The Deregulation Act 2015 is lengthy and impacts on many areas of business, not only agricultural tenancies and residential lettings. Our focus in this article is the amendments to the Agricultural Holdings Act 1986, whereby the Deregulation Act enables third party determination of disputes arising under the 1986 Act in certain instances, namely rent reviews, Model Clauses (s7(2)), and end of tenancy claims under s83, to name but three. This mechanism is not however available for disputes in respect of notices to quit, which are still referred to arbitration.
The vital factor is timing, and the fact that the parties must agree between themselves to use an independent expert. Either party may withdraw from the agreement to appoint an independent expert up until that expert is appointed, and instead refer the matter to arbitration. However once an independent expert has been appointed, the matter cannot subsequently be referred to arbitration, except where that expert becomes unable to act due to illness or death etc. Similarly where an arbitrator has been appointed there is subsequently no mechanism to revert to determination by an independent expert, again unless the arbitrator is unable to act.
Of course one would not wish to preclude recourse to arbitration should the parties not agree on an expert and on this basis, taking the example of a rent review, they would need to come to an agreement about, and indeed appoint, an expert, before the 12 month deadline for referring the matter to arbitration. This could in practice be tricky and indeed it will be interesting to see whether initially we do see many rent review disputes referred to an independent expert in this way, or whether it will be used more tactically in negotiations. Nevertheless it is perhaps more likely that this new option will be utilised for other disputes arising under the 1986 Act, where it is available, albeit with some degree of transition, to become accustomed to the option, as was seen following the introduction of the 1996 Arbitration Act.
This is a welcome option for the average tenant farmer, providing their landlord agrees, as the costs of arbitration can be prohibitive. The fact that very few arbitrations ever go the full course to a hearing, but instead often settle beforehand, illustrates that the costs now of a formal hearing can too often be disproportionate to the “value” in dispute.
This option is well overdue and should be welcomed by the industry. Certainly for simpler issues, that would previously have required arbitration, both landlords and tenants will be thankful for this cost-saving amendment. What also may help both landlords and tenants is the opportunity also of agreeing the independent expert terms, and that he will only make an award on his own costs, with the parties bearing their own. This would again go further to reduce costs and encourage parties to keep things simple. However when “high value” issues are in dispute it will be interesting to see whether parties will be willing to agree to use this new mechanism, or whether the tactics involved particularly with a rent review arbitration and the impending ‘threat’ of a potential costs award against a party, will continue to be seen as a useful tool when negotiating.
