APC Series: Lifting the lid on dispute resolution

Candidates need to be aware of how to recognise, avoid, manage and resolve disputes, including different dispute resolution procedures and how they apply to their area of professional practice. All candidates will come across disputes in their day-to-day work. Some of the most common causes of disputes include: errors or a lack of clarity in contracts or terms of engagement, for example around fee liabilities or scope of work; uncertainty; lack of communication; cultural differences; conflicting objectives between stakeholders; and delays. Often, disputes can be avoided by having clear documentation and agreement between the parties at the outset. This could be through formalising the instruction in terms of engagement or using a formal contract such as the JCT suite. Clear and robust client briefings are also an excellent way to define expectations and avoid disputes arising. Furthermore, collaboration between the parties with open lines of communication will help to avoid miscommunications and uncertainty. This demonstrates the importance of good teamwork and identifying and managing key stakeholders from inception of an instruction or project. Another technique to avoid disputes occurring is diligent risk management, including identifying risks (eg, project, business, environmental and external change risks), managing risks and setting out a risk management plan. Early warning notices can also be used, specifically in the NEC contract suite. This means that the parties must give early warning of anything that might delay a project or increase costs. This will be followed by an early warning meeting to discuss how the issue can be avoided or mitigated. Finally, partnering (or alliancing) can be used to take a collaborative management approach to projects, encouraging openness and trust between the parties. This approach was promoted by the Latham Report, Constructing the Team, in 1994. In the event of a dispute arising, the parties should seek to negotiate a compromise or an amicable settlement. An example of this could be agreeing the new rent at a rent review or resolving a service charge dispute. The RICS has a Conflict Avoidance Pledge that candidates should be aware of. This is the commitment from professionals to avoid conflict and seek early intervention. However, in many situations it is not possible to reach a negotiated outcome. In this case, what happens next? Alternative dispute resolution There are a range of alternative dispute resolution procedures available, which are outlined below. The RICS Dispute Resolution Service is available as an appointment body for third-party dispute resolvers, including adjudicators, arbitrators and independent experts for commercial rent reviews (via a DRS 1 form) and consumer mediators. These are often used to avoid recourse to litigation, which is often costly and time consuming. In fact, the Pre-Action Protocol under the Civil Procedure Rules encourages the parties to a dispute to consider ADR prior to litigating. A party that fails to engage in ADR without good reason can have cost sanctions imposed against it by the court. First, mediation. This involves a neutral third party (mediator) who assists the parties in reaching a settlement to the dispute. The mediator clarifies and prioritises the issue, clarifies needs, provides a reality check and helps the parties to identify solutions. The RICS adopts the ACRE approach to mediation: analytical, commercial, restorative and expert. The outcome of mediation can be legally binding, if an agreement is reached that is subsequently formalised in a written contract. Mediation is confidential, flexible and voluntary. Typical uses include construction disputes and the RICS Covid-19 Commercial Rental Independent Evaluation Service. Conciliation is similar to mediation but where the third party is interventional and provides solutions to the parties to resolve the dispute. Contractual adjudication, by contrast, is governed by section 108 of Part II of the Housing Grants, Construction and Regeneration Act 1996. Adjudication aims to reach a quick (within 28 days) interim resolution of construction disputes. An independent third party adjudicator considers the claims of both sides before reaching a legally binding judgment. This can only be revised by arbitration or litigation and there is no right of appeal. Most commercial property disputes – for example, for rent reviews, lease renewals or service charges – are resolved by expert determination or arbitration. Most leases will set out the specific form of ADR to be adopted in the appropriate clause – for example, rent review clause or dispute resolution clause. Expert determination is where an independent expert determines the dispute between the parties. It is not governed by legislation. An expert will exercise their own professional expertise and judgment and will have no power to compel disclosure or documents or witness attendance. The expert can receive the parties’ representations, but is not obliged to do so or to consider them. Arbitration, on the other hand, is governed by the Arbitration Act 1996. Arbitrators must base their decision on the representations of the parties, although they can draw the parties’ attention to other matters. The arbitrator’s award must lie between the parties’ submitted positions and they can use their expertise in assessing the relevance and quality of the evidence put forward by the parties. Professional Arbitration on Court Terms is a specific ADR initiative set up by the RICS and the Law Society, relating to lease renewals. The third party can be an arbitrator or expert, contrary to the name, and it offers a quicker, cheaper and more flexible alternative to litigation. Trip hazards A key source of confusion for APC candidates is the difference between an independent expert and an expert witness. The role of an independent expert is explained above. An expert witness is not a form of ADR. It is instead the role of a surveyor involved in third-party proceedings. They have an overriding duty to provide independent, impartial and unbiased evidence to the tribunal, dispute resolver or court. This is different to the role of the surveyor as an advocate in negotiations, where their duty is towards the client. The RICS publishes professional guidance for dispute resolvers and surveyors acting as expert witnesses and as advocates. These can all be found on its website under the “sector standards” page. The quick quiz 1. What is a DRS2 form used to appoint? a) Dispute resolver for matters other than rent reviews and construction adjudications b) Dispute resolver for construction adjudications c) Dispute resolver for rent reviews d) Dispute resolver for agricultural disputes 2. Is litigation a form of ADR? a) No b) Yes 3. What part of the CPR relates to an offer to settle? a) Part 21 b) Part 8 c) Part 36   Answers: 1: b   2: a   3: c Professional guidance alert WH Smith Retail Holdings Ltd v Commerz Real Investmentgesellschaft mbH  (25 March, 2021, Winchester County Court) New RICS Rules of Conduct RICS Levitt Report  Further reading and resources Sector standards for dispute resolutions RICS Conflict Avoidance Pledge  RICS PACT  Jen Lemen BSc (Hons) FRICS is a partner at Property Elite Image © dan burton/unsplash