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Disputes come up involving real estate contracts all the time. Some examples would include a seller’s refusal to sell the property; a seller’s failure to disclose defects regarding the property; claims for damages, to name a few.

In California real estate sales contracts, there is typically a duty to first try to resolve the dispute through the use of mediation. This article discusses mediation clauses in real estate contracts and the use of mediation in resolving disputes involving real estate contracts. Many of the issues discussed in this article, however, are not limited to real estate contracts and can be applied to many contract disputes involving other types of contracts.

The typical residential real estate contract in California is put onto an eight-page California Association of Realtors form, which, among other things, includes a mediation clause (“CAR Form”). The mediation clause contained in the CAR Form requires that prior to commencing legal proceedings to enforce rights under the contract, parties to the contract must first engage in the mediation process.

To understand what this means its best if you understand what a mediation is. A mediation is a process where the parties to the dispute, typically the buyer and the seller, meet, usually accompanied by attorneys, with the assistance of a mediator, who is usually either an attorney or a retired judge, in an effort to resolve the dispute without the necessity of commencing litigation. Mediation is a form of alternative dispute resolution which has become very popular in California, mostly because it saves the parties a great deal of money and it enables them to control the outcome of the dispute by agreeing to terms of settlement they find acceptable, rather than exposing the dispute to the cost and uncertainty of a judge, jury, or arbitrator.

The mediation clause in the CAR Form works with an incentive. The mediation clause in the CAR Form requires the complaining party, before commencing legal action, to first demand mediation. That same mediation clause requires the other party to the contract who receives the mediation demand to agree to participate in the mediation. By the terms of the mediation clause in the typical CAR Form, if either party fails to agree to utilize the mediation process, they are waiving their right to recover attorney’s fees in the ensuing legal proceeding, even if they prevail in the lawsuit and the contract contains an attorney’s fee clause. This creates a great incentive to engage in the mediation because if you fail to agree to mediate, you will not be able to recover your attorney’s fees even if you win the ensuing lawsuit.

Mediations can be extremely effective in resolving disputes involving real estate contracts or any other type of contract. For a mediation to be effective, however, it is generally advisable to make use of an experienced attorney who has had successes in resolving cases through the use of mediation. That attorney should be effective in articulating persuasive arguments on behalf of the client, should be familiar with local mediators so as to select an effective mediator, and is effective at advocating for their client at the mediation to influence a favorable outcome and settlement.

I have represented many clients in California, throughout the Bay Area, the East Bay, Oakland, and Walnut Creek, in various types of mediations, including real estate contract disputes, contract disputes, and other real estate and business disputes. If you have questions, or need assistance in mediating your dispute by an experienced and effective California attorney, please feel free to contact me to discuss your case or to arrange for a consultation. I can be reached at (510) 465-0025.

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