Valuation for Arbitration

A valuation for arbitration will be needed when a property dispute cannot be settled, for example, when the rent for a rent review cannot be agreed by the parties, or during a divorce where a property or a property portfolio is being value to be split between partners. Here the Chartered Valuation Surveyor has a duty to put forward his opinion of the market value of the property or buildings as arbitration submissions to an appointed arbitrator whose duty it is to ultimately settle a dispute.

Arbitration is a typical process to settle value disputes such as rent reviews, but can have much wider application also. The commitment to using arbitration as the process for solving the dispute would usually be set out at the outset, perhaps within the lease and means that both parties have committed to the process. When the rent review or whatever, cannot be agreed either party can then ask the president of the RICS* to appoint an Arbitrator who will be independent of the parties. Each party will then appoint their own surveyor to make submissions to the Arbitrator. The appointed Surveyors will then seek to reduce the items of dispute and set out an agreed statement of facts, such as areas, age of buildings, planning permissions granted etc… to narrow the issues to an opinion of value upon which the Arbitrator will decide.

The Arbitrator’s remit

The remit of the Arbitrator may be either to decide the matter only on the basis of the submissions and counter-submissions of the parties or to act as ‘expert’ enabling him or her to decide the matter based on the submissions received and his own expert knowledge. All valuations submitted by a Chartered Valuation Surveyor under any arbitration process must be accompanied by a prescribed statement of truth.

Expert Witness Valuations

A Valuer acting as expert witness is, from the outset, preparing his report and Valuations for a Court process and possibly a hearing. The Valuer will have to consider the physical factors of a property, the Counsel or Solicitors appointing him or her will advise on material title issues, leases and tenancies. Extra emphasis on the quality of valuation evidence is paramount as transactions offered up as comparable evidence will need to be in full detail to stand cross examination in Court. Not only factual detail of the comparable transaction, size, aspect, location, time on the market, price achieved but also in terms of market movements from the transaction date of any comparable to the date of valuation of the dispute. This is often achieved by analysing the various house price indices to index each comparable to the valuation date.

When choosing a Valuer to act in Arbitration proceedings or as Expert Witness look for someone who has at least 10 years experience post qualification. A Chartered Valuation Surveyor who knows the locality in which the property is situated, someone who is decisive, can put points across clearly and is a good negotiator.

Role of an Arbitrator & Independent experts

Role of an Arbitrator

• Must comply with formal statutory framework, laid down by Arbitration Act 1996, (in conjunction with the lease or contract).
• Oral hearings are more common, and can be expensive.
• The Arbitration Act 1996 allows parties the ability to control the process.
• The decision is based on evidence/submissions to the arbitrator.
• You cannot sue an Arbitrator for negligence.
• There is some scope for re-opening the decision, if incorrect.
• Arbitration is a private process, with a duty of confidentiality. In theory, you are not able to use another award as evidence, without the consent of parties. The Arbitrator will not attach much weight to such evidence.

Role of an Independent experts

• Informal process (as opposed to legislative), the procedure derived is solely from the terms of the lease or contract.
• Decisions are usually based documents submitted, so compared to Arbitration, may be cheaper.
• It is the lease or contract that gives parties the opportunity to control the process.
• An expert may use their own knowledge and expertise, to reach their decision.
• You can sue an expert for negligence (in theory).
• The decision is more likely to be final and binding, (even if incorrect).
• In theory, you cannot use a determination as evidence in another process without the consent of parties. In any case, little weight tends to be attached.