Property and Law: Alternative Dispute Resolution (ADR)
Property and Law: Alternative Dispute Resolution (ADR)
Currently, negotiation, mediation and arbitration enable to resolve different conflicts. These have become acceptable and inevitable aspect of creative lawyering in the 21st century. As a result, Alternative Dispute Resolution (ADR) processes are being applied in different types of situations around the globe – all of these care governed by either litigation or, in extreme cases, by warfare between countries. Because it is considered as convenient way of resolving conflicts, as a result, it is being used in different areas of economy, security and social issues such as national and international peace and order, environmental and public policy, science and technology, sports, social development and community-related issues, crime control and prevention, and other related social and economic conditions, and more importantly in the field of property or real estate law.
This paper will focus on discussing ADR as a way of resolving disputes and conflicts which can arise in the Real Estate practices in the UK. Thus, it will focus on analyzing the different advantages and disadvantages of individual ADR process and connected it with the areas of Real Estate Law and Practice in the UK.
What is ADR?
ADR is the general term that is used in order to define a set of different approaches and techniques that aims to resolve disputes in a non-confrontational way. These processes or approaches are used to resolve dispute in approaches and processes that are short of, or alternative to, full-scale court processes. Currently, ADR is no longer just a forceful option to litigation, but it is considered as an obligatory consideration in the quest of claims before the courts. Different case law shows that those who have unreasonably refused to mediate may suffer from adverse cost effects of trial, even when they are the successful party.
Basic ADR Processes
There are different types and processes used in ADR nowadays, but the most common are the arbitration and negotiation, mediation, arbitration and conciliation.
Negotiation pertains on the contractually mandated good faith negations between the parties. Commonly, a clause to the effect is offered for cooling off period and put off arbitration before a specific time period has elapsed. This can be effective in focusing the mind of the parties on the different advantages of settlement during the initial states of the dispute rather than on the different tactical advantages to be gained by the commencement of proceedings. However, this process is subjected time limit in order to prevent an obstinate party from arguing that the arbitration cannot be instigated because of the continuing negotiations. With this, its common time period is 30 to 60 days. It is important to take note that the issue whether the triggering of contractual period will help to stop time running for limitation purposes, without express agreement to that specific effect, is still uncertain.
Arbitration is a form of ADR which involve the formal submission of the dispute to a non-judicial third person. The expertise of the arbitrator may be a business professional, while the expertise of the judge in litigation is the law. A person or entity may get into arbitration by way of contractual agreement, by status, or even by court order. Commonly, the decision of the arbitrator is binding on the parties. A contractual agreement to arbitrate a dispute is the most common situation in the current world. This form of ADR is commonly use in dealing with the development and sale of real estate, particularly in the construction contracts.
It is important to consider that a conciliator is also appointed by agreement between the parties – conciliation ADR process – but they commonly take more complex role in the negotiation process than the mediator and can make recommendations on what he or she thinks as fair solution of the dispute. In order to do so, arbitrator tends to see the parties involved privately. The limitation is that in conciliation, the conciliator cannot force or require the parties to reach or established a settlement and has no power to inflict a binding award towards the parties.
The last most common ADR type is mediation. In this process, an impartial third party is employed by the third parties in order to act as a mediator but does not generally make recommendations or even render decisions. Rather, he or she just guide and support the parties to negotiate their own solution to the dispute. The parties will be able to agree on whether or not the mediator is to consult with them in separate manner or caucusing, jointly or both. In the end, the mediator cannot force or require the parties to reach a given settlement, but he or she may take a very dynamically influential approach.
Application of ADR in Real Estate Disputes in the United Kingdom
In general, there are different forms and types of disputes that might arise in the property matter. This includes the rent review, service charge, boundary dispute, misleading sales advert, consent refused for assignment, failure to complete on sale, lease renewal, dilapidations and negligent valuation. In addition, some construction matters can also be encountered including property management and the relationship between the general and sub-contractor, homeowner and contractor, etc. CPR Pre-action Conduct Practice Direction encourage the application of ADR process before the actual court proceedings in order to enable the parties involved to settle the issues between them without the need to start lengthy and costly court proceedings. The next sections of this paper will tackle on issues that are related with the application of ADR processes in the disputes which can be experienced in the real estate cases in the UK.
