When you sign a purchase agreement in the state of Minnesota, “you have the right to choose whether to have disputes about disclosure of material facts affecting the use or enjoyment of the property that you are buying or selling decided by binding arbitration or by a court of law. By agreeing to binding arbitration, you give up your right to go to court for claims over $15,000.”
You must either sign or decline to sign an Arbitration Disclosure and Residential Real Property Arbitration Agreement as part of coming to an agreement on the purchase of a home in Minnesota. But how do you decide whether to sign or not sign?
Minnesota Realtors and National Center for Dispute Settlement put together a Comprehensive Guide to Residential Real Property Arbitration… free to download.
Here are some key points from the guide to help you decide if arbitration is right for you…
What is arbitration?
Arbitration is dispute resolution process that is used as an alternative to the court system. Rather than suing the opposing party in a court of law, a complainant would file a demand for arbitration with NCDS, and an arbitrator would be assigned to the case. The arbitrator would oversee the procedural and substantive issues that arise and issue a decision that is binding upon all parties.
What’s the difference between arbitration and the courts for dispute
Arbitration is typically less complex, less expensive, and faster; however, these are generalizations. Conciliation court can be more expeditious for claims under $15,000 (the current limit) and be less expensive and complex even than arbitration. (That is why the Minnesota REALTORS® program excludes claims under the current Conciliation Court limit ($15,000); see below for more information). Be sure to do your own comparison of costs (filing fees, attorneys fees, etc.) before deciding. An attorney can be useful in helping determine whether arbitration is right for you.
Is there a minimum or a limit for the dollar amount of the Demand in an Arbitration?
There is no limit to the amount that a claimant can make in a Demand; however, no Demand for less than $15,000, or the current Conciliation Court limit in Minnesota, can be heard through the NCDS arbitration process. The Arbitration Agreement specifically excludes any claims that are less than the Conciliation Court limit because Conciliation Court is often even simpler and less expensive than arbitration in those cases.
Can arbitration decisions be appealed?
Typically, there is no right to appeal an arbitration decision in the same way that a decision from a district court can be appealed to a higher court. However, there are limited appeal rights related to certain procedural failures that might have denied a party a fair hearing, or other issues. Typically, decisions issued by arbitrators are final.
Can I use an attorney if I chose arbitration?
Yes. Choosing arbitration is simply choosing a dispute resolution process. Just like in the court system, you can choose to hire an attorney to assist you in your claim, or in defending you, or you can represent yourself. However, like the court system, an attorney is not required to proceed.
Who must sign the Arbitration Agreement to make it valid and binding?
Both the buyer and the seller, and both licensees representing or assisting the buyer and seller must sign to have a valid agreement to arbitrate. If one party is not represented by a licensee, then only the party’s signature is necessary. However, if a party is working with a licensee, the licensee must also sign. If only the buyer and seller sign, then the agreement will not be binding. Parties may still voluntarily elect to arbitrate rather than utilize the court system at any time once a dispute arises.
When would I file an arbitration claim?
An arbitration claim, just like any legal claim, should be a last resort. You may want to reach out to the opposing party prior to filing to see if you can work out your dispute. Often, settlements leave both parties feeling better about the resolution, rather than taking a chance that the arbitrator will decide against you in an all-or-nothing type of decision. The Minnesota REALTORS® also provides mediation services to parties in advance of an arbitration, should they decide that a mediator might help foster a settlement. In any case, if an arbitration is filed, it is after the purchaser identifies a material fact that was not disclosed and identifies that the seller and/or licensee was aware of this fact and failed to make the proper disclosure. Typically, this is after the closing. In any case, all claims must be filed within 24 months of the closing, except if fraud is alleged.
What is the deadline to file an arbitration claim?
An arbitration must be filed within 24 months of the closing date on the property, unless fraud is alleged. Seek legal advice regarding whether you may still have a claim if more than 24 months have passed since your closing. This is the deadline regardless of any longer applicable statute of limitations that might be given in Minnesota Law.
What are the pros and cons, generally, of arbitration vs. court?
PROS OF ARBITRATION
- Less formal and not as complex as litigation
- Decided by an arbitrator (private citizen)
- Generally less expensive than litigation, except in cases of Conciliation Court
- Discovery of documents is restricted, so it will be less cumbersome
- The decision of the arbitrator is final and binding, with very limited appeal rights
- Decisions in arbitrations made more quickly than in court (hearing is usually scheduled within 90 days of the receipt of demand + 30 days for arbitrator’s decision)
- Party can participate in choosing the arbitrator(s)
CONS OF ARBITRATION
- Give up your right to go to court
- Give up your right to have a judge/jury
- Give up access to the courts/appeals/rules
- Discovery of documents is restricted, so it may be harder to access all of the evidence you might want to discover
- Give up rights to an appeal
- Court hearing and appeal process can take many months, if not years, to be final
- Assigned a judge to hear the matter
This is only a fraction of the information available to help you make an informed decision. Download free copies for further study through the links below.