Royal Institution of chartered surveyors.

The PACT process beyond being both a quicker and a considerably less expensive process than a court hearing has the principal advantage of having the dispute decided by a property specialist who will understand the valuation issues, and the same time allowing the parties to agree part or all of the process themselves. Further if there is a clear cut decision in favour of one side or the other there is also the potential, depending on the terms of the appointment, for the winning party to seek recovery of all their professional costs of the process. Ultimately the tenant as with a court judgement still has the option of whether to take up the new lease on the basis of the rent determined.

Whilst the PACT process is gaining in frequency of use elsewhere in the country, it is surprising given the clear benefits the scheme offers that approaching 18 years after it was first launched it remains very much an under used resource.

P.A .Dickins Bsc (Hons) MRICS
Head of Landlord and Tenant