How to lower the cost of settling farm tenancy rent disputes

A simplified and less costly form of arbitration is available to help landlords and tenants resolve rent negotiation issues.

Tenants have recently been advised by the Tenant Farmers’ Association (TFA) to serve notice so their rents can be reviewed next year once more is known about the implications of Brexit for farm finances.

Fearing they will end up with higher rents or locked in costly arbitration proceedings, tenants are usually reticent about triggering the rent review process.

See also: How to manage a farm succession handover

Arbitration involves both parties submitting evidence about the productive capacity of the farm, with an independent professional nominated by the Royal Institute of Chartered Surveyors (RICS) ruling on what the final amount should be.

However, it is often extremely time-consuming and costly, with both parties often requiring the services of land agents and other professionals to compile supporting documents.

This means the cost of the dispute can often exceed the amount the two parties are disputing, according to Calum Gillhespy, chartered surveyor with GSC Grays.

Although only a small proportion of rent reviews end up in arbitration, it can be devastating for those involved, not only due to the financial cost but because it often causes a severe breakdown in the relationship between tenant and landlord.

Simplified Arbitration Service

How it works

  • Limits arbitration process cost to £3,000 plus VAT
  • Costs shared equally between both sides
  • Decision within 10 days of final meeting
  • Relies on some goodwill existing and likely to be most successful in dealing with technical points

Mr Gillhespy says the Simplified Arbitration Service, a process launched by RICS in 2016, offers a quicker and less costly alternative for disputes, particularly over smaller amounts of money.

This is where both parties agree to a RICS-nominated independent expert taking a maximum of three days to consider skeleton arguments from both parties and undertaking a site visit.

The expert then is obligated to report back within 10 working days following the meetings, unless both parties agree otherwise.

The streamlined system means costs are capped at £3,000 (plus VAT) and the bill is shared equally by both parties.

TFA chief executive George Dunn said the organisation supported an increased number of disputes being resolved using this process.

However, he warned it was only likely to succeed where a measure of goodwill still existed between the parties and they were only at deadlock over technical points.

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