With the aim of enabling proceedings to be concluded within a reasonable time and of allowing the parties to resolve their disputes before reaching the courthouse door, an application to a mediator before recourse to an action has become a statutory requirement in a significant proportion of claims arising from a lease relationship.
At the point now reached, the proper conduct of the mediation process under headings such as rent claims, eviction and adaptation of the rent is a precondition of the court being able to begin examining the merits of the matter. Where the process is not conducted correctly, the proceedings come to an end without reaching the merits, even if the claim is well founded.
In this briefing note we address systematically which claims the requirement covers, the situations that fall outside its scope, how the application is made, the legal value of the documents drawn up at the end of the process and the consequences of non-compliance with the procedural requirement.
The Statutory Basis of the Requirement
The conversion of mediation into a procedural requirement in lease disputes came about through the addition, by Act No. 7445, of Article 18/B to the Mediation in Civil Disputes Act No. 6325.
Mediation in Civil Disputes Act No. 6325, Art. 18/B
“ARTICLE 18/B – (1) In the following disputes, it is a procedural requirement that an application have been made to a mediator before an action is brought:
a) Disputes arising from a lease relationship, with the exception of the provisions relating to the eviction of leased immovable property by way of enforcement without a judgment under Act No. 2004 …”
The provision draws a broad frame. Claims for sums due under a lease agreement, claims for damages, actions directed at the vacation of the leased property, disputes as to the termination of the contract and requests for the adaptation of the rent to new circumstances all fall within this scope. Where the mediation stage is skipped and the court is approached directly, the judge dismisses the action on procedural grounds without entering into the merits at all.
Lease Disputes in Which Mediation Is Required
Actions for the Determination of the Rent
Since rent determination actions, brought in order to fix or to redetermine the rent, are in the nature of disputes arising from a lease relationship, they fall within the mediation requirement. If an action is to be brought because the five-year period has expired, or in order to have the rent redetermined by reference to comparables, an application must first have been made to a mediator.
The rationale here is that the parties should test the possibility of agreeing on a new rent before carrying the matter before the courts. Where this stage is skipped, the decision the court will give is dismissal of the action on procedural grounds.
Actions Seeking Eviction
Actions directed at the vacation of the leased property likewise fall within the requirement. Termination of the contract, the need of the lessor or of the lessor’s relatives, reconstruction and substantial alteration, default by reason of non-payment of the rent, an undertaking to vacate that has been given, or conduct contrary to the contract — whichever ground is relied upon, completion of the mediation stage is required before an eviction action is brought.
If the lessor skips this stage, the action is dismissed on procedural grounds without the merits being discussed at all.
Exception: enforcement proceedings without a judgment seeking eviction, conducted within the framework of the Enforcement and Bankruptcy Act No. 2004, have been left outside this requirement. There is no need to go to a mediator before proceeding with those enforcement steps.
Rent Claims and Claims for Damages
Where unpaid or partially paid rent, claims for service charges and common expenses, and alongside these claims for damages arising from harm caused to the leased property, are to be made the subject of an action, the mediation condition applies.
That said, there is no obstacle to commencing enforcement proceedings for these claims; an application to a mediator is not required before proceedings are commenced. The condition comes into play once the dispute is carried to the court: if the debtor objects to the proceedings and the creditor takes the route of an action for the annulment of the objection or of a debt claim action, the mediation process must have been conducted before those actions.
Requests for the Adaptation of the Rent
Where extraordinary developments arising after the conclusion of the contract have made the rent unbearable for one of the parties, or where the economic balance in the contract has been seriously upset, a request for adaptation arises. This request too is subject to the mediation requirement, since it stems from the lease relationship.
In practice, requests for adaptation are put forward for the most part in cases of sudden breaks in economic indicators, high inflation, extraordinary rises in exchange rates, or the contract becoming an unsupportable burden for one party. In these disputes as well, the mediation stage must be exhausted before going to court.
Cases Falling Outside the Requirement
Eviction by Way of Enforcement Without a Judgment (Enforcement and Bankruptcy Act Art. 269 et seq.)
Where enforcement proceedings without a judgment seeking eviction are to be conducted under the provisions of Act No. 2004 on grounds such as non-payment of the rent or the existence of a written undertaking to vacate, no obligation to apply to a mediator arises. Since the statute expressly treats this route as an exception, the proceedings may be commenced directly.
