30 SEP 2019
In a challenging economic context, dilapidations are likely to come to the fore as leases end and landlords and tenants clash on the cost and extent of repairs and making good.
The RICS Dilapidations Forum Conference 2019 brought together hundreds of specialists from across the UK to examine the big issues and how to manage the interests of both sides effectively.
Bryan Johnston of the Property Litigation Association gave the opening keynote, reviewing some recent cases and exploring the status of alternative dispute resolution in dilapidations, the major theme of the day. This was followed by a fascinating exploration of dilapidations or equivalent practices around the world from Alison Hardy of Ashurst and Mark Tatlow of CBRE. In a global market, practitioners and advisors need to be aware of where responsibilities fall in different jurisdictions, and how these may be affected by factors ranging from local social mores, to the impact of climate on building condition.
As leases shorten and the market becomes more complex, difficult questions of valuation will doubtless become more common; a breakout session on challenging areas in dilapidations valuation presented some case studies for delegates to consider, while other delegates heard updates on new RICS technical due diligence guidance.
After lunch, Gary Webber and Sara Benbow of The Property Mediators explained the key skills for mediators and how to engage with difficult people who are MAD (making a Mistaken Assessment of Danger) or BAD (displaying Behaviour that is Aggressively Defensive). This requires making sure that everyone feels heard and that there is a space opened up for mediation where issues can be explored in greater depth.
The afternoon discussion with Janet Bignell QC of Falcon Chambers and Julian Greenhill of Wilberforce Chambers considered court vs arbitration. The vast majority of cases do not go as far as a judgement – indeed a quick straw poll of delegates revealed that while around a third of them had written an expert report, less than half of those had got as far as court, and only a few of those had actually got to a judgement. Cost ultimately deters most, and 'without prejudice' meetings often bring about settlement. But some parties still remain determined to have their day in court and refuse dispute resolution – could one answer be ADR clauses in leases?
As leases shorten and the market becomes more complex, difficult questions of valuation will doubtless become more common
RICS head economist Simon Rubinsohn opened the afternoon's panel on the future of UK leases with a quick overview of the current economic situation. The work of Tom Sleigh, head of flexible workspace consulting at Colliers, brings him into contact with many landlords who are looking to provide a flexible offering to compete in a crowded market, as well as investors who are beginning to get more comfortable with this new reality in real estate. Graham Chase of Chase & Partners looked at the retail market – one facing a permanent restructure as shopping habits and town centres change. Many landlords are letting to temporary occupants, but this is not a long-term solution – Chase proposed that better planning for mixed uses to ensure footfall and a reining in of section 106 and CIL payments are needed to create sustainable high streets for the future.
The day closed with an engaging roleplay scenario – including tenant, landlord, solicitors and mediators – to provide a portrait of how mediators work in practice, demonstrating how they balance confidentiality and sharing useful information, as well as finding ways to move the two parties towards at least some consensus - the 'zone of possible agreement'.
A key message of the day was that the greater professionals' awareness of mediation is, the more it may be possible to avoid expensive and stressful court cases and come to a solution that works for both sides under the circumstances.