PACT: Is It the Right Way to Resolve a Lease Renewal Dispute?

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Frustrated by the time, cost and complexity of the lease renewal process? You’re not alone.

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Lease renewals don’t always go smoothly. Disagreements over rent, lease length, break clauses or repairing obligations can quickly turn a straightforward renewal into a lengthy and expensive process.

Traditionally, resolving these disputes may mean going to court. But there is another option: PACT (Professional Arbitration on Court Terms), an alternative dispute resolution process that can provide a more streamlined and proportionate route to resolving certain lease renewal disputes.

Metrus has partnered with Lawrence Stephens to streamline the practical and legal aspects of PACT, helping landlords and occupiers better understand the process, their options and what to expect.

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So, what is PACT, and when does it make sense?

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What is PACT?

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PACT is a form of alternative dispute resolution (ADR) used in England and Wales for commercial lease renewal disputes.

Rather than asking a court to decide the disputed terms, the landlord and tenant agree to appoint an independent expert or arbitrator to determine issues such as rent, lease length, break clauses, repairing obligations and service charges.

The decision is legally binding and can provide a more private, cost-effective and streamlined alternative to court proceedings.

But while PACT can offer a different route to resolving a dispute, it is important to consider whether it is the right route for the circumstances.

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But is PACT always the answer?

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Not necessarily.

While PACT can offer a quicker route to a decision, delays can still arise if information is not provided promptly or negotiations become prolonged.

The binding nature of the decision is also important. Challenging the outcome is only possible on limited legal grounds, meaning one party may ultimately have to accept an unfavourable decision.

The choice of decision-maker matters too. Where the dispute is primarily about rent, a specialist valuation surveyor may be best placed to determine the issue. Where complex legal questions or unusual lease terms are involved, legal expertise may be more appropriate.

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The key consideration is therefore not simply whether PACT is available, but whether it is appropriate for the dispute in question.

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When is PACT the right approach?

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So, when does PACT make sense?

For disputes centred on rental value, PACT can be a useful option, particularly where both parties want an experienced valuation professional to determine the outcome.

For more complex disputes, direct negotiation or mediation may provide a better opportunity to reach a mutually acceptable solution. In some cases, court proceedings may still be necessary.

Ultimately, the right approach depends on the nature and complexity of the dispute, the issues that need to be determined and the outcome the parties are seeking — not simply on the fact that the parties disagree.

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A changing approach to lease renewals

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Choosing how to resolve a lease renewal dispute is becoming an increasingly relevant consideration for landlords and occupiers.

For landlords and occupiers, understanding the available options and choosing the right approach for the circumstances could be just as important as negotiating the lease itself.

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Finding the right route

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PACT can be a valuable tool in resolving certain lease renewal disputes, but it is not necessarily the right answer in every situation.

Understanding the practical, valuation and legal considerations at an early stage can help landlords and occupiers make a more informed decision about whether PACT, negotiation, mediation or court proceedings is the most appropriate route.

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If you are considering PACT or facing a commercial lease renewal dispute, the Metrus and Lawrence Stephens teams can help you understand the practical and legal considerations and determine the most appropriate route for your circumstances.

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To discuss your options, contact Metrus or the Lawrence Stephens property team.

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Metrus: David Burlinson, Director | Email: david.burlinson@metrus.co.uk | Telephone: + 44 (0) 20 7079 3992

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Lawrence Stephens: Abtin Yeganeh, Partner, Head of Real Estate Disputes | Email: AYeganeh@lawstep.co.uk | Telephone: +44 (0)20 3836 1914

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