Showing posts with label ADR. Show all posts
Showing posts with label ADR. Show all posts

Saturday, March 21, 2015

Introduction to Real Estate Disputes

Introduction to Real Estate Disputes

Tip: Before you sign a real estate contract, check to see if it has a Mediation Clause.
Real Estate touches most of our lives; buying your first home, dreaming of that 2nd home away from the the city, or downsizing after your children have started having their own kids. Dreams of opening that bakery after retirement and finding the perfect location on Main Street, only to discover the city use permit is no longer valid due to expired city permits.

Sometimes, what may have appeared as the perfect transaction, turns into a nightmare between buyers and sellers, landlord and tenants, or parties of interest such as you and the Home Owners Association. Disputes do occur in Real Estate, which can be costly, emotional, stressful, and most importantly, time consuming. Here are some examples.

Examples real estate conflicts:

  1. The buyers purchased their Bay Area home. Within days of purchasing, a plumbing back-up causes damage. The problem was rooted in the sewer system, and the cost to repair included new sewer lines to be constructed from the street to the house. Unresolved for several months, it continued to back-up. The buyers went to an Attorney. 
  2. The buyers alleged Non Disclosure - an accusation which the Sellers denied. The legal clock began to tick for all concerned. 
  3. The homeowner purchased property with a Homeowners Association that offered well manicured lawns, lush landscaping and high-end homes. The agreement signed came with CCR'S (Covenants Conditions and Restrictions) requiring the purchaser to landscape the property. The new homeowner declined to landscape according to the Homeowner's Association. The Association had a duty to enforce the rules, so another legal battle ensued. 
  4. The landlord and tenant fight over a security deposit over damages. Digging deeper, no one did a rental agreement or a walk thru prior to renting or moving out.

Alternative Dispute Resolution and Real Estate

When a dispute does occur in real estate, it is not the end of the world. In California, as within other jurisdictions, Alternative Dispute Resolution (ADR) is now playing a larger role to resolve these challenges as they arise.

Real Estate contracts written by the California Association of Realtors require that parties try mediation prior to a process of arbitration or litigation. Mediation can help parties with various types of real estate contracts, including
buyers, sellers, landlords and tenants. In November, the California Association of Realtors formed a group of mediators specialized in real estate disputes to help resolve issues. The group, known as The Mediation Center, helps parties avoid unnecessarily long legal battles.

Mediation services offers many benefits. A conflict that might have lasted months or years can be resolved within a matter of hours. For example, a buyer and seller of the Bay Area had a conflict about tree roots going over each other's property. Four hours after the mediation commenced, the parties had a written settlement. Courts also support ADR via "small claims" or civil unlimited cases. One can gain information at the local Self Help Center or the Court clerk in each county in California. The Superior Court in Sonora of Tuolumne County also has a active mediation panel. Those members settle in excess of 80% of disputes. The disputants often leave the court happy, and rarely return.

Private mediation is another option for disputants.

Conclusion - Introduction to Real Estate Disputes

There is saying in the legal community; "Why litigate when you can mediate?" Be willing to resolve your dispute with mediation, which can often bring about a great many benefits, versus the the frustration and expense of litigation.

About the author - Real Estate Disputes

Jim W Hildreth, Mediator, focuses his practice on California Real Estate Disputes. He serves on multiple Superior Court rosters as a civil mediator and was appointed to the California Association of Realtors as a mediator. He serves the San Francisco Bay Area, Central Valley & Mother Lode. Contact Jim Hildreth and visit his site.

What is ADR?

What is ADR?

Alternative Dispute Resolution

Introduction to ADR

Popular television shows depict trials as the climatic event – an intellectual sparring of wit and strategy – and the whole dispute is over within an hour. In reality, legal disputes drag over months or years before a trial may take place. Preparation can be tedious and insipid, while 95% of lawsuits will settle and never even go to trial, which has led some lawyers to write about the phenomenon of the “Vanishing Trial”.[1]

Most lawsuits today are resolved through Alternative Dispute Resolution (ADR). ADR refers to various processes to resolve disputes outside of the formal public courts system. The main forms of ADR are negotiation, mediation, and arbitration, although there are also hybrid processes such as the minitrial, med-arb, and early neutral evaluation.

A Spectrum of ADR Options

ADR options are organized along a spectrum, from negotiation, which is the least formal process, to arbitration, which is the most formal process and therefore, the most similar to a trial. The more informal the process, the more control the parties have. In more formal processes such as arbitration, the parties have less control because the outcome is determined by a third party. Mediation falls somewhere in between. These processes are by no means mutually exclusive, and parties may pursue these options in sequence, or even at the same time.

Negotiation is the most informal process and has the fewest rules and procedures. Parties may negotiate directly with each other, or through their lawyers. Mediation involves a neutral third-party who does not impose a solution but helps the parties reach a resolution by facilitating more structured negotiations. The parties retain control over the final agreement. Arbitration is the most formal process where a third party adjudicator has the power to impose a binding solution on the parties after hearing each party’s position.

Key Differences Between ADR and the Traditional Trial

Trials are open, so all members of the public, including journalists, are welcome to attend (with a few exceptions in special cases). Furthermore, trial decisions are published and establish a precedent for future cases. In contrast, ADR is private and the result remains confidential between the parties.

The courts system is a formal process with rules of civil procedure and statutory deadlines. ADR is crafted to suit the needs and demands of the parties, and may take many different forms.

