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Why Invest Money in Tenanted Property

When You Can Squander It On Lawyers?

Paul Randolph examines the benefits of Mediation for Landlords' disputes

 

Most Landlords will find themselves in a disagreeable dispute at some time in their careers - whether with a tenant, sub-tenant, letting agent, building contractor, insurer or lawyer.

 

Being in dispute drains landlords of the three most valuable commodities they need: time, energy and money. And the protracted litigation that follows such disputes can be seriously destructive - destroying businesses, family life and health.

 

Disputes involving property seem to precipitate the most powerful emotions. Property represents a dual level of value: the sentimental value of a cherished home, and the commercial value of a potentially priceless investment. This tends to make any Landlord and Tenant dispute a highly emotional affair.

 

In Property disputes parties become easily entrenched

 

The problem is that when emotions run high, disputing parties can sometimes act and react illogically and irrationally. They may no longer see sense, or act in their own best commercial interests, but may rather be prepared to go to extremes to achieve "justice" and "fairness" and will go to war on "matters of principal".

 

It is in these circumstances that landlords and tenants can become deeply entrenched and may not be so susceptible to the rational advice of their lawyers, their experts, their family or their friends. Both sides may feel that the only way forward is to get to Court where the judge will instantly recognize that they are right, where their stance will be completely vindicated, and where they expect the other party to be publicly castigated and humiliated by the Court.

 

But those who have been through the litigation process know that this simply does not happen. 'Going to court' is a costly and damaging affair. According to a survey carried out many years ago by Dame Professor Hazel Genn, 65% of successful litigants were dissatisfied with the outcome: either they had not received adequate compensation, or it had taken too long, or it had been too costly and too damaging.

 

Can Mediation be the answer?

 

Mediation can address all these issues:

  • it is fast: a mediation can be set up in a matter of weeks, if not days
  • it is fast: a mediation can be set up in a matter of weeks, if not days
  • it is relatively inexpensive: the cost of a mediator - on average £900 per party for a full day - is miniscule compared to the cost of lawyers
  • it is effective: the mediator can address the emotional and psychological blockages in a therapeutic way which neither litigation nor simple negotiation can do.

 

Case Studies

 

Take the following case:

"The shower keeps leaking!" So began a dispute which dragged on for 4½ years, culminating in a week-long County Court trial, all of which cost the Landlord a total of £96,000 in solicitors', Counsel's, and surveyors' fees. His claim for £11,000 arrears of rent and service charges was successful, as was his defence of a counter-claim for breach of covenant. But it was an entirely hollow victory: he recovered only a proportion of his claim and an even smaller proportion of his costs - and worse still: he was now tied for a further period to a bitter and vengeful tenant who would undoubtedly continue to remain a thorn in his side throughout her tenancy.

 

In a similar type of case, the parties went to mediation:

A tenant of 4th floor flat in a prestigious mansion block in North London had over a period of years continually complained about a plethora of alleged incidents of disrepair, culminating in a long-running battle over the poor heating to his apartment. Eventually the tenant installed his own boiler and heating system and refused to pay his contribution to the service charge. The Landlord brought a claim for breach of covenant, and the tenant counterclaimed for the cost of the boiler and damages for disrepair. After money had been haemorrhaging from the landlord's pocket into those of his lawyers and experts, he was persuaded to go to mediation. The mediation was set up in three weeks, and both parties attended without their lawyers. The dispute was satisfactorily settled in one day: the Landlord agreed to buy back the flat at a beneficial price, and the tenant agreed to abandon his claims. Both parties were content, and for the shared cost of a mediator for one day, they had avoided a further 6 months of unpleasant litigation with a stressful 6-day hearing at the end of it.

 

So how does Mediation work?

 

The first factor to appreciate is that the mediator is neither a Judge nor an Arbitrator, but simply a 'facilitator'. The Mediator cannot order or impose a judgment or solution upon an unwilling party; but rather the mediator is there to simply to assist the parties in arriving at their own agreed resolution. The beauty of this is that the parties retain total control over the outcome - if they do not like a proposed resolution, they need not accept it. Furthermore, the entire mediation process is confidential and 'without prejudice'. This means that the parties avoid 'washing their dirty linen in public', as they would in a court, and are also able to air their grievances in a totally confidential environment; nothing said or revealed in mediation is admissible in any subsequent court hearing, should the mediation not result in a settlement.

 

The Opening Joint Session

 

The mediation itself usually starts with all parties around a table, providing them with an opportunity to have their say, openly and frankly, and if necessary to 'vent' their feelings about the dispute and the other party. The mediator will already have contacted both parties - privately and in confidence - to discuss any issues either party wishes to raise, and to finalise arrangements, such as where the mediation will take place; who will or will not attend, how long it will last, and so on.

 

The first joint opening session is a vital element of the mediation and its effect can be most therapeutic. It may be the first time that the parties meet face-to-face; or it may be the first time that they have had an opportunity to hear the other side's story first hand, rather than filtered, repeated, and analysed by a number of intermediaries. And sometimes it is the first opportunity to see the other side's lawyers 'in action' - often a salutary experience. Take the following example:

Four University students rented a house about which they complained incessantly to the letting agent. The landlord had built up an impression of the girl students as "spoiled pampered brats" for whom "nothing was good enough". In turn, the girls perceived the landlord as greedy, uncaring, callous and dismissive. At the opening session of the mediation, both sides were able to see that the true villain of the piece was the letting agent, and that each side had in fact tried to behave reasonably and responsibly. Moreover the students were able to discover that the landlord's solicitor, whom they had demonised as both 'stupid and confrontational', was in fact both sensible and fair. The various areas of dispute were resolved in half a day, and the relationship between landlord and tenants was cemented for the future.

 

Private "caucus" sessions

 

After the opening session of the mediation, when all have had their say, the process moves to "private sessions", where the parties remain in separate rooms, and the mediator shuttles back and forth between them, discussing and exploring with them the underlying aspects of the dispute, seeking eventually to find common ground.

 

The entire process is informal - it can take place in an office, at the rented property- or even in a wine bar. There are no rules of evidence or procedure, and each party can withdraw or change their minds without penalty. It is not until the parties sign a 'Settlement Agreement' that the entire process becomes legally binding. Once the agreement is signed, it has the validity of a contract or court order which a judge can enforce. And after signing, the only matter that remains to be decided is who buys the drinks!

 

Mediation has a statistically high rate of success - in the region of 80%. Mediation can succeed where negotiations have failed. Negotiation, especially when conducted by lawyers, tends to be "strategic and positional": both parties initially put forward extreme positions, in anticipation of being whittled back, then try to justify them, with the result that both sides dig their holes deeper, and both end up accusing the other of being unreasonable and intransigent.

 

A trained mediator can effectively deal with the "baggage" which parties sometimes bring to the dispute, and so cut through the emotional and psychological blockages that so often prevent parties reaching an amicable settlement. In the present credit crunch, it is commercially indefensible to enter unnecessarily into lengthy litigation. It makes business sense to try to mediate - and as early as possible, even before a dispute has got anywhere near the lawyers.

 

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