When entering a real estate sales transaction, the parties to the sale enter a contract for the sale of the real estate. In California, real estate sales contracts are typically entered on “form” contracts. In the residential setting, the California Association of Realtors (“CAR”) form is most commonly utilized. In the commercial setting, an AIR Commercial Real Estate Association form is most commonly utilized.
When people transact business, particularly when the stakes are as high as they are in a real estate transaction, disputes sometimes arise. Some disputes happen prior to the sale closing, and some disputes occur after the sale closes. Some common types of disputes include a claim by a buyer after the close of escrow that the seller knowingly failed to disclose defects regarding the property or made material misrepresentations regarding the property; and prior to the close of escrow a common dispute that arises relates to impediments to get escrow closed.
In dealing with these disputes in California, the parties need to look to the written real estate sales contract to understand how the dispute needs to be dealt with. In the residential setting, the CAR form requires the parties to the contract, prior to commencing any legal proceeding, to engage in a mediation, which is a process that is designed to get the dispute settled without the necessity and cost of having to litigate the dispute. For a prior article on mediating real estate disputes, see http://www.businessandrealtylaw.com/2014/05/30/mediating-real-estate-contract-disputes And in fact, the CAR form not only requires that a dispute first gets mediated by the parties, but also states that if one of the parties refuses to participate in a mediation process or agree to participate in a mediation process, then they are waiving their right to recover any attorney’s fees if any litigation ensues.
Both commercial and residential form real estate contracts contain arbitration clauses. If the arbitration clause is initialed by both parties, then any dispute as between the parties to that contract, should be litigated through an arbitration. An arbitration is a private trial which is often quicker than utilizing a lawsuit and the court system. If the arbitration clause is not initialed by the parties, then the parties, if they are going to commence legal proceedings, would do so by filing a lawsuit.
Both the CAR forms and the AIR forms contain an attorney’s fees clause, which has the effect that if a dispute is fully litigated, the prevailing or winning party to that dispute may be entitled to recovery of some or all of their attorney’s fees. The attorney’s fees clause could be very very powerful, as it can minimize the risk of frivolous or baseless claims.
I regularly represent clients in the East Bay, in Oakland, California, and in Walnut Creek, California, in real estate contract disputes. If you have questions, or need representation by a California real estate attorney involving a dispute regarding a real estate transaction, please feel free to contact me to discuss your case or to arrange for a consultation at (510) 465-0025 or (925) 708-3306.