Surveying the scene
Date: 04 December 2009
Authors: Andrew Chesser
Issue: Vol 159, Issue 7396
Categories: Features, Property
It is fair to say that hardly any claims for damages for dilapidations on the termination of a commercial lease are actually litigated all the way through to a trial and, indeed, comparatively few have any input from lawyers at all.
However, this is an area where an interesting debate is taking place between surveyors and lawyers involved in the dilapidations field as to the basis on which surveyors are acting, whether this affects how they can charge their clients, and the recoverability of fees from the other party.
Expert?
It is argued that expert status is assumed from the very beginning of the process, that it is from the inspection of the premises and either preparation of a schedule of dilapidations or responding to one.
The Royal Institution of Chartered Surveyors’ (RICS) Guidance Note on dilapidations and the Property Litigation Association Draft Pre-action Protocol both advocate Civil Procedure Rules (CPR) style statements of truth from surveyors. There is further guidance within the CPR from the practice direction on pre-action conduct which was published in April 2009.
Arguments
If the argument is right, the surveyor is acting as an expert rather than advocate so that total independence and objectivity is required and the charging of fees on any basis which is contingent on the outcome is not appropriate.
It is widely accepted that CPR experts cannot charge their fees on a contingent basis as this is inconsistent with their independence.
The contrary argument is that the surveyor does not become a CPR expert until later in the process, perhaps when it is clear that there is a dispute which is likely to be litigated, or even not until the surveyor is appointed as an expert after permission is given for expert evidence by the court.
If this argument is right, surveyors have no duty to the court at the early stages and are free to agree fees with their clients on whatever terms they choose. It is said that many clients are perfectly happy, and indeed, some prefer to agree performance-related fees.
However, if the matter does move to litigation, the status and fee basis of the surveyor will have to change.
Adviser?
There is no definitive answer as to which argument is correct. The RICS Working Group on Dilapidations confirmed its view in May 2009, after the new practice direction on pre-action conduct was published, that surveyors were acting as advisers, and not as experts, in the early stages of dilapidations claims.
There have been opposing views as to the correctness of this and some are calling for the Guidance Note to be changed. A response from the RICS is awaited.
In the absence of mandatory guidance from the RICS, it seems unlikely that a consensus within the industry will be reached. There may only be a definitive answer if the issue is litigated to trial.
Manifestation
The issue could manifest itself either in a costs assessment or, more significantly, when the surveyor is giving evidence, now definitely as an expert, if the opponent’s counsel chooses to examine the conduct of the surveyor and attack his credibility and independence.
It is said by some that this could give rise to professional conduct issues for the surveyor. But it may also have a bearing on whether the evidence will be accepted or, at least, preferred over that of the opponent.
The contrary argument will be along the lines that, even though the surveyor may have had a fee arrangement with the client which was not compatible with CPR expert status, the views expressed were those using his expertise. Of course, there could be credibility issues if there has been a significant and unexplained shift in position.
Costs
This debate is taking place against the background of the general principle that a landlord’s costs of negotiation (which are usually surveyor’s fees) are not recoverable from the tenant.
Negotiations
The cost of the negotiations needs to be distinguished from the costs of preparing a schedule of dilapidations (which will usually be recoverable under the terms of the lease) and from the costs of the surveyor when there is no doubt that he is acting as an expert witness, ie the cost of the preparation of the expert’s report and attendance at trial.
There used to be an RICS scale of recommended fees for negotiating claims for dilapidations but this was abandoned at the request of the Office of Fair Trading, some years ago.
Prevailing argument
If the argument that surveyors are acting as experts from the outset prevails, then the surveyor (who will mainly be acting for the landlord in these circumstances) will seek to argue that the costs of negotiation should be recovered as they were reasonable pre-litigation costs.
However, if there is no actual litigation in place when the claim is settled (which will be the most usual situation), there will be no forum in which to argue that the costs should be payable.
Anecdotal evidence as to whether tenants are prepared to pay landlord’s costs of negotiation vary. However, it is likely that the position is driven by commercial realities with one or other party taking a view on the question of costs so as not to let it upset an overall settlement.
The debate would benefit from there being a definitive answer, not least so that focus could be given to the substantive issues within a claim for dilapidations, rather than the process being the centre of attention.
Andrew Chesser is a partner in the property litigation group at national commercial law firm, Beachcroft LLP.
E-mail: achesser@beachcroft.com
Website: www.beachcroft.com
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