Pilot scheme launched for LTA 1954 unopposed lease renewals

Unopposed lease renewal proceedings do not usually involve complex legal issues and only very few reach trial. The main issues in dispute tend to be the rent payable under the new lease, the length of the term and whether the tenant/landlord should have a break option. The usual forum for resolving these issues is the County Court with the only real alternative the little used PACT (Professional Arbitration on Court Terms) scheme.

The pilot scheme

This month a one-year pilot scheme will be launched for unopposed lease renewal proceedings issued at the County Court at Central London (CCCL). The scheme will transfer unopposed lease renewals from the CCCL to the First-tier Tribunal (FTT) for determination although the claims and any interim applications will still have to be issued in the CCCL.

The pilot scheme is only applicable to properties in London over which the CCCL has jurisdiction. Applications made in the CCCL in respect of properties outside London will be sent back to the relevant County Court venue which does have jurisdiction.

After transfer the Civil Procedure Rules which govern court proceedings will continue to apply and the judges of the FTT will have the same powers as the judges of the County Court including the power to award costs.

Aim of the pilot scheme

The stated aim of the pilot is to “ensure that all cases proceed to a final determination as smoothly and as quickly as possible” and the draft standard directions which have been produced aim to progress the case to trial within 20 weeks with a tribunal valuer sitting with the tribunal judge at the trial.

Changes to the current process

The draft standard directions provide for:

• no extensions to the directions to be agreed between the parties save for an initial option to stay for three months to enable the parties to refer the matter to PACT or mediation for determination
• no case management conference
• only one chance to comment on the draft lease for the tenant
• no direction for disclosure, witness statements or schedules of disputed terms
• the valuation experts to exchange comparable evidence on market rent while the lease is being negotiated and prior to solicitors agreeing which terms of the lease are in dispute, and
• the case to be listed for trial from just 12 weeks after the directions are issued.

Advantages of the pilot scheme

Apart from the speed of determination the obvious advantage of the scheme is that the case will be considered and determined by a tribunal with relevant industry knowledge and expertise.

It is also understood that if valuation is the only issue in dispute between the parties the FTT may consider written submissions rather than order an oral hearing.

Will it work?

Concerns have been expressed as to the practicalities associated with the scheme:

• Issuing renewal proceedings at the last minute is sometimes unavoidable. The speedy progress to trial does not really afford much time for the parties to assemble evidence and to negotiate constructively.
• The standard directions appear to assume that only rent is in dispute. The parties will therefore need to apply for bespoke directions if they are disputing legal issues. However, the real issues in dispute are often not clarified until an advanced stage in the negotiations.
• How realistic is it to expect experts to prepare their reports when the terms of the draft lease are still being negotiated?

It is understood that following meetings between members of the FTT, CCCL and court users to discuss the proposed new system revised directions and guidance for the pilot scheme are expected to be published soon.

What effect will this have on the lease renewal process in the future?

Parties will need to be more proactive commencing negotiations for the new lease as soon as a statutory notice is served bringing the existing lease to an end. This may include submitting a draft lease before proceedings are issued or directions given.

It seems inevitable that there will be greater use made of extensions to the statutory deadline for issuing proceedings in the CLCC in order to buy more time for negotiations.

Once proceedings are issued parties will have to get used to complying with a tight timetable with limited possibility for delay. Failure to comply with directions strictly could result in the claim being struck out.

If the pilot scheme is considered a success then it will presumably become a permanent arrangement and will be rolled out country wide. The days of issuing proceedings and then negotiating terms over a lengthy period of time will become a thing of the past.