Removal of the objection: where the debtor objects to the proceedings, the creditor may ask the enforcement court to remove the objection and to order eviction. Where this route is chosen, there is likewise no mediation requirement.
Annulment of the objection: if, by contrast, the creditor chooses to bring an action for the annulment of the objection before the general courts rather than the enforcement court, the dispute takes on the identity of an action arising from a lease relationship; an application to a mediator before the action therefore becomes a procedural requirement.
Requests for an Interim Injunction and for Preliminary Attachment
Since orders for an interim injunction and for preliminary attachment, sought before an action is brought or while proceedings are running, are in the nature of provisional legal protection, they fall outside the scope of mandatory mediation. In order to prevent situations in which delay would be prejudicial, such requests may be addressed to the court directly.
Even so, if the substantive action to be brought after that protection contains a claim for a sum due, for damages or for eviction arising from the lease relationship, the mediation stage must again have been completed for that action.
Enforcement Proceedings Based on a Written Undertaking to Vacate
Where enforcement proceedings based on an undertaking to vacate given by the tenant in writing are to be commenced under the provisions of Act No. 2004, there is no need to go to a mediator; in that event eviction proceeds within the rules of enforcement law.
Where recourse is had directly to an action on the basis of the same undertaking, the picture changes. Since the claim will be in the nature of a claim for eviction arising from the lease relationship, the pre-action mediation condition applies.
Making the Application and the Course of the Process
The Office to Which the Application Is Made
The rule is that the application is made to the mediation office at the place of residence of the opposing party. Alongside this, the office at the place where the immovable property in dispute is situated is also a suitable address for the application.
In places where no mediation office has been established, applications are received by the registry office assigned for this purpose. If the parties agree between themselves, they may also arrange for a particular mediator to be appointed.
Application Procedure and the Information Required
The application may be made by one of the parties in person or through a representative, and it is also possible to make it electronically through UYAP.
For the application to be regarded as valid, the form or petition must briefly explain the subject matter of the dispute, state which legal outcome is sought, set out the names and surnames of the parties and, for legal persons, their titles, and give the known address and contact details.
The attachment of documents at the application stage has not been made compulsory. Even so, placing the lease agreement, any notice served or documents relating to payment on the file contributes to the meetings progressing soundly.
Appointment of the Mediator and Contacting the Parties
Following the application, the office appoints a mediator from among the mediators entered in the register.
The appointed mediator makes contact with the parties, fixes the date of the first meeting and invites the parties. The invitation is as a rule made by way of telephone, SMS, e-mail or similar means of communication.
Formal service of process on the parties is not compulsory. The mediator is, by contrast, obliged to document within the file the invitation issued and the attempts at contact made.
Where the addresses cannot be reached or contact cannot be established, the mediator records that fact in the final minutes and brings the process to an end.
The First Meeting and the Sanction for Non-Attendance
The essential point in the process is that the parties be present at the first meeting. Attendance may be in person, or may take place by way of representation through a lawyer.
A party who fails to attend the first meeting without a valid excuse may be held liable for half of the costs of the proceedings even if successful in the action brought subsequently, and the counsel’s fees awarded in that party’s favour are fixed at half. The legislature has expressly provided for this sanction in order to secure the effective operation of the institution of mediation.
Where the parties are present at the meeting, the mediator guides them towards settlement; the meetings are conducted under the principle of confidentiality.
The Time Limits Governing the Process
In lease disputes time begins to run on the date on which the mediator is appointed, and the process is as a rule completed within three weeks. Where necessity arises, the mediator may extend this period by a maximum of one week.
For as long as the process continues, the statute of limitations and preclusive periods do not run. If the parties settle, a settlement document is drawn up; if no settlement is reached, the mediator draws up the final minutes, and that document establishes that the condition required for an action to be brought has been fulfilled.
Reaching Agreement and the Settlement Document
At the end of the process, minutes of differing character are drawn up according to whether or not the parties have settled. These documents are legal texts that establish the completion of the mediation and clarify the rights and obligations of the parties.
If an action is to be brought in a dispute subject to mandatory mediation, the minutes showing the outcome of the process must be attached to the petition. Otherwise the court dismisses the action without entering into the merits, on the ground that the procedural requirement has not been satisfied.
