Mediation vs. Arbitration in Real Estate Disputes: Which Is the Better Option?
When real estate disputes arise, litigation can feel daunting and exhausting. Thankfully, parties involved in a real estate dispute can seek alternatives to traditional courtroom litigation, such as mediation and arbitration. These alternative dispute resolution (ADR) forms offer unique benefits but operate differently. So, when it comes to resolving real estate disputes, which is the better option? This article discusses how each process works, its advantages and disadvantages, and how to choose the best option based on your unique circumstances.
Understanding Mediation in Real Estate Disputes
Mediation is a popular method of resolving disputes outside of court, including real estate disputes. This non-binding ADR method involves working with a neutral third party (the mediator) to reach a mutually acceptable resolution. The mediator does not make the final decision but facilitates communication, clarifies issues, and helps the parties reach a compromise acceptable to both. Mediation focuses on collaborative problem-solving instead of imposing a decision on the parties.
In Tennessee, mediation may be voluntary or required by a contract. If a contract includes a mandatory mediation clause, the parties must attempt mediation before proceeding to litigation or arbitration. This step encourages early resolution and may avoid the need for more formal legal action.
Understanding Arbitration in Real Estate Disputes
Arbitration is a more formal process than mediation, which involves working with an impartial third party, called an arbitrator or a panel of arbitrators, to resolve the matter. The individual or panel listens to both sides of the story and then makes a binding decision. Arbitration is like a simplified court trial, but it happens outside court and typically moves faster. Also, arbitration does not involve extensive discovery.
Like mediation, arbitration can be voluntary or contractually required. It is common for commercial real estate contracts, especially those involving large-scale transactions, to include arbitration clauses. However, unlike with mediation, where it is possible for a resolution not to be reached, arbitration results in a legally binding decision made by the arbitrator or panel of arbitrators. This final decision is enforceable, providing the parties with certainty and closure. There are minimal options for appeal.
Advantages and Disadvantages of Mediation
Here are some advantages and disadvantages of mediation in real estate disputes.
Advantages
Mediating a real estate dispute may have several advantages, including the following;
- Confidentiality
- Cost-effective
- Faster resolution
- Control over outcome
- Preserves relationships
Disadvantages
Some of the cons of mediation include;
- Non-binding nature, meaning unresolved disputes may still escalate to litigation or arbitration
- Success heavily relies on the willingness of the parties to compromise
Advantages and Disadvantages of Arbitration
Here are some advantages and disadvantages of arbitration in real estate disputes.
Advantages
Pros of arbitrating real estate disputes include;
- Binding decision
- Faster than litigation
- Confidential
- Expertise of arbitrators
Disadvantages
Limitations of arbitrating real estate disputes include;
- Limited appeal rights
- Costs can escalate
Which Is the Better Option?
Which is right for you between mediation and arbitration depends on several factors, such as the nature of the dispute, your desired outcome, and your relationship with the other party. If your contract does not require either ADR method first, choose mediation if you prefer a collaborative approach and wish to preserve your relationship with the other party. If you need a binding decision or the dispute involves complex issues that require expert judgment, it may be best to choose arbitration.
Contact a Knoxville Real Estate Attorney
Contact our experienced Knoxville real estate attorney at Reynolds, Atkins, Brezina & Stewart, PLLC, for help choosing the best action for your dispute.
