By JODI SUMMERS
When you are buying and selling real estate, on all standard real estate contracts there is always one page of the transaction where you must initial several times. If you notice, it is on the dispute resolution section that requests that the parties in the transaction mediate and arbitrate any problems as opposed to going to court.
“In meditation, you have a third party, a neutral person who helps the parties themselves come to an agreement,” said June Barlow, vice president and general counsel of the California Association of Realtors.
“Mediation means an expert mediator attempts to get the parties to agree on a fair settlement of the dispute,” adds noted real estate attorney and columnist Bob Bruss. “But the mediator has no legal authority to force an agreement. Because most informal mediations are resolved within a day or two, the cost is far lower than a court lawsuit. If the mediator successfully resolves the dispute, he or she should insist all parties sign the settlement agreement before leaving the mediation (to prevent later misunderstandings or change of mind).”
Either side can initiate a mediation. Mediation services can be found through local chambers of commerce, the Los Angeles County Bar Association and the Los Angeles City Attorney’s Dispute Resolution Program.
“The goal is to resolve the problem in a way that makes both parties feel good,” Barlow said.
When a grievance goes to mediation, it is the role of the mediator to assist the parties with useful dialogue on their issues.
During the mediation process, the parties are encouraged to communicate openly on what they are willing to do to put the dispute behind them. The mediator may conduct private meetings with each side. Those meetings, called caucuses, are protected under the California Evidence Code. Unless permission is given, the mediator cannot repeat anything discussed within the context of the caucus, said Steven Cohen, Esq., J.D., M.B.A., of Cohen & Associates, who specializes in dispute resolution.
The mediator may use a variety of techniques to urge the negotiations forward. As you would expect, mediation styles vary depending upon the nature of the dispute, the personalities of the disputes compounded by other factors. With the facilitative style of mediation, the mediator does not offer a personal opinion but assists the disputing parties in arriving at a solution based on the disputees’ direction and goals. A mediation using a more evaluative style will allow the mediator to offer an “advisory” opinion in order to promote an agreement. You also will find a blend, and all cards are played differently when parties are represented by legal counsel.
Often times, there is no time limit for the mediation process. It may take a few meetings, or it may take months, depending upon the factors of each negotiation.
Sometimes a mediator concludes that an agreement cannot be reached despite best efforts. If a dispute cannot be solved through mediation, the mediation board may request a cooling off period prior to going to arbitration. If the dispute cannot be settled through mediation or arbitration, elections or other out-of-court settlement procedures may be used to settle the dispute.
When buyers and sellers resort to arbitration, they give up their right to a jury trial, Barlow said. Most times both parties must agree on an arbitrator selected from such services as the American Arbitration Association or JAMS dispute resolution services.
“Arbitration is a process where disputing parties present their disagreement to an impartial third party for the purpose of making a determination of the outcome,” attorney Cohen said. “This third party, called a neutral, makes a determination based on evidence presented during the arbitration process. Evidence is given the appropriate weight it deserves as most rules of evidence are relaxed in the arbitration process.”
Ideally, according to the American Arbitration Association, a neutral arbitrator is nominated by leaders in their industry or profession to the National Roster of Arbitrators and Mediators. The association’s code of ethics guides their conduct. A neutral can serve on a three-person arbitration panels or as the independent neutral when only one arbitrator is required. The neutral acts as a “judge” on the case and settling the dispute.
“The arbitrator, chosen by mutual agreement, hears the evidence of both parties and then renders a binding decision, which is then presented to the local court for confirmation,” Bruss said.“Although arbitration is usually less expensive and faster than a court trial, the parties give up their legal right to a jury trial, appeal of the arbitrator’s decision, and to court procedures and evidence rules.
“As a lawyer, my personal opinion is that it is fine to agree in a real estate sales contract to mediate any disputes that later arise between the parties. However, I do not favor agreeing in advance to give up important legal rights and to arbitrate future disputes. If a dispute later arises that is not resolved by mediation, at that time the parties can then agree to binding arbitration. But I don’t think it is wise to agree to binding arbitration at the time of signing a purchase contract.”
Originally published in the Santa Monica Daily Press print edition on May 31, 2006. Read the original PDF.