This summer and autumn see important changes to traditional agricultural tenancies in England. After many years the “model clauses” for repairing liabilities have been updated to reflect modern conditions under the Agriculture (Model Clauses for Fixed Equipment) (England) Regulations 2015. A raft of aged regulations on end-of-tenancy compensation for short-term improvements and tenant right matters have been repealed. But another change is the most important. Disputes arising under the Agricultural Holdings Act 1986 (“AHA 1986”), which once had to be settled by arbitration, can now be referred for third party determination instead. There is one exception: disputes relating to a notice to quit. This still leaves a long list which can now be settled by third party determination, including rents, repairing questions and disputes over the terms of a written tenancy agreement.
Will third-party determination make any difference?
The graph below shows the number of appointments made by the RICS Dispute Resolution Service over the past 20 years in respect of AHA 1986. It reveals that an average of 425 AHA 1986 applications a year camouflages a wide range, which peaked at 784 in 2008. On top of the RICS presidential appointments there will also be private appointments, but one active arbitrator estimates these at only 10% of the total, taking the average yearly appointments up to 470 or so and the peak of 784 up to 870 or so.
This disparity between private and presidential appointments could be important to the popularity of third party determination. A private appointment for a rent review must be completed and accepted by the arbitrator before the rent date, whereas an application to the RICS only needs to have been made properly before the rent date. Agents struggling against the deadline are therefore likely to make an application in order to protect their position. And once you have initiated arbitration procedures you cannot revert to third party determination (and vice versa unless the third party expert dies or becomes unable to act).
How many arbitrations go all the way?
RICS data only cover the total annual applications, but informed estimates suggest that about 80% of all AHA applications relate to rents, 10% to end-of-tenancy claims and 10% are divided between notices to quit (about 5%) and other notices.
But do all these applications go all the way to a final award by an arbitrator? Though hard evidence is limited, informed estimates suggest that, of the applications that relate to rent, only 5% go all the way. Of the applications which relate to notices to quit, about 60% will lead to an award. Other notices are lower at 40%, while end-of-tenancy compensation is likely to see only about 20% of applications eventually being the subject of an arbitrator’s award. Overall that probably means no more than 50 full arbitrations in an average year.
The simplified arbitration solution
Third party determination is seen as a solution to the cost of agricultural arbitration. But by the time the independent expert has been found, instructed and has undertaken the work to solve the dispute, will this really be any cheaper than a well conducted arbitration – particularly as the independent expert will have to start from scratch, compared with the role of an arbitrator in “valuing the valuers”?
Meanwhile, the RICS has developed a fast-track, low-cost alternative form of agricultural arbitration which may provide a more robust and cost-effective answer. Planned to launch in November, the Simplified Arbitration Service draws on procedures developed by the courts for small claims, including informality, limits on expert evidence and short, cost-effective timetables. With the fee set at £3,000, it is intended that the cost of the arbitration will be shared between the parties (ie £1,500 each) irrespective of the outcome. Written submissions will be made by both parties. The arbitrator will undertake a site visit and hold a meeting or hearing with both parties. Expert evidence is not expected to be called, and will be tightly controlled where it is permitted.
The arbitrator will ask the questions with no process of examination and cross-examination. An award will be issued within 10 working days of the hearing.
There will be fallback provisions if the issue should prove itself unsuitable to a fast-track approach, including the use of directions under the Arbitration Act 1996.
Philip Meade, a veteran of more than 100 arbitrations over the past five years, chairs the RICS Dispute Resolution Board. He is concerned that arbitration is becoming less popular, owing to the costs and uncertainty. He says: “We hope to address this with a combination of well-trained dispute resolvers for complicated high-value disputes and the fast-track procedure by providing an efficient, cost-effective and binding method of settling disputes where the amounts in dispute are relatively low and sometimes less than the costs that can be incurred.”
With doubts now emerging over the potential cost and liabilities associated with independent third party determination, the new RICS fast-track approach is to be welcomed. It is a bold step towards the restoration of arbitration as a means of robust and speedy dispute resolution.
