Dealing with an eviction that makes it all the way to the courtroom is one of the most difficult, expensive, and arbitrary situations for a property manager—thus the need for alternative dispute resolution services. Eviction disputes are considered essentially minor nuisances by most judges, and so the judge will want to absorb only the most relevant details and make a decision almost offhandedly—they rarely last more than 20 minutes if it makes it to the courtroom. (There’s nothing like being saddled with thousands of dollars in back rent just because the judge was in a crap mood that morning.)
But what forms of alternative dispute resolution are there? Actually, there are a few— mediation and binding arbitration being the most common.
Download Your FREE guide to evicting a tenant!
We hope you never have to evict a tenant, but know it’s always wise to prepare for the worst. Navigating the legal and financial considerations of an eviction can be tricky, even for the most experienced landlords. Lucky for you, the experts at BiggerPockets have put together a FREE Guide to Evicting Tenants so you can protect your property and investments.
Mediation vs. Binding Arbitration
When a dispute is mediated, that means both sides sit down with a professional mediator and discuss the problem in a (theoretically) level-headed fashion. After discussing the matter together, the mediator will then talk to each group individually to get to the ‘bottom’ of any issues that seem to be incomplete or talked-around in the group setting. Mediators may also engage in investigations of their own if they believe either party to be deceitful.
Then, the parties gather in the same room again, and the mediator will guide a second discussion, this time with the aim of getting the two sides to agree on a resolution that will leave everyone equally satisfied. If such a resolution is reached, a contract enforcing that resolution is written up, signed, and everyone goes on their way.
When a dispute is arbitrated, at the beginning of the process, an Arbitration Agreement is written describing the precise nature of the problem and having both parties agree to follow the dictates of an Arbitrator or panel of Arbitrators. From that point, the process looks very much like a courtroom: both sides present their story, the evidence to support it, and the Arbitrator(s) will decide how the problem should be most fairly resolved. In the end, the Arbitrators will create a plan, and present it to a judge, who will (almost always) immediately issue a Court Order that the plan be followed.
Non-Binding Arbitration is similar, but without the Court Order, making it essentially a gentleman’s agreement.
The key difference between mediation and arbitration is that in mediation, the final contract is reached only when both parties agree that it is acceptable. In arbitration, the final contract is decided by a third party, but because the Arbitrator generally spends more time getting to know the story and each side, it is often noticeably less…arbitrary…than that of a harried District Court judge.
How to Invoke an Alternative Dispute Resolution
Some states allow landlords to include clauses in their Lease Agreements that essentially say “Tenant agrees to use XYZ mediation/arbitration service to resolve any disputes not relating to habitability.” Michigan is not one of them—if you live here or in any state that forbids such clauses, your best bet is also the simplest: ask the tenant. Many tenants can’t afford legal fees, and alternative dispute resolution can potentially save them just as much money as it saves you.
What alternative resolutions have you used to avoid the eviction process? Share your thoughts below.