Rent review is considered as one of the disputes in the real estate market. It is important to take note that every rent review clause should contain provision for the determination of a new rent by a third party in the presence of dispute. The person to be appointed in order to settle on the dispute will generally be a surveyor or valuer and the rent review clause can include the specific requirements with regards to his or her experience. The decisions of the High Court in McCarrick v The Gaiety (Sligo) Ltd. High Court, 2nd April 2001, enables to show the different influence or use of arbitration in real estate market disputes, particularly regarding rent reviews. This can also be reviewed on the case of Warborough Investments Ltd v. S. Robinsons & Sons (Holdings) Ltd (2003, which enable to show the ability of the arbitrator to use his or her own expertise in valuation matters in the different issues and circumstances of real estate disputes. The result showed that the ability and skills of the arbitrators in deciding regarding the reconsideration in each case enables to solve disputes. However, it is also important to take note that there is a limitation on the power or authority of arbitrators in decision-making process. There are cases which show that if the arbitrator draws on the knowledge outside the particular field, then he or she is no longer assuming the role of an impartial arbitrator but that of an advocate. Particularly, the result of Sokratis Rokopoulos v Esperia S.P.A. (1987) 1 Lloyd’s Reports 456 shows that:
“He can and should use his special knowledge so as to understand the evidence that is given, the ledgers of the clerks, the usage of the trade, the dealings in the markets and to appreciate the worth of all that he sees upon a view, but he cannot use his special knowledge, or at any rate he should not use it, so as to provide evidence on behalf of the defendants which they have not chosen to provide for themselves, for then he would be discarding the role of an impartial arbitrator and assuming the role of advocate for the defaulting side. At any rate, he should not use his own knowledge to derogate from the evidence of the plaintiffs' experts without putting his own knowledge to him and giving them a chance of answering it and showing that his own view is wrong... ...so in assessing rents, an expert arbitrator can rely on his general knowledge of comparable rents in the district. But if he knows of a particular comparable case, then he should disclose details of it before relying on it for his award”.
The major advantages of this process are: speed, continuing relationship of the parties, abilities of the parties to choose the form of decision making process; privacy of award and finality. On the other hand, the main disadvantages of this process are: it will not mean cheaper or less time consuming, the award is reviewable by the competent jurisdiction of the court, thus the decision is considered at the trial division level and the difficulty of continuing effort due to commitment of the arbitrator. As have mentioned in the first part of the paper, the roles and responsibilities as well as the authorities and powers are limited, thus, it cannot be affected in some aspect of the dispute.
Mediation is considered as the process where in the two or more parties in dispute employ or assign an independent third party in order to help them out in accomplishing a discussed agreement in order to determine their differences. In details, the third party does not inform and notify them what to consent and does not sit in verdict ahead of them, thus he does not work as an expert. Instead, he or she helps out the parties in establishing or thinking about their own decision. With these, the main characteristics or the primary attribute of the process is its non-binding and disregarding the issue of prejudice, bias and maintain confidential procedure, which enables the third party to act as a catalyst. In addition, mediation is deliberate because there is no pressure or force upon the parties to partake. It is non-binding only because the parties that are involved can withdraw from the process at any time they want before the final step or settlement has been achieved. However, it is important to consider that once that the settlement has been obtained, recorded and signed by all the parties involved, then it becomes a binding contract and indicates that the dispute is at its end. Because litigation may already have been set in train, it is universal and general for the parties to agree or approve in order to be attached or included to the contract. It is considered as bias-free or free from any prejudice due to the fact that there are nothing said in the duration of the mediation process, which is considered and connected to the subsequent litigation. Above all, it is confidential due to the fact that parties have selected to resolve their dispute away from the eyes of the public.
Unlike other ADR processes like arbitration and litigation, mediation enables the parties to maintain their control based on their demands or needs regarding the different alteration in the development of the discussions. Therefore, mediation helps in order to restore broken communication between two companies or organizations, at the same time, mend those broken business relationships. Primarily, the mediator is the one responsible in making sure that the expert evidence needed for the dispute reconciliation will be gathered and provided completely. Furthermore, it is important to be independent and high of integrity and honesty by ensuring that that personal opinions and experience will not cause bias perceptions and decisions. In the end, the primary role of the mediator is to present and explain the different facts and assumptions that have been gathered from the materials and other documents that have been analyzed and evaluated. Therefore, mediation process is more detailed than the first process.
