The Residential Real Property Arbitration program is a voluntary, optional means of dispute resolution on issues relating to disclosure of material facts pertaining to the property. The system, which serves as an alternative to litigation, is endorsed by the Minnesota Realtors® and administered by the National Center for Dispute Settlement ("NCDS"). This option should be presented to the parties at or about the time that a listing agreement, a buyer representation agreement, or when the purchase agreement is signed. The agreement to arbitrate these disputes is enforceable only if all buyers, sellers, and licensees representing or assisting the buyers and sellers consent by signing the Disclosure Statement: Arbitration Disclosure and Residential Real Property Arbitration Agreement ("Agreement") form. (This is because any of those parties or brokers/agents could be named as parties in arbitration.) By agreeing to arbitrate such disputes, the parties give up the right to resolve those issues in court. The Agreement is a separate form, not an addendum to the purchase agreement, and failure to sign that form has no effect on the purchase agreement.
Arbitration or Court
Brokers/Agents should review the Rules under which the Arbitration program is administered (available from NCDS). Arbitration is often a quicker, cheaper, and simpler means of resolving disputes for buyers and sellers. Parties should be aware, however, of a number of significant differences between use of the arbitration and litigation systems to resolve a dispute, including the following:
- The initial cost of filing a claim is higher for arbitration than for filing a lawsuit.
- The time deadline for filing an arbitration claim is more limited than in litigation.
- The probable length of time from filing a claim until an award or decision is made is often much shorter in arbitration than when litigating a dispute.
- The site of the arbitration hearing is usually at the subject property.
- Appeal and pre-hearing discovery rights in arbitration are very limited.
Brokers/Agents can make available to customers and clients copies of the Arbitration FAQ as well as the NCDS Rules and fee schedule to assist in making the decision whether to consent to arbitration for resolution of disputes over property condition.
The arbitration option should be presented to buyers and sellers as soon as possible to give them ample time to consult an attorney, but the Agreement must be executed at the time of the purchase agreement to be valid. Copies of the NCDS Rules governing the program can be made available to the parties at or before that time to assist them in making a proper determination for themselves. The MNR standardized purchase agreement contains signature lines for the parties' acknowledgment of receipt of the Agreement form; however this signature line does not in any way bind a party to arbitration - only the Agreement does so. Agents should become familiar with the NCDS system, and be aware of whether their office has a policy relating to arbitration.
Demand for Arbitration
To file a demand for Arbitration, contact NCDS to request a Demand for Arbitration or Submission Form as well as Rules the Residential Real Property Arbitration and the fee schedule at 866.727.8119, or you can download this information from the NCDS website at www.ncdsusa.org.