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An arbitration clause survives in statutory tenancy

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A clause in a tenancy agreement referring a dispute to arbitration survives in statutory tenancy

 

The parties in any contract, including a tenancy agreement, may include a term providing that if a dispute arises between them concerning the contract, it shall be referred to arbitration for resolution in accordance with the provisions of the Arbitration Law, Cap.4.

Such a term is binding and in the case of a tenancy agreement that has expired and the tenancy becoming statutory, it continues to apply. Article 27(1) of the Rent Control Law, L.23/83, provides that as long as the tenant remains in possession of the property and observes the terms and conditions of the last tenancy agreement, they are entitled to the benefits deriving from them. Therefore, the clause on arbitration survives and continues to bind them during the term of the statutory tenancy and is enforceable.

The dispute may consist of a claim by the landlord against the tenant for an amount owed by the tenant for rent and accrued on the basis of the tenancy agreement. In such a case, the landlord must show readiness to resolve the dispute by referring it to arbitration. If they fail to do so and proceed to court, the tenant is entitled to seek an order for stay of proceedings invoking the arbitration clause and an order referring the dispute to arbitration.

A tenant who wants a stay of proceedings must, after filing an appearance and before submitting a reply or taking any other procedural step, submit an application requesting stay of the proceedings and for the dispute to go to arbitration in accordance with the provisions of article 8 of Cap.4. They must state that when the proceedings commenced, they were and still are ready to do whatever is necessary for arbitration. The court has the discretion to issue the order if it is satisfied there is no reason to justify not referring the dispute to arbitration.

The possibility of invoking the arbitration clause in statutory tenancy was examined by the Rent Control Court in a judgment issued on May 30 following an application from a tenant in the context of the main application from their landlord claiming rent was owed. The tenancy agreement which had expired, contained the term regarding arbitration. The landlord filed an objection claiming that the tenancy agreement between had expired and so the dispute was not covered by it, the tenant was statutory and the dispute was now regulated by the Rent Control Law.

The court stated that the main dispute between the parties was whether the provision for referral to arbitration was still in force. It referred to article 27(1) of the Rent Control Law and case law, concluding that the provision in the original tenancy agreement survived its expiry and continues to bind the parties during the term of the statutory tenancy. In considering whether the exercise of the court’s discretion to stay the proceedings and refer the dispute to arbitration was justified, it held that no good cause had been shown by the landlord for the court not to refer the dispute to arbitration. Consequently, it issued the orders sought by the tenant with costs against the landlord.

The court held that the landlord’s argument that the arbitration clause did not extend beyond the time period covered by the agreement argument was overturned by law and case law. The arbitration clause does not remove the jurisdiction of the court, but gives any party, subject to conditions, the right to apply for a stay of proceedings and to refer the dispute to arbitration.

 

George Coucounis is a lawyer practising in Larnaca and the founder of George Coucounis LLC, Advocates & Legal Consultants, [email protected]

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