The Content and Effect of the Settlement Document
If at the end of the meetings the parties reach agreement on the subject of the dispute, minutes of agreement (a settlement document) are drawn up. The document sets out the matters agreed and the reciprocal obligations of the parties in a manner that leaves no room for hesitation.
Signed by the parties and by the mediator, this document is, where the conditions sought are met, accepted as a document in the nature of a court judgment and may be given effect directly by way of enforcement. The settlement document is accordingly binding as between the parties and carries a legal effect close to that of a court decision.
The fact that a settlement has been reached prevents, as a rule, the same matter being litigated again. The document produces the effect of bringing the dispute definitively to an end.
The Annotation of Enforceability
The enforceability of the settlement document varies according to the persons who have signed it.
Where a document drawn up within the scope of mandatory mediation has been signed jointly by the parties, their lawyers and the mediator, it is regarded as a document in the nature of a court judgment without any need for a further annotation (Act No. 6325, Art. 18).
Where the document does not bear the signatures of the parties’ lawyers, or where the statute provides for a situation in which obtaining an annotation of enforceability is compulsory, an annotation of enforceability must be obtained from the competent court in order for the document to be put to enforcement.
The absence of an annotation does not wholly deprive the document of its legal value; the agreement continues to exist as a valid contract between the parties. Once the annotation is granted, the document becomes enforceable like a court judgment and may be made the subject of enforcement proceedings.
The Court with Jurisdiction over a Request for the Annotation
As regards a request for the grant of an annotation of enforceability, subject-matter and territorial jurisdiction are determined according to the stage at which mediation was resorted to:
- If mediation was resorted to before an action was brought, the Civil Court of Peace at the place where the mediator performed the task has subject-matter jurisdiction.
- If mediation was conducted after an action had been brought, the authority to grant the annotation is the court hearing the dispute.
The annotation granted by the court confers on the settlement document the character of a court judgment, and the document may be made the subject of enforcement proceedings directly.
Failure to Reach Agreement
If the process ends without the parties reaching agreement on the subject of the dispute, the mediator draws up minutes of failure to agree (the final minutes). This document is an official text establishing that the meetings have been inconclusive and that the parties have not settled.
In an action subject to mandatory mediation, the attachment of those minutes to the petition is a procedural requirement. If they are not attached, a procedural dismissal by the court arises; in practice, however, it is also seen that the claimant may be granted time to cure this defect.
The Legal Nature of the Final Minutes
The minutes of failure to agree evidence that no settlement has been reached between the parties and that the mediation stage has closed. At the same time they establish that the process was conducted in accordance with the procedure and that the condition required for an action to be brought has been met.
The day on which the minutes are drawn up is accepted as the date on which the mediation came to an end. That date is also of legal significance for the purposes of the period for bringing an action and the calculation of the statute of limitations.
Bringing an Action After the Process
Where no settlement has been reached, no obstacle remains to carrying the dispute before the courts. What the claimant must do at this stage is to attach to the statement of claim the final minutes showing that the process has been completed.
The periods relating to the bringing of an action begin to run afresh from the date on which the final minutes were drawn up. The statute of limitations and preclusive periods, which did not run while the mediation was continuing, resume running from where they left off once the process closes.
Minutes of Non-Attendance
If one of the parties fails to attend the meeting without a valid excuse, the mediator draws up minutes of non-attendance. This document shows that the person concerned did not take part in the process and that the possibility of settlement could not for that reason be assessed.
A party who fails without excuse to attend the first meeting may bear half of the costs of the proceedings even if held to be in the right in the action heard subsequently, and counsel’s fees are awarded in that party’s favour at half the rate.
Representation in the Mediation Process
The parties may attend the meetings themselves, and may equally be present through their lawyers or authorised representatives. The proper constitution of representation is decisive both for the validity of the process and for the outcome of the action to be brought afterwards.
Where attendance at the meeting is secured by a person without authority, or by a power of attorney that does not contain the necessary authority, the allegation may arise that the process was not conducted in accordance with the procedure. The scope of the authority to represent must therefore be examined scrupulously, particularly as regards legal persons and parties represented by counsel.
- Attendance through a lawyer
A party may be represented at the meetings by its lawyer. For this, the power of attorney must contain authority to take part in the mediation activity and to reach a settlement.
For the dispute to be capable of being closed by agreement, it is of further importance that the power of attorney specifically contain authority to settle and to release. Where this authority is absent, the validity of the agreement reached may be opened to argument.
