PACT (Professional Arbitration on Court Terms) was introduced by a joint working party involving RICS, the Law Society and the Independent Surveyors and Valuers Association in 1997.
The overriding advantage of PACT is that landlords and tenants can choose to select who determines the terms of their new lease. Therefore, the parties can choose to appoint an industry expert with relevant market knowledge rather than risk the uncertainty of the Court’s determination.
Under PACT, the parties also benefit from flexibility not usually found in the Court process. This is because the parties can agree to circumvent some of the requirements traditionally found in the Court’s timetable (for example disclosure or a full hearing) and to elect for the issues to be determined upon the papers with written submissions and without a hearing. Consequently, the use of an independent expert to determine the terms of a new lease has generally resulted in not only better decisions, but cheaper and quicker ones too.
On the face of it, PACT would appear to offer many advantages and few drawbacks, however, until recently, PACT has not been embraced by solicitors and surveyors. A number of reasons are cited for this, but perhaps practitioners have not been compelled to engage in PACT because the consequences of ignoring PACT and progressing a lease renewal via the courts process was predictable and without risk. However, recently there has been a culture change brought about by the Jackson reforms.
Defaults and delays by the parties and their solicitors which result in delays in the Court process and abortive costs will not be tolerated and Judges are taking a tough line. This tough line means imposing sanction in costs, but also refusing to grant late adjournments and vacation of hearings.
In addition, parties are expected to have their house in order and to produce more documents to assist the court in managing the case. This increases legal costs for progressing a lease renewal.
The increase of such costs may incentivise the parties to seek alternative methods to resolve the dispute surrounding the terms of a new lease. If that is the case, PACT may well fit the bill. If further motivation was needed, parties may look no further than the recent Court of Appeal case of PGF II SA v OMFS Company 1 Limited .
In PGF II SA v OIMFS Company 1 Limited, the Court of Appeal held that it was unreasonable, except in limited circumstances, for a litigant to fail to respond to a proposal to mediate a dispute.
PACT is a form of Alternative Dispute Resolution, but it is not the same as mediation. However, many practitioners speculate how long it will be before a court is asked to consider whether adverse costs, or another sanction, should be imposed upon a party to a lease renewal for failure to actively consider PACT when suggested by the other party.
Wright Hassall’s Commercial Property Litigation team are experts in Business Lease Renewals and PACT.