Property Arbitration Agreement -- Yes or No?

3 Replies

We are about to make our first offer.

The last section of our agreement allows us to accept or deny a Residential Real Property Arbitration Agreement. We've done some research online, but want to know the pros and cons of accepting or denying this section.

Thanks for the help!

P.S. The property is a triplex in Minnesota built in 1884.

I'm not a lawyer by any means, but from what I understand; accepting an arbitration clause locks you into using arbitration rather than the usual court system to settle legal disputes. There is no appeal process for arbitration that I know of, but arbitration is less expensive and entirely private (aka no bad press). Arbitration is also generally faster than the courts. Many businesses opt for arbitration for the cost, speed, and privacy of it. On the other hand, court cases use precedent, are public, and can be appealed. 

It comes down to personal opinion.

Talk with the seller about it. Some sellers won't sign the contract if you don't accept the arbitration clause. Ask the seller why they put the clause in there and if they would sign the contract without it.

Definitely also consult a lawyer. Many lawyers will talk with you about minor things like this without charging you for it.

@Konrad Lightner  .  I am not an attorney and this should not be taken as legal advice but as a guide to better understand your options coming from a small business owner perspective. It really depends on the specific language within the clause and really should be looked at by an attorney.  Is the clause for Arbitration or Mediation?  Both are typically cheaper and quicker but the clause tends to favor whoever wrote the clause(they have their best interest at heart by default) as they define the terms within the clause.  The major difference is Arbitration is legally binding while Mediation is not.  Meaning Arbitration is typically upheld and more enforceable in court where as if mediation fails you can go to court to try to get a more favorable outcome.  The language in an arbitration clause needs to be very specific with defined terms for, among other things, who is the arbitrator and how long can the arbitration go on, who pays for the arbitration, etc. It can make a significant difference. Vague language can nullify the clause if it establishes no guidelines to follow.

If you are going to sign a clause you need to make sure it is written in your favor or as neutral as possible. 

www.adr.org is the american arbitration association website which can walk you through the proper steps to setting up the clause and finding a neutral arbitrator(soooooo important!)

Obviously, we hope to never encounter any form of legal action but it is best to have the path as clearly defined as possible if we do.  Never assume someone(they seem nice but when in a dispute things change) will do something a certain way unless it is specifically defined in writing!

Best of luck!

John

I have worn a lawyer hat in a previous life but I must first counsel you to obtain legal advice licensed in your state.   

If it were I as long as the provision is clear I prefer arbitration personally.   Do you want the O. J. Simpson jury or with due respect some random judge who might be a raving leftist communist.

My personal opinion if you plan on doing what you say no real reason not to utilize the arbitration model. 

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