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. This memorandum provides a brief overview of some of the issues parties to real estate transactions may confront when deciding whether or not to use mediation as a method for resolving those disputes.
Q 1. What is mediation?
A 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.
Q 2. How is mediation different from other dispute resolution processes?
A 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 nonadversarial 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.
Q 3. What are some of the advantages of mediation?
A Mediation is a flexible dispute resolution system that can be used to resolve virtually any type of dispute. Mediation enables the parties to work together and keeps them in control of the decision making process (and usually free from lawyers, judges, arbitrators, or inflexible laws, court rules and procedures). Since mediation is nonadversarial, it also allows the parties to achieve a "win-win" outcome, in contrast to the winner-and-loser scenarios associated with litigation and arbitration. Another advantage of mediation is that it is a private and confidential process; the discussions and agreements resulting from the mediation are not part of a public record as they are in litigation.
Q 4. How does mediation work?
A One of the benefits of mediation is that it does not have to follow any particular set of rules or procedures. However, there is such a thing as a "typical" mediation. The typical mediation will begin with the mediator introducing himself or herself to the parties and explaining how the mediation will be conducted. The mediator will then verify that certain documents, such as a confidentiality agreement, have been signed by the parties prior to proceeding with the mediation. Once preliminary matters are handled, the mediator will give the parties an opportunity to express their views of the dispute. Depending on the mediator's style or the parties? wishes, the mediator may then separate the parties and meet with them individually. Some mediators do not separate the parties unless a particular unexpressed feeling or issue needs to be dealt with in confidence.
Once the parties have presented their views on the dispute, the mediator will then work with them to identify areas of agreement and disagreement. The mediator does not tell the parties how to resolve their dispute, however. If the parties do reach an agreement, the mediator will assist them in reducing their agreement to writing.
Q 5. Who can be a mediator?
A Since the goal of mediation is to reach a settlement, and a professional is likely in the best position to help the parties accomplish this, the use of a professional mediator is encouraged.
Nonetheless, California law does not require licensing or certification for mediators. Therefore, in theory, any person can be a mediator whether or not they have professional training. In general, most mediators are professionals who have attended training programs, received certifications from a college or a private mediation group, and obtained relevant dispute resolution experience.
Q 6. How much does mediation cost and who pays for it?
A 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.
C.A.R. offers a mediation program through the C.A.R. Real Estate Mediation Center for Consumers. The administrative cost is $200, to be split by the parties. Mediation fees are $150 per hour for the first two hours and at the mediator’s published rate thereafter.
Q 7. Where do I locate mediators and mediation services?
A C.A.R.’s Real Estate Mediation Center for Consumers is available at www.consumermediation.org. Other mediators and mediation services can be located by contacting government agencies such as the California Department of Consumer Affairs, or by asking an attorney or a local bar association for referrals, or even by looking through a telephone directory or through the internet.
Q 8. What if mediation does not resolve my dispute?
A 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.
This legal article is just one of the many legal publications and services offered by C.A.R. to its members. For a complete listing of C.A.R.'s legal products and services, please visit car.org.
Readers who require specific advice should consult an attorney. C.A.R. members requiring legal assistance may contact C.A.R.'s Member Legal Hotline at (213) 739-8282, Monday through Friday, 9 a.m. to 6 p.m. and Saturday, 10 a.m. to 2 p.m. C.A.R. members who are broker-owners, office managers, or Designated REALTORS® may contact the Member Legal Hotline at (213) 739-8350 to receive expedited service. Members may also submit online requests to speak with an attorney on the Member Legal Hotline by going to http://www.car.org/legal/legal-hotline-access/. Written correspondence should be addressed to:
CALIFORNIA ASSOCIATION OF REALTORS® Member Legal Services 525 South Virgil Avenue Los Angeles, CA 90020
The information contained herein is believed accurate as of Oct. 26, 2012. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney. Revised by Robert Bloom, Esq.