Mediation can help in order to consider in-depth analysis of the situation. In the Basingstoke and Deane B.C. v. The Host Group,  1 W.L.R. 348, according to Nicholls L.J.:
“There is really no dispute that the general purpose of a provision for rent review is to enable the landlord to obtain from time to time the market rental which the premises would command if let on the same terms on the open market at the review dates. The purpose is to reflect the changes in the value of money and real increases in the value of the property during a long term. Such being the purpose, in the absence of special circumstances it would in my judgment be wayward to impute to the parties an intention that the landlord should get a rent which was additionally inflated by a factor which has no reference either to changes in the value of money or in the value of the property but is referable to a factor which has no existence as between the actual landlord and the actual tenant, i.e., the additional rent which could be obtained if there were no provisions for rent review”.
In the end, this process can help in order to save time and money in significant manner. Furthermore, it can also be useful process in managing the expectations of the clients. It can also help in order to lessen and remove the risks that are connected by trying the cases in the front of the jury. It also enables the parties to maintain confidentiality, because the process will be done just between the two connected parties. Mediation can also help in order to contribute to the overall process by expressing their opinions and reactions which will be able them to be heard, thus help to resolve some problems related to emotions. With that, it can help in order to enable the parties involved as well as the mediator to practice creativity in the process of establishing the resolutions, at the same time, it can concur to the relief that the court could never award. Based on these, it can help to motivate the parties, because they are more likely to cooperate and follow agreements because they have been part and very cooperative to the entire process. Above all, there is no real disadvantage and problem with mediation due to the fact that most of the cases reconcile and even those that don’t, enables to realize the benefits including the appreciation and recognition of each party’s interests and perceptions, motivation, approval, future long relationship and even the process of lessening the issues.
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D Gray, Alternative Dispute Resolution (DLA Piper 2010) <http://www.dlapiper.com/>
Center for Democracy and Governance, ‘Alternative Dispute Resolution Practitioners’ Guide’, (Technical Publication Series 1998) <http://www.usaid.gov/>
J Karp, E Klayman, F Gibson 2003, Real Estate Law (5th Chicago IL, Dearborn Real Estate 2003)
J Paulsson, The Freshfields Guide to Arbitration and ADR: Clauses in International Contracts (2nd Kluwer Law International, The Netherlands 1999)
J Ratcliffe, M Stubbs & M Shepherd, Urban Planning and Real Estate Development (2nd Taylor & Francis, Great Britain 2004)
S Sayce, J Smith, R Cooper & P Venmore-Rowland 2006, Real Estate Appraisal: From Value to Worth (Wiley-Blackwell 2006)
Y Shamir, ‘Alternative Dispute Resolution Approaches and Their Application’, (UNESCO Technical Paper 2004) <http://unesdoc.unesco.org/>
 A. Fiajoe (2004)
 J Ratcliffe, M Stubbs & M Shepherd (2004)
 A. Fiajoe (2004)
 Y Shamir (2003)
 Center for Democracy and Governance (1998)
 D Gray (2010)
 J Paulsson (1999)
 J Karp, E Klayman & F Gibson (2003)
 J Paulsson (1999)
 J Paulsson (1999)
 CPR 1998 Pre-Action Conduct 1 (2)
 S Sayce, J Smith, R Cooper and P Venmore-Rowland (2006)
 Cases include: King and Anor v Thomas McKenna Limited and Anor (1991) 1AER, 653; Thomas & Elaine Doyle v Kildare Country Council & Shackleton, Supreme Court (1993); Keenan v Shield Insurance Co Ltd (1988) IR 89 at 96; and Sokratis Rokopoulos v Esperia S.P.A (1987) 1 Lloyd’s Reports 456.
 RICS DRS March 2010
 RICS Survey Acting as Expert Witnesses (2008
 Basingstoke and Deane B.C. v. The Host Group,  1 W.L.R. 348
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