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Mediating “Early and Often” in Real Estate Disputes

October 5, 2013

Even as I start my tenth year of full time mediation practice, I still pick up pithy sayings, and nuggets of truths, from my colleagues.

So I did last Wednesday as I participated as one of several panelists in a program on finding, choosing and using local mediators in the present-day marketplace.

One of the program panelists with me, my colleague Jan Frankel Schau, whom I admire greatly as a fine peacemaker, was asked this question by the Moderator, Floyd J. Siegal, another terrific mediator whom I also admire for his work:

“When is the best time to mediate?

Panelist Jan Schau quickly responded by saying, “Early and Often!”

I hadn’t heard those particular words in that particular context, but I liked what I heard when she said it, and I smiled.

Why?  Because I know there are contexts in which early mediation is not only preferable but mandated by contract because it is seen as so salutary.

For instance, in the Southern California residential real estate market, where nearly everyone uses the Residential Purchase Agreement of the California Association of REALTORS®, Buyers and Sellers routinely bind themselves to participating in a pre-litigation mediation in the event a dispute arises between them.

Moreover, the contract provision requiring early mediation has teeth:

If one does not seek such mediation before filing a lawsuit, or refuses such a mediation, then, with very few exceptions, the one who avoided the early mediation will not be awarded attorneys fees even if otherwise entitled to them at the end of the litigation.

So, the motivation to mediate early is built into the contract.

Here is what one court said about this when a prevailing party did not first mediate before filing suit:

“[T]he public policy of promoting mediation as a preferable alternative to judicial proceedings is served by requiring the party commencing litigation to seek mediation as a condition precedent to the recovery of attorney fees. In this case, had the parties resorted to mediation, their dispute may have been resolved in a much less expensive and time-consuming manner. Instead, in a dispute that entered the court system as a small claims action for $5,000 in damages for breach of contract, Leamon spent over $27,000 in attorney fees and, as a result of her victory, avoided an order for specific performance that would have required her to accept $82,000 in exchange for the Property. The economic inefficiency of this result may have been avoided if, prior to judicial proceedings, a disinterested mediator had explained to Leamon and the Krajkiewczes the costs of litigating the dispute through to a judgment or a final resolution by an appellate court.

Leamon v. Krajkiewcz (2003) 107 Cal.App.4th 424, 433.

Note that, in the above quote, Justice Vartabedian, who wrote the opinion, hoped that such a pre-litigation mediation would have resulted in settlement then and there (avoiding the lawsuit altogether).

On the other hand, from experience I know that settlement may not always be the goal or the result of such a pre-litigation mediation; there are in fact some cases in which the reason a disputant attends a pre-litigation mediation is primarily or even solely to protect the opportunity to claim an award of attorneys fees in the lawsuit destined to be filed soon.

In that context, where the contractual right to attorneys fees is preserved in the pre-litigation mediation, one or more subsequent mediation sessions may be warranted after the lawsuit is well underway, when perhaps the parties have engaged in some discovery and have better positioned their case for resolution.

So, Jan Schau’s pithy response – to mediate “early and often” –  is really the right answer to the question of when to mediate.

***

David I. Karp is a full time mediator of real estate and business disputes in Southern California.  His business website is at http://karpmediation.com .  Mr. Karp is also on the mediator panel of the California Association of REALTORS® Real Estate Mediation Center for Consumers for matters appropriate to the panel.

Mr. Karp apologizes for any ads attached to this blog by wordpress.com; they are not his.

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From → Law, Mediation

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