If you feel you have been wronged in a significant California real estate purchase dispute (and, given the price of real estate here, few such disputes are insignificant), or if you have been threatened with legal action over a transaction, the idea of trying to work collectively with the other party to reach a mutually beneficial solution may seem less than appealing. Mediating real estate disputes can, however, bring a more swift and less costly end to your dispute relative to litigating the matter. Furthermore, you may be contractually obligated to do so per the terms of your purchase agreement and face negative consequences if you fail to mediate.
What is Mediation in a California Real Estate Dispute?
Mediation has been growing for decades as an alternative dispute resolution process in many areas, not just real estate, as it encourages parties to seek mutually beneficial outcomes and sort out their differences without incurring the legal costs of a lawsuit and filling the dockets of courts.
In mediation, the parties agree to go before a neutral third party who can listen to each side’s positions and suggest outcomes and concessions each party could make, all in the spirit of reaching an agreement between the parties which will resolve their differences and prevent a lawsuit.
The mediator does not have the power to impose an outcome on the parties in the same way an arbitrator or judge can, and instead the parties both retain the power to reject any agreements. And if they are unable to both reach an agreement they can live with, either party can proceed towards litigation.
Notably, the mediator in a real estate dispute can be any neutral third party, including (according to the California Association of Realtors), “mediators from an Association of REALTORS, a rabbi, priest, minister, or other neutral party.”
Parties are permitted to work with real estate attorneys in preparing for and attending mediation, and are strongly encouraged to do so to present their best arguments and defend their interests in any potential mediation outcome.
You May Be Required to Pursue Mediation Initially
Many home purchases in Los Angeles and throughout California incorporate the California Residential Purchase Agreement, provided by the California Association of Realtors. This agreement includes the clause: “The buyer and the seller agree to mediation by a neutral mediator to facilitate the resolution of any disputes. The mediator is not empowered to impose a settlement.” Notably, this is not an optional box on the agreement.
While not pursuing mediation does not necessarily prevent a party from going ahead and filing a lawsuit, a failure to attempt mediation can result in not being able to later pursue attorneys’ fees in a real estate lawsuit based on the following rule: “Any party who does not attempt mediation before filing an arbitration or court action (with the limited exceptions such as small claims court actions…) is not entitled to be awarded attorney’s fees, even if he or she is the prevailing party.”
Although this mediation will generally have to occur before any discovery or extensive pretrial preparation work is done, California courts have held that this does not prevent the courts from enforcing the clause against denying attorneys’ fees who fail to mediate. This is based on the principle that mediation can and should occur before the parties have devoted too much resources and money to trial preparation.
Some types of real estate disputes are not subject to the obligation to mediate pursuant to this clause, including foreclosure actions, unlawful detainer actions, filing of mechanic’s liens, and actions in probate court, small claims court, and bankruptcy court.
Contact an experienced real estate attorney to discuss mediation and other dispute resolution issues in your real estate dispute.
Contact the Real Estate Litigation Attorneys at Wagenseller Law Firm
At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. Contact Wagenseller Law Firm today to schedule a consultation to discuss your real estate matter, including preparing for mediation.