Mediation in Real Estate Disputes
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Mediation in Real Estate Disputes

Mediation is the ideal alternate way of resolving real estate disputes between disputing parties.

Mediation in Real Estate Disputes:

It is quite relevant and useful to quote late Chief Justice of US Supreme Court Warren E.Burger on the drawbacks of existing judicial system: “The existing judicial system is too costly, too painful, too destructive, too inefficient for a truly civilized people. … Reliance on the adversarial process as the principal means of resolving conflicts is a mistake that must be corrected… For some disputes trials will be the only means, but for many claims, trial by adversarial contest must in time go the way of the ancient trial by battle and blood.” Therefore resolving a dispute between the disputing parties through the process of court has always been expensive and dilatory. Hence, alternate dispute resolution methods like arbitration and mediation etc have been developed. As early as 1898, the Federal Government of US had adopted mediation as an alternate dispute resolution method. However, only in 1960s mediation was widely accepted and adopted as an alternate dispute resolution method in US.

In US, American Association of Arbitration through its guidelines and supervision helps to carry out the arbitration process as smoothly as possible to resolve various types of disputes between the parties.The arbitration process is more formal and its decision can be binding on the parties coupled with judicial sanction.The mediation process is simple and it is rather informal. Generally mediation is conducted on the initiatives taken by the disputing parties and so it is voluntary and non-binding. Nonetheless, if an agreement is reached between the disputing parties consequent to the mediation process, it is binding on the disputing parties.

What is mediation?

Mediation is an alternate dispute resolution method in which a mediator preferably an expert in the relevant field directly conducts mediation between the disputing parties in finding a solution to their problems.

Ever since mediation has been accepted as an alternate dispute resolution method, various types of disputes have been resolved through mediation that includes:

• Disputes concerning civil rights

• Women’ rights

• Consumer disputes

• Disputes pertaining to environmental issues

• Family disputes as to child custody and support

• Real Estate disputes

Different types of Real Estate disputes:

The real estate disputes may emanate between the parties for the following reasons:

• Between a land lord and his tenant pertaining to the violation of the terms of their rental or lease agreement,

• Between a vendor and vendee of a movable or immovable property over the price and misrepresentation of facts as to the property etc

• Between parties as to their easement rights,

• Between parties as to any nuisance caused by any one of them

• Between parties over an immovable property as to its possession or adverse possession.

The real estate disputes differ much from other disputes. While other types of disputes mostly affect only two parties, for example a family dispute arises between a husband and his wife, the real estate disputes arise between many parties who are engaged in the business.

The real estate dispute may arise between:

• a land lord and his tenant,

• a Home Owner’s Association and Member,

• a buyer and seller of an immovable property,

• a broker and a client,

• a broker and a broker or brokers

• a neighbor and his neighbor

• A contractor and his client

Hence a mediator of a real estate dispute must be a well versed and well trained person in various branches of real estate business. In fact, various US states have mediation experts known as neutrals and according to their credentials and mediation records they are ranked and even assigned star status. Each mediator’s hourly rate of fees is also determined according to his standing and ranking in mediation. Realizing the advantages of mediation and its effectiveness as an alternate dispute resolution method, many lawyers or attorneys also practice mediation, besides practicing law.

Real Estate Mediation Process:

The success of mediation lies in its process. At first the mediator gets introduced with the disputing parties and establishes contacts with them and helps the disputing parties to come to an understanding and their interest based negotiations. He actually explains the mediation process to the disputing parties; examines the necessary documents, besides assessing and fixing the date, place and participants in the negotiation process. Then the mediator formally begins the mediation process by introducing himself to the disputing parties and repeating the mediation process; explains its rules and process and the essence of confidentiality in the mediation process. Then the mediator hears the dispute separately from each party without any intervention from the other parties to the dispute. Then he arrives at the issues and divides them into two types: issues which are in complete agreement and issues that vary between the disputing parties. Then the parties also discuss about alternate solutions. Once viable options are chalked out, they are also discussed for acceptance. Then the mediator encourages them to arrive at a solution. When all issues are discussed threadbare, stumbling blocs in arriving at a solution are resolved.The final process in the mediation process is to finalize the resolution that is arrived at.

