Consultation Question 51 asks whether, in a lease renewal dispute, each party should be given the right to refer the dispute to non-determinative ADR, such as mediation or early neutral evaluation, with the result that the other party could not refuse to participate.
If such a right were introduced, the consultation also asks:
- whether it should apply to unopposed renewals, opposed renewals, or both;
- when in the process the right should be exercisable;
- what form of non-determinative ADR should be prescribed; and
- more generally, how the scheme should work in practice.
The framing is sensible. Whether this proposal would improve the renewal process depends less on the high-level concept and more on the detail.
The case for mandatory non-determinative ADR
There is a credible argument that some 1954 Act disputes are well suited to a structured ADR stage.
- First, many lease renewal disputes are more commercial than legal. In unopposed renewals in particular, the common issues are rent and term length, including break rights. Those are precisely the kinds of disputes where mediation or early neutral evaluation (where a third party assesses merits of the case) may help parties close the gap.
- Secondly, the consultation highlights cost and delay as recurring concerns in the present system. A structured ADR stage may help resolve some disputes before costs become disproportionate. Even where ADR does not produce settlement of the whole dispute, it may narrow the issues significantly.
- Thirdly, the 1954 Act currently lacks a bespoke procedural architecture for dispute resolution. There is no dedicated pre-action protocol, no statutory ADR machinery and no standardised dispute-resolution pathway built specifically for renewal claims. A formal ADR mechanism could help fill part of that gap.
- Fourthly, the wider litigation landscape has moved in favour of ADR. Courts now take a more interventionist approach to encouraging or, in appropriate cases, requiring parties to engage in non-court-based dispute resolution. Against that background, a more structured role for ADR in lease renewal disputes would not be out of step with the general direction of civil justice.
The counterarguments
That said, a right to compel participation in ADR is not without difficulty. The Law Commission suggests such an approach would allow no flexibility for the parties to take sensible, commercial decisions in appropriate cases that a dispute was not suitable for non-determinative ADR. Forcing every dispute through a non -determinative ADR process would therefore risk adding unwarranted costs and delay to claims.
The most obvious objection is that compelled participation does not necessarily lead to meaningful engagement. A party can attend a mediation or early neutral evaluation simply because the rules require it, without any genuine intention to compromise. In that scenario, ADR becomes another procedural stage rather than a real opportunity for settlement.
There is also the risk of front-loading cost. ADR is not cost-free. It requires preparation, advisers, papers and often the cost of the neutral evaluation. In disputes where the parties are entrenched, or where the evidential picture is not yet sufficiently developed, ADR may simply increase expense without improving the prospects of resolution.
A further concern is tactical use. One party might invoke ADR to delay progress, to seek early insight into the other side’s position, to increase pressure through additional cost, or to improve its later arguments on costs and reasonableness.
Finally, not all lease renewal disputes are alike. Some are highly suitable for ADR. Others are not. A single rule applying indiscriminately across all types of disputes may therefore be inappropriate.
Which disputes are most suitable?
The Consultation's distinction between opposed and unopposed renewals is an important one.
1. Unopposed renewals
The strongest case for allowing either party to require non-determinative ADR is in unopposed renewals. Where the tenant is entitled to a new tenancy and the dispute concerns rent or terms, there is usually a clear areas of dispute that ADR may realistically help to resolve.
Early neutral evaluation may be particularly useful in valuation-heavy disputes. Mediation may be better suited to cases where there are multiple issues in play and scope for a package deal. In either case, these are disputes in which structured settlement efforts often have a real prospect of success.
2. Opposed renewals
The position is more difficult in opposed renewals. Those cases may involve substantial factual disputes, witness evidence, expert evidence and contested statutory grounds. In redevelopment or own-occupation cases, for example, the landlord’s evidence may still be evolving at an early stage. ADR invoked too soon may therefore be premature.
That does not mean ADR has no role in opposed renewals. Some opposed cases may still benefit from mediation once the evidence has crystallised sufficiently. But that points towards a more flexible, timing-sensitive approach rather than a blanket right exercisable in every case from the outset.
When should the right to ADR be exercisable?
Timing will be central to whether any such scheme works. If ADR is triggered too early, before the parties have exchanged enough information to understand the real issues, the process may be ineffective. If it comes too late, most of the litigation costs will already have been incurred and the opportunity for meaningful cost saving may have passed.
The better approach may be:
- in unopposed renewals, for the right to arise once the issues in dispute have been sufficiently identified but before substantial litigation costs have been incurred; and
- in opposed renewals, for there to be a more flexible approach, with judicial oversight allowing ADR to be deferred or dispensed with where it would be premature or unsuitable.
That sort of model would reduce the risk of ADR becoming either an empty early formality or a late-stage exercise after the key costs have already been spent.
What form of ADR should be prescribed?
In our view, the legislation should not prescribe a single mandatory form of ADR.
Different disputes call for different processes. Mediation is often best where the dispute is broad, commercially sensitive or capable of compromise across several issues. Early neutral evaluation may be more useful where the parties want a non-binding view of likely outcome on a narrower technical or valuation issue.
A rigid one-size-fits-all model would therefore be unattractive. The better approach would be to define qualifying ADR broadly as a non-binding process conducted by an independent person, leaving the parties free to choose the most suitable method. If they cannot agree, there could be a default process or a power for the court or tribunal to direct the appropriate form.
How might such a scheme work?
If a right to require non-determinative ADR was introduced, the procedural mechanics would need to be clear and proportionate.
