Rent Review Dispute Resolution – Part 1

In his first article of a new series for 2025 on dispute resolution, Michael Lever, The Rent Review Specialist, outlines arbitration and independent expert procedures for business tenancy rent reviews. This series aims to equip readers with the insight to handle rent review processes confidently. 

I do not know whether this is the only branch of the law with a choice, but business tenancy law for rent review and PACT on lease renewal enables disputes to be resolved by one of two different procedures. On referral to a third party (or tribunal), an arbitrator or an independent expert (IE). 

Authority and Procedures of Arbitrators and Independent Experts

An arbitrator derives authority from the Arbitration Act 1996. An IE’s authority is from the lease in question and from case law. I remember a bygone era when the third party could have been appointed by the Law Society, or the Institute of Arbitrators (as was), or the President of a local Chamber of Commerce and, every so often, at least two or more arbitrators or umpires. Nowadays, thanks in no small part to lawyers, the Royal Institution of Chartered Surveyors (RICS) has almost the monopoly on appointments from its panel of specially trained surveyors, unless the lease also enables the parties jointly to appoint someone by agreement. 

An IE is normally a valuation surveyor whose opinion, (known as a Determination or occasionally a decision), on rent the parties covenant to accept. A lease might stipulate the third party’s required experience. Usually, a lease will say the determination is binding (except in the case of manifest error) and that the IE can decide points of law and instruct a legal assessor to advise the IE. Despite expecting an RICS appointee to have a thorough knowledge of business tenancy law, I have encountered surveyors acting as IE or arbitrator needing to obtain legal advice on basic points of law. The assessor overstepping the mark on what else should be assumed. 

Where one or both parties want to appeal, the only way to overturn an IE determination is to sue for damages in negligence for an arbitration award by leave of the court for serious irregularity under s68 Arbitration Act. The time limit for appeal is 28 days after the date of the award. It is important to request the arbitrator to agree to date the award after the arbitrator has received the whole of his costs for release (known as publication) of the award. Without such agreement, the award date is when the arbitrator signs the award. As it can often take more than 28 days for one or both parties to pay the costs for publication, the right to appeal is lost. So too, where the arbitrator awards the parties’ ultimate responsibility for costs, only for the successful party to find it too late to disclose a winning Calderbank offer. The general principle is that costs should follow the event. For a rent review, the rent compared to the rent opined by one of the parties – unless, per s61(2), it can be shown that in the circumstances that is not appropriate. Where minor mistakes are found in the determination or award, the third party can correct them. Where the procedure is for an IE determination, but the lease is silent on responsibility for the IE’s costs, the norm is for the applicant to the RICS to pay all costs, unless otherwise agreed by the parties. Under the Arbitration Act 1996, any agreement in the lease requiring each party to be responsible for 50% of the costs is void as per s60, any such agreement is only valid after the dispute. 

The lease will state when a third party can be appointed. For example, not before three months before the review date. At any time after the review date, or at any time after the review date and before the expiry of the review period. Whether time is of the essence depends upon stipulation or implication. The phrase ‘but not otherwise’ makes time of the essence, but ‘shall’ is either mandatory or directory, according to the circumstances. The House of Lords ruling, in the two appeals United Scientific Holdings v Burnley Borough Council, and Cheapside Land Development Co Ltd and Others v Messels Service Co 1977, decided directory; in doing so, started the ball rolling for interpretation of rent review phrasing. 

Occasionally, a lease enables the landlord only the right to refer the review to a third party. The landlord to elect whether an arbitrator or IE before or after the appointment. Although the third party is impartial, conflicts of interest do arise and must be disclosed before the appointment, in case one or both parties object. The President of the RICS can override the objection. Before Eurocom Ltd v Siemens Plc [2014], the applicant could prevent the RICS appointing a surveyor whom the applicant considered landlord or tenant propensity. Where the conflict of interest arises afterwards, it is necessary to draw the conflict to the third party’s attention. 

An arbitrator can only award a rent at or in between the extremes of the values presented by the parties. To have two extremes, both parties should reason accordingly, or else the arbitrator would have to adopt a robust approach. The extremes do not limit an IE. An IE has a duty to the RICS to proceed, regardless of whether the parties want to. Despite any timetable in the lease, including time limits for the determination, which in practice are often unworkable, procedure is often less restrictive. The strict rules of evidence, such as no hearsay, typically eased.

For costs, an arbitrator can award costs of the arbitration and the parties own costs. An IE can only determine on costs if the lease says so. Generally, the IE can determine the parties’ responsibility for the IE’s costs or if no direction, then the parties equally. As an IE is a valuer, I consider it better that the lease does not allow the IE to determine the parties’ costs, as that is akin to arbitration. A Calderbank offer is another reason, the subtle use of which I shall explain in the part two of this series. 

Michael Lever 
The Rent Review Specialist 
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