Trials are adversarial, where each party advocates that the law favours its position, and the judge ultimately rules in favour of one party. Although in ADR each party is seeking to maximize personal gains, the parties accomplish this through cooperation and compromise, rather than a winner-takes-all situation. Especially in non-adjudicative options such as mediation, “a mediator can often persuade the parties to resolve their dispute without determining which of their positions is ‘right’”. [2] Because ADR is less adversarial, it is better suited when parties want to continue their relationship beyond the present dispute.

Advantages of ADR

Some of the advantages that make ADR appealing are:

1.     Cost

The cost of a trial has made it prohibitive. In 1995, it cost each party over $40,000 in legal fees to go to trial, and in 2011, this estimate was close to $60,000.[3] This astronomical cost is out of reach for many people and even corporations, and is often disproportionate to the amount in dispute. Moreover, since the losing party is often required to pay part of the winning party’s legal fees on top of its own, this penalty serves as a looming risk and a deterrent for parties to go to trial.

The cost of resolving a dispute informally through ADR is much lower, and parties have more control over the process and the resulting legal fees. For smaller disputes, parties may choose less costly mediators, but select specialized mediators at a higher price for more complex disputes. A dispute over a $100 million may be resolved in a single day, negating the need to spend months of expensive preparation for a trial.

2.     Speed and efficiency

A backlog in the court system has meant when litigants request a trial date, they have to wait one or two years from that point, and even longer in some jurisdictions. Even after trial, parties may wait weeks or months for a decision to be released.

In contrast, a mediation or arbitration can be scheduled within a few months, and can be resolved fairly quickly. While courts usually discourage forum-shopping, which is choosing one court over another, ADR allows the parties to choose a decision-maker who best fits their schedule and needs. In mediation, the mediator does not make a decision, rather helping the parties come to a solution collaboratively. ADR may also remove the need for pre-trial procedures such as examinations-for-discovery and motions, which may be time-consuming and cause further delays. Instead, if there is a dispute about evidence or submissions, the parties may informally negotiate a mutually acceptable solution.

3.     Customizing the process

ADR is flexible to become whatever the parties agree to make of it. Parties may set their own procedures and decide which law applies. Most courts have judges who are generalists and must decide on cases ranging from criminal convictions to complex shareholder disputes – although there a few exceptions for Family Law Court or the Commercial List in Toronto. But in ADR, parties may choose a decision-maker who is a recognized expert in the area of the dispute.

Parties are free to use whichever form of ADR best matches their priorities. Parties may choose to air their grievances, or to never speak to each other except through a neutral third-party. They can choose whether their priority is to reconcile the parties in conflict or simply to reach a binding decision for the dispute at hand. Moreover, the parties can tailor the resolution to their own needs. Unlike court decisions, which often grant judgment in the form of a monetary payment, in ADR the parties have a greater range of options. Sometimes an aggrieved party may be simply seeking an apology or an acknowledgement that his/her actions were right. In other cases, one party may want to maintain the relationship while having a discrete issue addressed, which is easier to accomplish in an informal ADR atmosphere than in an adversarial process that pitches one party against another.

4.     Privacy and maintaining relationships

Another advantage of using ADR is that the situation giving rise to the dispute, the conflict resolution process, and the outcome all remain private and confidential between the parties and any decision maker. Typically, the decision-maker will require all participants to sign a confidentiality agreement. Privacy may be an important factor when there are claims that could significantly harm one party’s image and reputation, e.g. allegations of fraud, sexual harassment. With a private ADR resolution, the parties avoid being publicly convicted and may even agree to a no-fault settlement.

The ability to privately and quietly resolve a conflict allows parties to maintain their relationship if that is one of their goals.

When a Trial May be Preferable to ADR

ADR is not suitable for every legal dispute. Disputes involving the interpretation of a new statute or provision, the application of the Charter and Constitutional rights, and other public interest litigation require a public ruling to establish a precedent. Class actions may require litigation in order to ensure that all plaintiffs receive an equivalent remedy, rather than separate and inconsistent results. A trial is also preferable in situations where the defendant is being sanctioned, its conduct is condemned, and deterrence is a goal.[4] 

About the Author - What is ADR

Rhema - Legal Dispute Blogger

Rhema Kang is a litigation lawyer. She graduated with an Honours Bachelor of Arts from the University of Toronto in International Relations, and Juris Doctor from the University of Ottawa. She first became excited about mediation while working for the Honourable George W. Adams, a prominent Canadian mediator who handles legal disputes worth up to several hundred million dollars. Rhema was the researcher behind the book, Mediating Justice: Legal Dispute Negotiations, and won second prize in the FMC Negotiation Competition. Rhema enjoys dark chocolate with sea salt and finds it awkward to write about herself in the third person.

[1] Robert M Ackerman, “Vanishing Trial, Vanishing Community? The Potential Effect of the Vanishing Trial on America’s Social Capital” (2006) J Disp Resol165.
[2] Frank E.A. Sander and Stephen B. Goldberg, “Fitting the Forum to the Fuss: A User-Friendly Guide to Selecting an ADR Procedure” Negotiation Journal (1994) 49 at 56.
[3] George W. Adams, Mediating Justice: Legal Dispute Negotiations, 2d ed (Toronto: CCH Canadian Limited, 2011).
[4] Sander and Goldberg at 60.


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