Advantages to Mediation v Arbitration or Litigation From First Tuesday
Mediation: a viable alternative
Rather than immediately resorting to the costly and adversarial process of arbitration or litigation, in recent years the trend in real estate sales transactions indicates disputants favor the use of mediation. [For more information regarding mediation, see the August 2008 first tuesday article, Mediation: best, faster dispute resolution.]
Litigation is, at its heart, a deeply adversarial process which ends with a spurned “loser” who can then move on to draw out the dispute in a time-consuming and costly appeals process. Arbitration is also an adversarial process that functions similarly, shunting the disputants into “winner” and “loser” roles with feet set in concrete.
Only with mediation’s familiar arena of offer and counteroffer between the feuding parties in a face-to-face environment, as nurtured by the mediator, do disputants have the ability to come to a mutually crafted and agreed-to solution — the main advantage mediation has over actions in litigation or arbitration where one party wins and one loses (or both lose).
The extremely low cost of mediation, in terms of time and money, has been deemed another major benefit of the process. Consider as part of the cost the time involved in mediation versus the time involved in litigation or arbitration. Litigation can be drawn out for years with various pre-trial, discovery and appeals processes, all while attorneys’ billable hours soar. Arbitration may also last years and, in addition to contracted-for payment of the winner’s attorney fees, the loser is responsible for paying the arbitrator’s costs and fees.
However, mediation is typically a quick process lasting a few hours over a period of a few weeks, depending on the number of disputants and the complexity of the dispute. There are no lengthy waits for court hearings and no need for discovery or witnesses since the resolution is in the hands of the disputants themselves, again as encouraged and moved along by the mediator.
In addition to these benefits, the use of mediation also provides a solution to a dispute without adding or falling subject to the backlog of cases burdening the legal system.
Mediation does have its limits. In real estate matters, mediation is limited to resolving disputes involving buyers and sellers. Landlord-tenant disputes and trust deed defaults are largely based on very specific statutory requirements for performance which are either satisfied or unsatisfied, leaving little room for discussion. Mediation is a tool best used by disputants in sales of property and agency disputes.
In pursuit of justice
If mediation is not possible, disputants seeking a fair and final decision need to prepare for their only real option: litigation. There is no rational reason to risk an arbitrator making an erroneous decision barred from judicial review when a sound judgment held accountable under the law can be obtained for about the same cost and in nearly the same amount of time.
The responsibility of educating buyers and sellers of real estate about the toxicity of arbitration rests on the shoulders of their agents and brokers, who must advise their client on the consequences of initialing the provision and triggering its enforceability. Brokers who require their agents to use the trade union’s purchase agreement must make a point of providing their client with the full extent of their knowledge regarding the risks of arbitration.
Aside from the multitude of arguments against arbitration, one simple fact prevails: rather than expeditiously resolving disputes, arbitration creates disputes. Consider this axiom of business conduct: if an aspect of real estate sales transactions is known to create disputes, especially when that aspect was designed to limit them, it must be avoided.
Future homebuyers can be shepherded past the snare of arbitration by the gatekeepers of real estate who fully understand the danger of initialing and thus agreeing to the binding provision. As the devastating wounds of the Great Recession begin to heal in this plateau recovery and the California real estate market arms itself to abide by broader consumer protection laws, homebuyers will soon resent any failure to disclose the risks involved in arbitration. [For more information regarding the new real estate paradigm, see the May 2010 first tuesday article, Looking through the window towards recovery: a real estate paradigm shift — Part I and Part II.]Email (required but will not be published)