Real Estate Disputes come in all shapes and sizes. The seller disclosed the basement leaked a half a inch when in reality the basement fills to nearly four feet in the winter.

The homeowner did not disclose that the septic system is on the neighbor’s property.

The landlord and tenant are fighting over the security deposit.

The neighbor thought they were doing their a neighbor a favor, after a winter storm and cut down the 60 foot Ponderosa Pine Tree while the neighbor was absent.

Two business partners run a 7 million dollar business but do not have a partnership agreement.

A homeowner does not disclose to the buyer that the sewer backs up three or four times a year.

The real estate agent orders a well to be dug for a buyer, but when the property is in escrow, the deal falls through.

The Buyer who places a deposit of $50,000 dollars into escrow cancels the purchase after waiving all contingencies.

The reality is that most real estate transactions are completed with satisfied buyers and sellers. However, when a dispute arises, there are many options in California to deal with it.

In California, most real estate transactions that occur within the local real estate community will typically use forms from the California Association of Realtors (“C.A.R.”). Within that written agreement is a provision for dispute resolution called Alternative Dispute Resolution or ADR.

In California it is broken down to two components: Mediation and Arbitration.

In recent years, our society has seen a dramatic increase in litigation. Turning to the courts to resolve disputes seems to be an almost instinctive reaction these days. However, the sobering reality is that lawsuits can be financially and emotionally draining for the participants and can even impact our economy over the long-run. While buyers and sellers of real estate usually are able to negotiate away the little disputes that arise in the course of their transactions, sadly those disputes do sometimes end up in lawsuits.

Fortunately, there are alternatives to litigation for resolving disputes. Mediation is one such alternative that is growing rapidly in popularity—one that can dramatically reduce the time and cost (both emotional and financial) of resolving disputes. In fact, many real estate contracts, including those published by C.A.R., now require the parties to mediate many disputes that might arise between them.

Mediation is typically the first phase of dispute resolution and still allows for litigation down the road if parties do not reach resolution in mediation. In contrast, Arbitration is an opt-in or opt-out, where the parties either agree or disagree to resolve their dispute using arbitration.

Mediation is the term used to describe a relatively informal form of dispute resolution that occurs outside of the court system. In mediation, the parties to the dispute are assisted by a neutral third person called a mediator. The mediator is not empowered to impose a decision on the parties; instead the mediator facilitates discussions and negotiation between the parties with the goal of assisting them in reaching a mutually acceptable settlement of their dispute.

How is mediation different from other dispute resolution processes?

To understand how mediation is different from other dispute resolution processes, it is helpful to compare it against the various characteristics of the most common dispute resolution processes in use today: negotiation, litigation, and arbitration.

Negotiation is simply the process whereby parties meet to discuss a settlement of their dispute. This can be done face-to-face or through authorized representatives (e.g. attorneys). Negotiation is usually done outside of the court system and does not have to follow or conform to any formal rules or procedures.

Litigation is an adversarial process whereby the parties submit evidence to a judge or jury and then rely on the judge or jury to make and impose a binding decision regarding the dispute. Litigation is governed by formal rules and procedures of court and generally is time consuming and expensive. Since it is adversarial, litigation is in effect a contest in which a winner and loser are selected.

Arbitration is similar to litigation in that it is an adversarial process whereby the parties submit evidence to a neutral third person (the arbitrator) who then renders a decision regarding the dispute. However, arbitration is usually private and conducted without the formal rules and procedures of court. In order to compel another party to arbitrate a dispute, in most cases the parties must have previously entered into an agreement to arbitrate their disputes.

Mediation is different from litigation and arbitration in many respects. Perhaps the most significant difference is that mediation is a nonadversarial process. That is, the parties do not argue their positions and give decision-making power to a third party. Instead, the mediator’s role is to assist the parties in achieving a mutually agreeable resolution of their dispute.

Beginning January 1, 2012, there is a new option that might be highly valuable to the local Californian consumer! Instead of filing a claim in limited or unlimited jurisdiction, an individual party can now turn to their local California Superior Court, Small Claims Division. Beginning in 2012, a dispute may be submitted to small claims so long as it does not exceed $10,000! Prior to this new enactment, claims were capped at $7,500.

Small claims is quicker, cost effective, and timely. Additionally, many small claims courts now have a panel of mediators available to act as a mediator or neutral. Mediators typically provide these services on a volunteer basis which makes them free to the parties. For example, the Tuolumne County Superior Court has an active mediation panel for Alternative Dispute Resolution and has a nearly 90% settlement rate among parties using mediation.

It is best to review the individual programs, available with your individual local court. This can be done with a quick phone call to the local County Clerk or by checking the website of the individual Superior Court under ADR.

How much does mediation cost and who pays for it?

The cost of mediation depends on a variety of factors. For example, many government agencies sponsor mediation programs for the public, which are available for free or at a nominal cost. However, there are numerous private mediators and mediation services that provide mediation to the public as well. The cost of private mediation can vary but typically includes an initial filing or processing fee plus an hourly fee for the mediator’s services, both of which can vary depending on the mediator or mediation service. Parties contemplating mediation should compare mediation providers and their costs prior to selecting a mediation service. Usually the parties agree to divide mediation costs equally between them. This is the case if a California Association form is used.

Mediation can often be cost effective compared to litigation or arbitration. Fortunately, I have settled many disputes where each disputant paid less than $600 each to settle a complex case.

Where do I locate mediators and mediation services?

Mediators and mediation services can be located by looking in the local telephone directory (e.g., under “Mediation,” “Arbitration,” or “Dispute Resolution”), by contacting government agencies such as the California Department of Consumer Affairs, or by asking an attorney or a local bar association for referrals. In addition, many mediation providers maintain Internet websites. Please see for a list of online resources. Another way is to do a Google or Yahoo Search under Real Estate Mediation or Real Estate Mediator.

What if mediation does not resolve my dispute?

While mediation is highly successful, if mediation does not resolve a dispute, the parties are free to pursue any other system of dispute resolution available to them. For example, if the parties entered into an arbitration agreement, they could pursue arbitration. In the absence of an arbitration agreement, the parties would likely have to resort to litigation.

It should be noted that even if mediation does not resolve the dispute, it is still an effective way to narrow the issues in a dispute. It also allows the parties to express their feelings, and enable future proceedings to be more efficient and focused.

Why litigate when you can mediate? The consumer today has various alternatives in a real estate dispute before having to employ litigation which can result in cost and stress.

by Jim Hildreth

Jim W Hildreth is a California mediator who mediates in the courts and in the private sector. He is based in Oakland & Sonora, CA.