Unopposed business lease renewals under Part II of the Landlord and Tenant Act 1954 which are issued in the Central London County Court (“CLCC”) will be automatically transferred to the First-tier Tribunal (Property Chamber) (“FTT”). The mandatory pilot started on 1 January 2018 and will last for an initial period of one year. The tribunal judges will sit as district judges in the FTT, alongside a valuer (sitting as a legal assessor) and will apply the Civil Procedure Rules, including its usual costs rules. At a user group meeting chaired by Siobhan McGrath (President of the FTT (Property Chamber), attended by the PLA and others in October 2017, the FTT indicated a desire to change the culture of business lease renewals and in particular, make the court timetable much shorter.
Following transfer of the proceedings, the FTT will write to the parties and provide them with an opportunity to seek a 3 month stay in two scenarios. First, where both parties write to the Court and request this within 14 days in order to enable negotiations to continue or a reference to PACT to be made. Secondly, where lease expiry (and therefore, the valuation date) is later than 20 weeks from the case being referred to the FTT. Other than this initial opportunity for a 3 month stay, the FTT will not be prepared to grant any more stays save in “exceptional circumstances”. We understand such circumstances would not include for example being close to settlement because the rent is agreed and there are just a couple of lease terms in dispute.
If no stay is requested or at the expiry of the 3 month stay, the FTT will issue directions. We attach the draft guidance and standard directions issued at the user group meeting in October which represent a departure from the standard directions circulated to judges at Central London County Court in recent years (and which are based on the directions produced by the PLA). Whilst the FTT has not yet published any final standard directions, we understand that they will follow the draft directions attached and will reflect the standard directions for residential leasehold enfranchisement cases. There will be a 20 week timetable to the final hearing and there will be no case management conference, or provision for disclosure or witness statements. Where the parties require specific disclosure, or lease terms other than rent are not agreed so that witness evidence is required, the parties will need to make an interim application. The directions will provide for expert evidence and the valuers will be expected to exchange comparables at an early stage whilst the draft lease is circulated and before the schedule of unagreed terms is prepared. The directions seem to assume that there will be a travelling draft before proceedings are issued and that negotiations will have already taken place between the parties.
In terms of practicalities, all claims and applications should be issued and fees paid to CLCC in the usual way. This includes interim applications which will need to be issued at CLCC (with the appropriate fee), who will then transfer them to the FTT. In response to concerns about delay (especially given the tight timetable that is to be imposed upon the parties), it was suggested that any interim applications are also copied to the FTT. We have been advised that if the relevant property is outside of Central London but you issue in CLCC because you want to get onto the pilot scheme, you’ll get transferred back to your local County Court.
The FTT stated an intention to block list 40 cases for trial each week. This is on the basis that 95% will have settled before the trial date. Where cases go all the way, the tribunal judge will sit with a valuer, but London valuers are excluded due to potential conflicts. The FTT may consider written submissions rather than an oral hearing if rent/interim rent is the only matter to be determined.
Where one party is deliberately dragging its heels, perhaps because a tenant is considering relocation or a landlord is waiting for comparable evidence on a nearby property, there may be tactics to be employed and a tight timetable may benefit one party. In other cases having a more rigid and fast moving timetable may lead to settlement on the lease terms at a much earlier stage. The message that has been clearly relayed is that even if the parties both agree to stay the proceedings to attempt settlement by negotiation (as is common is many unopposed renewals) the FTT will not agree to this beyond the above limited circumstances and the parties will be confined to a tight, and potentially limited, timeframe. The advice to practitioners is to expect things to move much more quickly. Certainly after any initial stay has expired, you should assume no more stays will be granted. The valuers will need to be ready with their comparables and to the extent that you need to seek provision for specific disclosure or witness statements, this will need to be anticipated early on.