Real Estate Disputes come in all shapes and sizes.
For instance, imagine a dispute where the seller disclosed the basement leaked a half an inch and the realty is the basement fills to 4 feet in the winter.
Or the homeowner did not disclose that the septic system is on the neighbors property.
The landlord and tenant are fighting over the security deposit.
The neighbor thought they were doing their a neighbor a favor, after a winter storm and cut down the 60 foot Ponderosa Pine Tree while the neighbor was absent.
The business partners who run a 7 million dollar business and do not have a partnership agreement.
The homeowner who does not disclose to the buyer that the sewer backs up 3-4 times per year.
The real estate agent orders a well to be dug for a buyer, while the property is in escrow and falls through.
The buyer who places a deposit of $50,000 dollars into escrow, and cancels the purchase
after waiving all contigencies.
The realty is that most real estate transactions are completed with satisfied buyers and sellers. When a dispute (such as those listed above) arises, there are options.
In California there is a set of forms from the California Association of Realtors (C.A.R.) that the local real estate community uses. Within those forms there is a provision for dispute resolution called Alternative Dispute Resolution ( ADR). These forms break the dispute down into two components.
Mediation and Arbitration.
In recent years, our society has seen a dramatic increase in litigation. Turning to the courts to resolve disputes seems to be an almost instinctive reaction these days. However, the sobering reality is that lawsuits can be financially and emotionally draining for the participants, and can even impact our economy over the long-run. While buyers and sellers of real estate usually are able to negotiate away the little disputes that arise in the course of their transactions, sadly those disputes do sometimes end up in lawsuits.
Fortunately, there are alternatives to litigation for resolving disputes. Mediation is one such alternative that is growing rapidly in popularity–one that can dramatically reduce the time and cost (both emotional and financial) of resolving disputes. In fact, many real estate contracts, including those published by C.A.R., now require the parties to mediate many disputes that might arise between them.
Mediation is the first phase between the parties. Arbitration is an opt-in or opt-out, where the parties agree, approve, or deny.
Mediation is the term used to describe a relatively informal form of dispute resolution that occurs outside of the court system. In mediation, the parties to the dispute are assisted by a neutral third person called a mediator. The mediator is not empowered to impose a decision on the parties; instead the mediator facilitates discussions and negotiation between the parties with the goal of assisting them in reaching a mutually acceptable settlement of their dispute.
How is mediation different from other dispute resolution processes?
To understand how mediation is different from other dispute resolution processes, it is helpful to compare it against the various characteristics of the most common dispute resolution processes in use today: negotiation, litigation, and arbitration.
Negotiation is simply the process whereby parties meet to discuss a settlement of their dispute. This can be done face-to-face or through authorized representatives, such as attorneys. Negotiation is usually done outside of the court system and does not have to follow or conform to any formal rules or procedures.
Litigation is an adversarial process whereby the parties submit evidence to a judge or jury and then rely on the judge or jury to make and impose a binding decision regarding the dispute. Litigation is governed by formal rules and procedures of court and generally is time consuming and expensive. Since it is adversarial, litigation is in effect a contest in which a winner and loser are selected.
Arbitration is similar to litigation in that it is an adversarial process whereby the parties submit evidence to a neutral third person (the arbitrator) who then renders a decision regarding the dispute. However, arbitration is usually private and not conducted in the surroundings, or under the formal rules and procedures, of courts. In order to compel another party to arbitrate a dispute, in most cases the parties must have previously entered into an agreement to arbitrate their disputes.
Mediation is different from litigation and arbitration in many respects. Perhaps the most significant difference is that mediation is a non-adversarial process. That is, the parties do not argue their positions and give decision-making power to a third party. Instead, the mediator’s role is to assist the parties in achieving a mutually agreeable resolution of their dispute.
There is an exemption that is valuable to the local consumer, starting January 1, 2012. The individual parties can turn to their local California Superior Court, Small Claims Division as long as the dispute does not exceed $10,000. Previously this amount was limited to $7,500.
This Small Claims process is quick, cost effective, and timely. In addition many small claims courts may have a panel of mediators available to act as a mediator or neutral.
As an example the Tuolumne County Superior Court has a active mediation panel for Alternative Dispute Resolution and has a settlement rate close to 90% of cases resolved in mediation. Its best to review the individual programs available with your individual local court. This can be done with a quick phone call to the local County Clerk or checking the website of the individual Superior Court under ADR.
How much does mediation cost and who pays for it?
The cost of mediation depends on a variety of factors. For example, many government agencies sponsor mediation programs for the public, which are available for free or at a nominal cost. However, there are numerous private mediators and mediation services that provide mediation to the public as well. The cost of private mediation can vary but typically includes an initial filing or processing fee plus an hourly fee for the mediator’s services, both of which can vary depending on the mediator or mediation service. Parties contemplating mediation should compare mediation providers and their costs prior to selecting a mediation service. Usually the parties agree to divide mediation costs equally between them. This is the case if a California Association form is used.
As to the above example, of a Real Deposit Dispute of $50,000, a mediation can be cheaper than litigation or arbitration. I have settled many disputes where each disputant paid less than $600 each to settle a complex case.
Where do I locate mediators and mediation services?
Mediators and mediation services can be located by looking in the local telephone directory (e.g., under “Mediation,” “Arbitration,” or “Dispute Resolution”), by contacting government agencies such as the California Department of Consumer Affairs, or by asking an attorney or a local bar association (association for attorneys) for referrals. In addition, many mediation providers maintain Internet websites.
Another way is to do a Google or Yahoo Search under Real Estate Mediation or Real Estate Mediator.
What if mediation does not resolve my dispute?
While mediation is highly successful, in the event mediation does not resolve a dispute, the parties are free to pursue any other system of dispute resolution available to them. For example, if the parties entered into an arbitration agreement, they could pursue arbitration. In the absence of an arbitration agreement, the parties would likely have to resort to litigation.
It should be noted that even if mediation does not resolve the dispute, it is still an effective way of narrowing areas of dispute, allowing the parties to express their feelings, and enabling future proceedings to be more efficient and focused.
Why Litigate when you can Mediate? Today the consumer has other alternatives in a real estate dispute to avoid the cost and stress of litigation.
Jim W Hildreth is both a private and court appointed mediator, who’s specialty is “Real Estate’ Disputes.
He has over 40 years of experience and is licensed as a Broker in both Califor