Pro's and Con's Of Arbitration
Arbitration is a system of resolving disputes that is generally quicker, less expensive and more informal than litigation. Arbitration can binding or non-binding. Generally, it does not allow for appeals. You can have the dispute resolved by one arbitrator or a panel of arbitrators. Often arbitration decisions do not require a written explanation of the decision or require that laws, rules or regulations be followed.
The rules for arbitration have to be agreed to by the participants. In the case of residential real estate, when the buyer, seller and agents sign the Arbitration agreement they are also agreeing to the rules that have already been approved by MAR. It is binding arbitration with no appeal. One arbitrator will decide the dispute. Laws, rules and regulations do not have to be followed. No written rational for the decision need be given.
Why the Sudden Concern?
When claims are for relatively low amounts and where the arbitrators are considered fair and knowledgeable, arbitration can be a valuable alternative to litigation. For a long time, the general consensus was that the pool of arbitrators was knowledgeable and fair. Claims were relatively small (a big one was for a new septic system that cost at most $6,000.00 to 10,000.00). And, agents were rarely named and if they were named were rarely found liable. Unfortunately, the world has changed. Many people are viewing the pool of arbitrators as unknowledgeable about residential real estate, the size of the claims have sky-rocketed, agents are routinely added as a respondent and often times are hit with an award against them. As a result, many agents are now questioning the wisdom of automatically agreeing to the purchase agreement arbitration system to resolve disputes.
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Why Agree to Arbitration |
Why You Should Not Agree to Arbitration? |
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The process is relatively quick. |
For smaller claims, small claims court (conciliation court) is cheaper and just as quick |
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The process is relatively cheap. |
For a Seller or an Agent (who vary rarely have to bring a claim), if it is harder to bring a lawsuit, why make it easier to get a claim brought against them?;
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The arbitration is held at the property in question. |
For larger claims don’t you want the protections offered in litigation – discover, burdens of proof on claimant, claimant must follow the law and the right to appeal a bad decision?
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Because the amount in dispute is too low, you can’t afford the protections offered by the litigation system. |
For larger claims does either side want to roll-the-dice as to the qualifications of the arbitrator when there is no right of appeal and only one person makes the decision? |
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Because you are more likely to have a claim than the other party and want the advantages of arbitration. . |
You can get blind-sided at the arbitration hearing because you often times don’t really know what the claim is or what proof they will have which makes it impossible to defend |
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The purchase agreement arbitration agreement does not necessarily prevent a lawsuit against an agent for negligence yet the arbitration process certainly can include them and often does – gives the claimant two bites of the apple.
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