The service charge or the fees to be paid to the mediator in a real estate dispute is fixed on hourly basis based upon his standing and other credentials and the entire cost of the mediation process is equally shared by all disputing parties. It varies between $ 700 to $ 1600 depending upon the nature of the dispute and the hours spent by the mediator in the mediation process.

The following two case studies will be helpful to understand how a real estate dispute is resolved through mediation:

Case Studies of real estate disputes resolved through mediation:

Case study No.1:

It was a dispute that arose between a buyer and a seller of an immovable property.

After purchasing a house from the seller, a defect in the purchased property came to the knowledge of the buyer. The residential house had too many cracks in the roof that were not visible to the naked eyes. In the rainy season, the entire house was flooded due to the cracks in the roof. Hence, the buyer of the house raised the dispute with the seller, demanding the entire amount back that he paid for purchasing the house.The dispute was resolved through mediation as follows:

During the negotiation process, it came to the knowledge of the mediator as well as the disputing parties that the seller was not actually aware of the cracks that had developed in the roof and he did not cheat the buyer by burking anything.

Hence,the following alternate options to resolve the dispute were considered:

• Whether the seller could repair the roof or replace it with a new roof

• How much it would cost to repair the roof?

• Whether the seller had to bear the entire repairing cost or both the seller or the buyer had to bear it

• Whether the seller could repay the buyer the entire purchase amount and take back the house

The issues that were commonly agreed by both disputing parties:

• The seller had to do something to mitigate the sufferings of the buyer

• The seller had to either repair the roof of the house or repay the entire purchase money to the buyer.

Finally it was resolved as follows through mediation:

Since the purchaser was not willing for repairing the roof or to bear any additional cost involved in repairing the roof, he decided to move out of the house by getting back his purchase money in full from the seller.

• Therefore it was resolved that the seller should repay the entire purchase money to the buyer within a stipulated time and on receiving the purchase money the buyer had to move out of the house.

Case study No.2:

It was a dispute between two neighbors.

A neighbor complained that he had nuisance caused by the noise of the children residing at his neighbor’s house. After the completion of mediation process, it was resolved to raise a compound wall between the houses of neighbors to mitigate the effect of noise caused by the neighbor’s children.

Thus through mediation process more than 80 % of real estate disputes have been successfully resolved in the various states of US.

The mediation process is preferred by the disputing parties to resolve their real estate disputes for the following distinct advantages they provide over the other alternate dispute resolution methods:

Benefits of mediation:

• It is more popular than the other alternate dispute resolution methods.

• It is less cumbersome and less painful than the protracted legal proceedings.

• It is voluntary

• It is non binding.

• Dissatisfied Parties to the mediation process can withdraw from the mediation process at any time, since there is no compulsion to accept the process. Hence one can enjoy the flexibility in a mediation process. If they do not agree the mediation process, the disputing parties can easily switch over to arbitration or litigation process to resolve their disputes.

• If the disputing parties come to an agreement, the resolution is formalized and the dispute is resolved.

• It directly involves the disputing parties in the mediation process to arrive at a solution which evokes a commitment from the disputing parties towards the arrived solution.

• It offers solution to the disputing parties through a speedy process and less time consuming.

• It is confidential.

• It is economical and cheaper than the other processes incurring only a fraction of the cost of the litigation or arbitration process. A mediation process roughly costs about only a fraction of the cost involved in the other processes. For example, if the mediation process costs $ 1,600, a protracted litigation costs as much as $ 60,000 to $ 75,000.

The only drawback of the mediation process is that it does not act as a precedent for other disputing parties unlike a case study of a litigation process.

Thus mediation is an ideal way of resolving your real estate disputes.


5.Judicate West







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