Dispute Resolution – whether to use an Arbitrator or Independent Valuer

— 9 Mar 2021, 14:34:52 by Colin Davies

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Almost all commercial leases have a dispute resolving mechanism for rent reviews. This is usually by the appointment of an Arbitrator or Independent Valuer.

What’s the difference and is there a cost implication?

An Arbitration is governed by the Arbitration Act 1996 and is a judicial appointment in accordance with the Act. An appointment is usually made in accordance with the lease terms via the President of the Royal Institution of Chartered Surveyors (RICS), although this may vary within the lease. The Arbitrator is confined to deal only with the evidence put to them by the parties and cannot introduce any valuation evidence in their knowledge. They are not allowed to award beyond the valuation range provided by the parties in their evidence and will give a reason as to their decision.

By contrast, an Independent Expert is a tripartite legal agreement between the Landlord / Tenant and Independent Surveyor. Once again, their appointment is governed by the lease terms. The Independent Expert will receive evidence from both parties but is not restricted to the valuation range put to them and may use their own expertise in the marketplace. They will not give reasons in their determination and this is therefore normally the cheaper option.

In either event, it is important when drawing up new leases to ensure there is a mechanism that is appropriate to the nature of the subject property. Less valuable properties are usually better suited to an Independent Expert as the costs are less for both parties.

If you would like advice from our Professional team, contact Colin Davies.

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