- Attendance by legal persons
Legal persons take part in the meetings through the organ or representative authorised to represent them. The person present at the meeting on behalf of the company is expected to produce the document establishing the authority to represent and bind it.
The representative attending must hold the authority to take decisions on the dispute and to conclude an agreement. The binding force of an agreement signed at the end of meetings conducted with an unauthorised representative may become a matter of legal argument.
- Disputes involving more than one party
If there is more than one party to the dispute, each may attend the meeting separately; if they wish, they may also be represented through the same lawyer or representative. Where there is a conflict of interest between the parties, however, it is not possible for the same person to represent more than one party.
In files in which joint tenants, heirs or co-owners are parties, the limits of the authority to represent and the relationship of interests must for this reason be assessed with care.
- The consequence of the absence of authority
If the person attending the meeting has no authority to represent, or that authority is limited, the meetings retain their validity; an agreement binding on the party cannot, by contrast, be reached.
In such a situation the process may not be able to close by agreement and, as no settlement has been reached, the mediator draws up the final minutes. Clear and sufficient authority to represent is for this reason of great importance if mediation is to attain its purpose.
Bringing an Action Without Applying to a Mediator
If, in a lease dispute falling within the requirement, the mediation stage is skipped and an action is brought directly, the procedural requirement is treated as not having been satisfied. Before beginning to discuss the merits of the dispute, the court is bound to examine of its own motion whether that requirement has been met.
If a defect is established as a result of that examination, the action is dismissed on procedural grounds without the merits being entered into. The possibility of the action being examined on the merits therefore depends on the mediation process having been duly completed before the action.
Procedural Dismissal for Absence of a Procedural Requirement
Bringing an action in a dispute within the scope of the requirement without going to a mediator produces the result that the procedural requirement is absent. Before proceeding to examine the parties’ assertions and defences, the court assesses this point and, where it establishes the defect, dismisses the action on procedural grounds.
Since the decision given does not concern the merits of the matter, it does not constitute a definitive bar. Once the mediation process has been completed, the same dispute may be made the subject of an action again.
Whether the Defect Can Be Cured Subsequently
In actions brought without any application to mediation at all, the procedural requirement is treated as unfulfilled and that defect cannot be cured subsequently; the court dismisses the action on procedural grounds.
Where the process has been conducted but the final minutes have not been attached to the petition, the situation is assessed differently. Here the procedural requirement has in substance been satisfied and there is merely a failure to produce a document, so the court may grant the claimant time to cure that defect.
In short:
- If no mediation was resorted to at all, the defect cannot be made good; the action is dismissed on procedural grounds.
- If mediation was conducted but the minutes were not produced, it is possible for the defect to be cured by the grant of time.
The Independent Legal Assessment
Mediation in lease disputes is often seen as a formality to be got through; the process is, however, a critical stage that determines the subsequent course of the dispute. Errors such as making the application to the wrong office, formulating the claim too narrowly, or attending the meeting with an unauthorised person may result in the procedural dismissal of an action brought months later. The line between the scope of the requirement and its exceptions must also be drawn afresh in each file; in particular, the choice between enforcement proceedings and an action directly affects whether the mediation requirement arises at all.
The character of the document drawn up at the end of the process must not be neglected either. A settlement document that also bears the signatures of the lawyers ties the dispute to an enforceable outcome without the need for separate proceedings, whereas a document with incomplete signatures obliges the parties to make a further application to the court.
In building a strategy in a concrete file, the following headings should be addressed as a priority:
- Determining at the outset whether the claim falls within the scope of the requirement or within one of the enforcement routes the statute treats as an exception
- Drafting the subject matter of the dispute and the legal outcome sought in the application form so that they correspond with the relief claimed in the action to be brought afterwards
- Securing attendance at the first meeting and the authority to represent, with regard to the sanction as to costs and counsel’s fees
- Following the three-week period and the possibility of a one-week extension, taking into account the period during which the statute of limitations does not run
- Completing the document with the lawyers’ signatures in the event of agreement and, failing that, planning an application for an annotation of enforceability
- Attaching the final minutes to the statement of claim in full in the event of failure to agree
Independent Legal provides advisory and litigation services at every stage in disputes arising from a lease relationship, from the preparation of the mediation application through representation at the meetings to the conduct of the subsequent proceedings.