Minnesota Real Estate Arbitration

Share

Most residential real estate purchase agreements in Minnesota offer the buyer and seller the option of agreeing to real estate arbitration, rather than a trial in court, as a way of resolving disputes. As with all choices in life, there are positives and negatives to selecting arbitration. This article discusses how a buyer should think about making that choice, and what the real estate arbitration process is like in Minnesota.

First, it is important to understand that your choice of arbitration may depend on what purchase agreement form you used. The most commonly-used residential purchase agreement is the one prepared by the Minnesota Association of Realtors. The Realtors’ form has an arbitration provision that provides that the National Center for Dispute Settlement will handle the real estate arbitration in accordance with its rules.  Less commonly used is the form prepared by the Minnesota Bar Association, which offers real estate arbitration as an option, but does not mandate that the arbitration be handled by the NCDS. This article will focus on arbitration under the NCDS rules.

What is Real Estate Arbitration?

Arbitration is a dispute resolution process where an impartial person serves as a neutral decision maker. Usually, the arbitrator is a lawyer with experience or knowledge concerning residential real estate, but not always. The NCDS’s roster of arbitrator’s includes architects and contractors as well. In all cases, the arbitrator is tasked with considering evidence and deciding the matter. Usually, the decision involves deciding whether or not to award a buyer money to compensate them for a non-disclosure.

Should I Agree To Real Estate Arbitration?

The principal benefit of arbitration is that it tends to be a less legally-rigorous process and less costly than a court proceeding. Depending on the complexity of the claims involved, many individuals feel comfortable representing themselves in arbitration. If a buyer or seller does chose to use an attorney, the attorneys’ fees tend to be lower than for a court proceeding because it takes less time to get to a final resolution and the rules are less cumbersome to comply with.

On the other hand, my experience has been that an arbitrators’ decision making process is far less legally rigorous than that of a judge. Arbitrators usually don’t require claimants to satisfy all specific legal standards, and they rarely require adherence to the rules of evidence that govern trials in courtrooms. A party with a claim or defense that would benefit from a careful reading of the law would probably be ill served by an arbitrator.

What Is The Real Estate Arbitration Process Like?

The NCDS’s real estate arbitration process involves 4 stages: (1) submission of a claim and response; (2) very limited discovery; (3) the exchange of evidence; and (4) a hearing. Initially, the party making the claim submits the NCDS’s claim form to the NCDS, which in turn distributes it to the other party, known as the “Respondent.” The Respondent has the opportunity to respond, usually by denying liability for the claims.  At this stage, the NCDS also distributes a list of potential arbitrators and a calendar. The parties are asked to strike one arbitrator each, and to number the rest in order of preference. The parties are asked to cross off from the calendar all dates when they are not available for the arbitration hearing.

The NCDS rules do not afford many opportunities to gather evidence from the opposing party. The parties can ask the arbitrator to order the exchange of information or can request a subpoena for evidence from a third party, but this is all within the arbitrator’s discretion.

The NCDS rules require that the parties exchange an exhibit and witness list prior to the hearing. In most cases, the parties will actually exchange exhibits in advance.

The hearing is usually held at the property at issue, unless the parties and the arbitrator agree otherwise. The arbitrator will swear in the witnesses, and direct them to tell the truth. Then each side will have an opportunity to offer testimony and evidence.

Do I Need A Lawyer To Represent Me At A Real Estate Arbitration Hearing?

It is unquestionably advantageous to be represented by a lawyer at an arbitration. Whether you need a lawyer depends on the complexity of your case, the type of evidence that you will submit, and on whether your adversary will have a lawyer.