A cheaper and quicker alternative to arbitration may be on the cards with the introduction of “expert determination”, for Agricultural Holdings Act (AHA) tenancies.
Arbitration of tenant and landlord farming disputes has long been considered to be a lengthy and expensive process, which can be a significant distraction from day-to-day farming activities.
But expert determination, an alternative to arbitration, is currently being proposed as an amendment to the Agricultural Holdings Act.
The changes look likely to go through and would allow parties to appoint a relevant person to determine their dispute and so avoid the expensive and time-consuming route of arbitration.
What is expert determination?
Expert determination (or third-party determination) is said to offer a relatively quick, less formal and more cost-effective means of resolving a dispute.
Rather than parties presenting their case to an arbitrator, they agree to appoint a third party who should have expertise in the issue over which there is disagreement.
This person reviews the evidence and makes a decision to settle the dispute.
The decision is binding and can only be appealed or challenged in exceptional circumstances – although, as the law on expert determination develops, so does the scope of potential challenge.
Key to a successful third-party determination will be the appointment of a person with sufficient expertise to resolve the issues in dispute.
If, for example, the dispute was a rent review, a valuer may be appointed.
Expert determination: Key considerations
Before agreeing to appoint an expert rather than an arbitrator, both landlords and tenants should think very carefully about:
- The identity of the third party
- The terms of appointment and scope of engagement.
It may well be that the added complications of agreeing the above will overcomplicate a process which is currently relatively straightforward, and which has the backstop of an arbitrator being appointed by the Royal Institute of Chartered Surveyors (Rics) and the rules set out in the Arbitration Act 1996.
Third-party determination may have its place in very straightforward and narrow issues of contention that the parties are able to agree should be dealt with by this process.
Of course, the biggest challenge in a dispute scenario may well be agreeing who should be appointed – and at present, the proposed amendments do not provide a mechanism for appointment if there is disagreement over the “expert”.
Pros and cons
Expert determination is an informal process that allows the expert to direct what information and evidence they require and, in general, make a decision on paper and without the need for parties to appear before them.
Arbitration, in comparison, incorporates the provisions of the Arbitration Act 1996, which sets out the rules and procedures for the parties to follow with a substantial volume of case law for guidance.
An arbitration process can often run in much the same way as court proceedings, with formal directions and hearings.
In terms of duration, you could expect an expert determination to be resolved from start to finish in three to six months, whereas an arbitration could easily take six to 12 months – or more.
Costs of expert determination are likely to be significantly less than for arbitration, with the potential to avoid the involvement of solicitors.
The advantage of “informality” could also result in a lack of certainty and control, so the appointment and instruction of an expert needs careful drafting.
The speed of an answer may also be outweighed by difficulties in appointment and the relatively low cost may be subsequently outweighed by the difficulties associated with appealing or challenging a determination.
While an expert should not agree to being appointed unless they are truly independent, a decision can only be challenged if one party feels the expert allowed their independence to be compromised and is able to prove this was the case.
Which disputes will expert determination cover?
The main areas include agreeing terms of a tenancy, compensation for fixed equipment, removal of tenant’s fixtures, rent review, maintenance of pasture, sale of produce, compensation for damage by game and settlement of claims when a tenancy ends.
The amendments do not make any changes to the regime regarding notices to quit, which tend to be the most contentious and convoluted when referred to arbitration.
If parties are struggling to agree the identity of a third party then there may be little choice but for an arbitrator to be appointed via a referral to the Royal Institute of Chartered Surveyors (Rics).