Rent review disputes: when is the “final decision” final?
Rent reviews are often agreed. They can sometimes end up in arbitration, often dealt with by experienced surveyor-arbitrators. Those arbitrations have a clear framework, governed by the Arbitration (Scotland) Act 2010, which provides rules and procedure. However, sometimes, rent reviews are dealt with by expert determination. Often the experts are the same experienced rent review surveyors who act as arbitrators. But the procedure is very different.
Whilst expert determinations have been around for some considerable time, the procedure and framework is vague (or to have a more positive spin, “flexible”) and there is comparatively little authority for how they should operate. What are an expert’s powers? What can they decide? Can their decisions be challenged? These are often tricky questions.
One of these questions came up in the recent Court of Session case of Cine-UK v Union Square Developments, which was a rent review dispute connected to an Aberdeen cinema. The question for the court was whether the decision of the expert was challengeable.
Leaving aside the argument that the expert made a legal error in the decision (an argument the court rejected), the more fundamental question was whether the court had any power to review the decision at all. The judge found that, based on the terms of the contract, the intention of the parties was for the expert’s decision to be final – and therefore not capable of being reviewed by the court.
The court also had to address this key question- did the expert answer the correct question? If the expert hadn’t answered the correct question, the determination could have been capable of review. The judge highlighted that the crucial test here is whether the expert has answered the wrong question or whether answered the right question but in the wrong way. In this case, even there had been an error, it would have been the latter.
What the decision highlights is that the scope to which an expert’s decision may be challenged, is very much determined by the wording in the agreement (in the case of rent reviews this will be the lease), and each case will have to be carefully considered.
The benefit of expert determinations is often thought to be the speed and finality of a decision by the expert. That is commendable, but it can often still leave questions hanging and matters open to interpretation. Hopefully this case will go some way to addressing that, but the age old adage loved by lawyers still applies – “it depends”.
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