Who Must/Should Attend a Pre-Litigation Real Estate Mediation?
Like it or not, disputes erupt in real estate transactions involving Buyers and Sellers, Lessors and Lessees, Real Estate Brokers and their Principals, and so many others.
Numerous applicable contracts – including those contracts on forms promulgated by the California Association of REALTORS® (“CAR”) – mandate mediation for such disputes prior to commencing any litigation or arbitration. (And there are consequences if they do not mediate.)
The question is, “who must/should attend?”
In CAR’s Residential Purchase Agreement, as an example, the Buyer and Seller agree in advance to participate in the mediation of any dispute with one another and further agree to participate in the mediation of any disputes they have with their Broker(s).
So the Buyer and Seller must attend and participate.
On the other hand, in the same agreement, Brokers are not compelled to mediate with the Buyer and/or Seller, unless they agree to do so in writing.
So Brokers may attend, but are not required to do so.
But should they attend anyway?
I think it depends on the goal of the mediation.
One goal of the mediation is to resolve the dispute if it is possible to do so, but another equally important goal for Buyer and Seller is to preserve the right to attorneys fees under the contract if there is no settlement and if litigation or arbitration ensues.
If the goal of the mediation is solely to preserve the right to attorneys fees as between Buyer and Seller, the Broker need not attend. (But how would one know that in advance?)
On the other hand, if there is a good chance that the dispute may resolve, with the aid of the Brokers being in attendance, I think it is appropriate for them to attend, if nothing more than to support their clients, so long as they are invited.
Even if resolution does not occur at the mediation, the resolution might occur as a result of the mediation. For their own benefit, then, Brokers can be better informed of the nature and extent of the dispute and any potentials for resolution in the future if they attend, even if resolution does not occur at the mediation.
Who else should attend?
I believe it is always better if Buyers, Sellers, and Brokers have counsel with them.
Attorneys are a big help and should attend too if at all possible. The mediator cannot give legal advice and so there should be someone in attendance who can do so. It is the attorney’s role to give advice and counsel.
Others who might attend include spouses or close family members, insurance adjusters, inspectors of the property or any others involved in the transaction who might provide information that clarifies any ambiguities or confusion.
In the current economy, with the courts in disarray because of budgetary constraints, my view is that anyone who is helpful to resolution should attend.
On the other hand, there are some who attend who could or may derail the negotiation, intentionally or otherwise, because of their own agendas, priorities or emotions.
So, ultimately, one must be thoughtful as to whom one invites to attend a pre-litigation real estate mediation.
David I. Karp is a full time mediator of real estate and business disputes, principally, and a member of the mediation panel of the California Association of REALTORS® Real Estate Mediation Center for Consumers. His business website is at http://karpmediation.com . He apologizes for any ads affixed to this post by wordpress.com; they are not his.