Any scheme would ideally include:
- a straightforward notice mechanism by which one party can require ADR;
- a limited period for the parties to agree the process, timing and identity of the neutral third party;
- a default appointment route if agreement cannot be reached;
- clarity that participation is required, but settlement needs the agreement of both parties;
- express judicial power to defer, adapt or disapply ADR where the case is unsuitable; and
- safeguards to ensure ADR cannot be used to prejudice statutory deadlines or substantive rights.
Without that level of procedural clarity, there is a risk that disputes about the ADR process itself would become a source of satellite litigation.
Our view on Question 51
There is a good case for exploring a statutory right to require non-determinative ADR, particularly in unopposed renewals where disputes about rent and terms are often well suited to mediation or early neutral evaluation. But a blanket right applying across all renewals and all stages of the process risks adding cost, delay and tactical complexity.
If reform is taken forward, the better model may be:
- a mechanism focused primarily on unopposed renewals;
- flexibility over timing;
- freedom to choose between mediation, early neutral evaluation or another suitable non-binding process; and
- judicial power to defer or disapply ADR where the case is unsuitable.
That would encourage structured early resolution where ADR is most likely to assist, without imposing unnecessary burdens where it is less likely to be effective.
Question 52 moves away from compulsion and asks whether more should be done to promote and incentivise ADR.
The consultation discusses reforms modelled in part on the approach taken in the Electronic Communications Code. Possible measures include:
- requiring section 25 and 26 notices to include wording about the availability of ADR and the possible costs consequences of unreasonably refusing to engage with it;
- requiring parties to consider ADR before issuing proceedings, where reasonably practicable;
- allowing a party to serve a notice stating that it wishes to engage in ADR, with any unreasonable refusal potentially relevant on costs; and/or
- expressly stating in the legislation that the court or tribunal must consider unreasonable refusal to engage in ADR when making costs orders.
The Law Commission acknowledges that some of this may not materially change the current legal position, because the courts already have powers to encourage ADR and penalise unreasonable refusal in costs. But there is still a respectable argument for putting ADR more visibly into the statutory architecture of the 1954 Act.
Could promotion be more effective than compulsion?
Possibly. If ADR is built into the statutory notice and costs framework, parties may take it more seriously from the outset, but without the harder edges of a mandatory participation right in every case.
That approach may also sit more comfortably within the structure of the 1954 Act. The 1954 Act generally operates as a framework encouraging agreement, with the court acting as the backstop where agreement cannot be reached. Stronger statutory encouragement of ADR is consistent with that design.
ADR wording in section 25 and 26 notices
This appears to be a sensible and relatively modest reform.
If ADR is to be considered earlier in the process, the statutory notices that initiate renewal disputes are an obvious place to flag it. Prescribed wording could explain that ADR is available, identify the types of process that may be suitable, and make clear that unreasonable refusal to engage could have costs consequences.
That would not compel ADR, but it would improve visibility and set expectations at the start of the dispute.
A requirement to consider ADR before proceedings
This has some merit, provided it is framed carefully.
A requirement to consider ADR is not the same as a requirement to undertake it. In most cases, there is little objection in principle to requiring parties to turn their minds to ADR before proceedings are issued. But this should remain a proportionate obligation, not a technical trap. The requirement should be to consider ADR where reasonably practicable, rather than to engage in it regardless of circumstances.
Used sensibly, this could encourage earlier discussions and more informed decision-making without creating unnecessary procedural rigidity, although there is a risk that it does not carry sufficient consequences to encourage compliance, which could undermine its effectiveness.
A notice expressing a wish to engage in ADR
There is also a good case for a formal mechanism under which either party can serve a notice expressing a wish to undertake ADR.
That would create a clear procedural marker, prompt a substantive response from the recipient and provide a more structured basis on which later costs arguments about refusal or reasonableness could be assessed. It would encourage engagement without mandating ADR in every case.
Costs consequences for unreasonable refusal
In our view, this is the strongest of the reforms suggested in Question 52.
The legislation should make clear that unreasonable refusal to engage in ADR may be taken into account when the court or tribunal is considering costs. That would not create a wholly new principle, but it would place the point on a clearer statutory footing in the specific context of lease renewal disputes.
As ever, what counts as “unreasonable” will remain fact-sensitive. A party should not be penalised for declining ADR where the process is plainly premature, disproportionate or otherwise unsuitable. But clear statutory recognition of the costs consequences would provide a meaningful incentive for genuine engagement.
Our view on Question 52
The 1954 Act should, in our view, do more to promote and incentivise ADR. In particular, there is a good case for:
- prescribed ADR wording in section 25 and section 26 notices;
- a requirement to consider ADR before proceedings, where reasonably practicable;
- a mechanism enabling either party to serve a notice expressing a wish to engage in ADR; and
- express provision that unreasonable refusal to engage in ADR may be relevant to costs.
Those changes would be relatively modest, but they could improve awareness, shape behaviour earlier in the process and support a more disciplined settlement culture.
The Law Commission’s view on dispute resolution is not really about whether ADR is a good thing in principle. It is about whether the current 1954 Act process is too thin procedurally, and whether earlier and more structured ADR could reduce cost and delay without creating fresh disputes.
Questions 51 and 52 therefore warrant careful consideration. The answer is unlikely to be a straightforward yes or no. A more balanced approach may be to encourage greater use of ADR under the 1954 Act, with mandatory non-binding ADR reserved for cases where the nature and timing of the dispute justify it.
In our view, the Law Commission is right to reject mandatory determinative ADR. As to Question 51, there is a credible case for a limited mechanism allowing non-determinative ADR to be required, particularly in unopposed renewals, but not for a blanket right across all disputes. As to Question 52, there is a stronger case for reform through statutory encouragement and incentives, especially through notice wording and costs consequences.
If taken forward in a measured way, those reforms could make the lease renewal process more modern, more proportionate and more commercially realistic without undermining access to the court.
