With the squeeze on court resources resulting in increasing delays, more landlords and tenants are looking to PACT as an alternative to lease renewal proceedings for settling the terms of their protected leases.
PACT stands for Professional Arbitration on Court Terms. It is run by The Royal Institution of Chartered Surveyors (RICS) and the Law Society, supported by the Incorporated Society of Valuers and Auctioneers.
The scheme deals mainly with unopposed lease renewals under the Landlord and Tenant Act 1954 where a determination is required to settle the terms of the lease, or the rent, or both. The scheme allows for those terms to be decided by a surveyor or solicitor acting as either arbitrator or independent expert with the appointments being made by the RICS or Law Society in the absence of agreement.
The objective of the scheme is to increase the effectiveness and flexibility of the legal system and to give a greater choice to both landlords and tenants.
When can you use PACT?
The PACT process can be initiated 'in court' or 'out of court'.
'Out of court' means following service of an unopposed s.25 notice or s.26 notice prior to court proceedings being issued. The parties can simply agree to appoint an independent third party and be bound by the result.
'In court' PACT is used where a s.25 or s.26 notice has been served (again unopposed), a court application has been made and both parties agree to, and the court endorses, the appointment of an independent third party to determine the outstanding issues.
What issues can be determined by PACT?
If there is a dispute over the validity of notices or the extent of the premises to be comprised in the new tenancy, court proceedings are more appropriate that PACT as resolution is likely to turn on legal rather than factual questions.
PACT is better suited to determining:
- Duration of the new lease
- Other terms (e.g. repair, decoration, alienation, service charge, rent reviews, break clauses, etc.)
- Interim rent
Who to appoint?
The professional expertise required of the appointee will depend on the issues to be resolved. If both legal and valuation issues are outstanding, it may be best to appoint two different people, or for the appointee to take independent 'technical' advice as required.
The appointee will act as arbitrator or independent expert. An arbitrator is governed by the Arbitration Act 1996 together with the PACT agreement made between the parties, whilst the independent expert is governed only by that agreement. The other main differences are:
- The parties can agree with the arbitrator how the process will run. An expert alone decides the procedure (unless the agreement provides otherwise) but is usually expected to allow the parties to provide their views and relevant information.
- A PACT arbitrator has the same discretion as to the rules of evidence to be adopted as any other arbitrator under the 1996 Act whereas an expert decides what information they will take into account and the importance attached to it.
- Regarding the award, an arbitrator will give reasons unless the parties agree otherwise. An expert will not give reasons unless the agreement provides for this or unless they agree to a request for reasons from the parties.
- An arbitrator is entitled to withhold release of their award until they are paid. An expert does not have the same power under statute, but it is normal custom and practice for the same to apply.
So why use PACT?
Specialist knowledge - For example, a solicitor or barrister may be appointed to deal with legal or drafting disputes, a valuer may be appointed to deal with rent. County Court judges may have little specialist knowledge in these areas.
Flexibility- A full court hearing will be avoided and documents-only or more informal procedures tailored to the dispute may be agreed.
Speed -the appointment can be made of an appointee who is able to proceed immediately, avoiding the wait for a court hearing date.
Cost saving - although the appointee's fees will be an additional cost, the savings in time arising from the foreshortened procedure should lead to an overall cost saving.
When are court proceedings preferable?
- PACT is unlikely to be suitable where there are several legal issues or complex issues of fact or evidence to be determined as the court's evidential procedures will be needed to deal with these
- It is not always quicker or cheaper - if there are several outstanding issues and arbitration is used, this will largely follow the court process anyway but have the added procedure of appointing a third party. It may also take time to agree the terms of appointment, particularly when using an expert as there is no governing law as with arbitration. Also, if one party is reluctant or obstructive the process could become unworkable
- There are only limited rights of appeal for arbitrators and none for experts save for in cases of manifest error, a major concern if the third party has reached what the parties perceive to be an unreasonable/unworkable determination
- If an unsuitable appointee is used this can result in both parties being frustrated and unhappy at the award/determination
- Court proceedings can set precedents, PACT awards/determinations do not
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.