ANATOMY OF A REAL ESTATE NON-DISCLOSURE DISPUTE Part C: Alternative Dispute Resolution
Today, we continue our Series entitled Anatomy of a Non-Disclosure Dispute with Part C – Alternative Dispute Resolution. At BPE Law Group, we have represented hundreds of buyers, sellers, agents, and inspectors in these very contentious legal disputes.
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Part C: Alternative Dispute Resolution
In Parts 1 and 2 of this Series, we covered (1) Initial Evaluation and (2) the Risks and Rewards of legal action. Most actions brought by a Buyer against a Seller for non-disclosure of a defect are initially governed by procedures set forth in the Purchase and Sale Agreement signed by the Buyer and Seller. Today, at least for residential transactions, parties are typically represented by Realtors who are using a standard form Agreement produced by the California Association of Realtors (“CAR). That form contains a Section entitled “Alternative Dispute Resolution” (also called “ADR”) which is the topic of today’s Article. The ADR provisions have two parts: (1) Mediation; and (2) Arbitration.
Mediation is a relatively informal, non-coercing process designed to assist the parties to resolve their dispute without a lawsuit or arbitration. The process is non-binding and confidential. As used in the CAR Agreement, the Mediation is Mandatory for the Buyer and Seller (although there are a few exceptions). Significantly, if a party refuses to participate in Mediation or initiates a lawsuit or Arbitration before Mediation, then that Party may be denied recovery of their attorney fees even if they win the case.
On the Pro side, contract Mediation is both fast and low-cost. On the Con side, because the Parties have not as yet been able to compel disclosure and evaluation of the other Parties’ evidence (called “Discovery”), Mediation is not often successful, particularly for larger claims.
Mediation is commenced by the parties agreeing to use a particular Mediator or Mediation Panel. Often the Mediator is an experienced attorney although trained real estate professionals also serve. Prior to the Mediation, the Parties generally will provide the Mediator with a written explanation of the facts as they see them as well as any supporting evidence. Although use of an attorney is not required, Parties often are represented by legal counsel and their explanations (called “Briefs”) may also contain references to specific law or cases supporting their clients’ position.
The Mediation process generally consists of an initial collective meeting in a conference room followed immediately by separate conferences between the Mediator and each party as well as their attorney (if any) and any witnesses. Through this process, the Mediator is gathering information from each side and evaluating the available evidence which may be limited at this stage since Discovery has not as yet occurred. Discovery will be explained in our next Article in this Series. During the meetings with the Parties, the Mediator might ask further questions and initiate settlement negotiations. Significantly, these sessions are completely confidential and the Mediator may not share one Party’s comments with any other Party without the Party’s consent. Hopefully through this back and forth process, a resolution can be reached. If so, the terms of the resolution are set forth in a written Settlement Agreement which is signed by all Parties. If not, then the matter may proceed to a lawsuit or arbitration.
Unlike the Mediation provision which is mandatory, the Arbitration provision only takes effect if the Buyer and Seller initial their consent in the space immediately below the Arbitration provision. If so initialed, then any dispute between the Buyer and Seller arising out of the Agreement must be resolved by binding arbitration, not a lawsuit in a court.
Arbitration is often called “private Court” since most of the sale processes used in a lawsuit are also available in an Arbitration proceeding where the appointed or agreed-upon Arbitrator (often often an experienced attorney or retired Judge) is in effect serving as a private Judge. The Discovery investigation process is available to all parties and responses can be compelled by the Arbitrator. Once the parties have conducted their investigations and are ready to seek a decision, the Arbitrator schedules an Arbitration Hearing, much like a Court Trial, at which the Arbitrator will conduct the Hearing pursuant to a set Procedure, evaluate the evidence presented and Party and Witness testimony, hear legal arguments by each Party’s attorney. After all has been presented, the Arbitrator will render a Decision typically called an “Arbitration Award”.
Significantly, because the Parties elected to proceed through Arbitration when they initially entered the Contract, the Arbitration The Arbitration Award is fully enforceable and, if a losing Party fails to comply, the Award can be readily converted to a Court Order.
On the Pro side, binding Arbitration is generally faster than litigation in the Courts. From commencement if a dispute through the Arbitration Hearing might take as little as 6 months, unlike the multi-year process court-based litigation. Plus, some Arbitrators can conduct both the Mediation and Arbitration through a combined process potentially saving the Parties more time and money. On the Con side however, Arbitration is binding, there is no right of Appeal, and there is no Trial by Jury. So a party that loses at Arbitration generally has no recourse if they dispute the result or the Award.
Should Parties Initial the Arbitration Provision – from the foregoing information, the question often arises as to whether or not a Buyer or Seller should initial the Arbitration provision. There are a lot of factors that go into this decision that might best be a topic for a Party and their attorney before the Agreement is signed. For a more in-depth discussion of this issue, please review our Blog Article dated June 21, 2017 which can be found on our website at www.bpelaw.com or by clicking the Link below.
For over 20 years, the attorneys of BPE Law Group, P.C. have been representing and assisting Buyers, Sellers, Agents, and Inspectors in handling real estate non-disclosure disputes as well as their other real estate, business, and estate planning needs.
If you have questions or want to schedule a Consultation now, give us a call at (916) 966-2260 to schedule a Consultation with one of our experienced attorneys. If you have an immediate question on this topic, please email Keith Dunnagan at email@example.com