What is “Arbitration?”

The vast majority of the time, Minnesota real estate transactions go smoothly, and the seller is pleased with the purchase. The seller provided the buyer with a Seller’s Real Estate Transfer Disclosure statement, after filling it out truthfully and thoroughly. Known reports of lead paint were shared with the buyer, as well as specific information about wells, septic systems, underground fuel tanks or items that are not readily seen when touring the home. The buyer was made aware of any known material defect in the property prior to the time of purchase. Perhaps the local municipality required some sort of pre-sale truth-in-housing inspection. On top of that, an astute buyer would have purchased the home subject to a satisfactory private home inspection by an inspector of the buyer’s choice.

On very infrequent occasion, the buyer is surprised by a defect discovered after the closing date. Perhaps it is faulty plumbing, defective wiring, a cracked furnace heat exchanger, or a leaky basement. Perhaps the seller had not been entirely candid about disclosing all known defects. Perhaps the seller was not even aware of them. Worse yet, maybe the buyer did not have the house examined by a professional inspector prior to sale. In any case, the disgruntled buyer usually calls up the seller, expecting a remedy. Frequently, the seller offers a solution that satisfies the buyer, and the defect is no longer an issue. If this does not happen, the buyer looks for legal remedies. At this point, the buyer may be making claims of fraud, misrepresentation, warranty, or negligence.

Of course, lawsuits and small claims court can be used to seek redress. Arbitration is also an option used to resolve the issue. However, you may have signed an arbitration agreement that would preclude this option. If the buyer signed a Residential Real Property Arbitration Agreement form when purchasing the property, and all parties including seller, listing agent, and selling agent have signed it, the buyer has given up the right to go to court. The arbitration option was presented to you when you purchased the home. Signing an arbitration form is voluntary, and is not part of the purchase agreement. You are given the right to choose binding arbitration over the court system, as a way to resolve any disputes that might arise.

The Arbitration System is a private system offered as an alternative to the courts, as a way of resolving disputes. The standard Residential Real Property Arbitration Agreement requires that the services of Construction Arbitration Services.

Here are some important facts about the arbitration process

• The cost of filing an arbitration is determined by the amount of the claim, but is typically much higher than the cost of conciliation court filing fees. The current maximum claim for conciliation court is $7,500, and is subject to change in the future.
• Sometimes arbitration is quicker than litigation.
• Time for filing your arbitration claim is limited. The arbitration request must be filed within 24 months of the date of the property closing. In cases of fraud, this period may be extended by courts or an arbitrator.

• Arbitration hearings are typically conducted at the subject property. All parties involved are notified 14 days prior to the hearing. All parties may present evidence or testimony.

• The Construction Services (CAS) appoints an arbitrator. A three-person arbitration panel can be appointed at the request of any party.
• Awards must be made within 30 days from the final hearing date.
• Your right to appeal an arbitrator’s decision is very limited.
• The arbitrator does not have to show findings of fact to justify the award. The prevailing party may also be awarded the cost of the administration fee.
• Your REALTOR cannot give you legal advice about signing the Residential Real Property Arbitration Agreement.*

*If you need help determining if the arbitration process is right for you, you should contact an attorney. The information provided here is subject to change, and is provided for informational purposes only. It should not be construed as legal advice.

Possibly related posts:

1. Disclose! Disclose! Disclose!
2. Minneapolis Truth-of-Sale-in-Housing Requirements