Mediation in leasehold enfranchisement

After over 10 years working in the leasehold reform sector, I have never seen mediation used as a mechanism to resolve an enfranchisement dispute. My business partner, Richard, says the same of his almost 30 years’ experience. In that same 30-year period, the use of mediation has grown exponentially in other areas, so why not enfranchisement?

The answer, I think, is two-fold. Firstly, there is no incentive. In other civil disputes heading for the Courts, there are cost consequences should the parties not attempt alternative dispute resolution. For enfranchisement disputes destined for the First-tier Tribunal (Property Chamber), financial penalties for unreasonableness are exercised extremely rarely. I have seen some truly appalling behaviour both from parties and their professional advisors (who frankly should know better), but there is no repercussion. It would be impossible to persuade someone of this nature to engage with a voluntary mediation process.

The second issue is expense. Many of the disputes heard in the FTT are of relatively low value. The parties are already stumping up fees for valuers and lawyers, and are unlikely to want to pay a further fee for mediation. The cost of referral to the FTT itself is relatively modest (at the time of writing, a £100 application fee and then a £200 hearing fee), and in some cases the issuing of Tribunal directions is enough to encourage the parties to engage in a more productive negotiation. It may seem disproportionate, then, to ask the parties to engage a third party at further expense.

However, the pressure on the current system is not sustainable. Between January and March 2023, multi-track cases involving claims of over £25,000, and fast-track cases (between £10-25,000) took 18 months to reach trial. Small claims at less than £10,000 took one year from issue of the claim to trial. The President of the Law Society commented that the “unacceptable” delays are a consequence of “long-term underinvestment”, heightened by the pandemic. Partly to relieve this pressure, the Ministry of Justice are contemplating introducing “mandatory” mediation for small claims. If any trial of that nature is successful, it is likely to expand beyond just small claims, and also perhaps into the Tribunal system.

We are anticipating widespread leasehold reform, although the exact nature of the new legislation is unknown at the time of writing. It is possible the Tribunal system could be overhauled at the same time, with the introduction of cost consequences and therefore references to alternative dispute resolution mechanisms such as mediation.

Mediation success rates are extraordinary, and if it were introduced at an earlier stage (i.e. before large costs are racked up in the immediate lead-up to a Tribunal hearing) it could also be cost-effective.

In a world of total leasehold reform uncertainty, perhaps parties need to look to take back control of their own dispute, and perhaps mediation could be the answer.

HEH June 2023

Henrietta is an RICS-accredited evaluative mediator. If you would like to discuss mediation in leasehold enfranchisement, please contact us.