Even with widespread acceptance in general civil litigation, using Alternative Dispute Resolution processes, especially mediation and arbitration, to resolve real estate disputes is a fairly new idea in Ontario.
The Ontario Real Estate Association and Toronto Real Estate Board’s standard residential Agreement of Purchase and Sale does not have any dispute resolution provisions. So until recently, the resolution of real estate disputes relied on direct negotiation between the parties. If that failed and it often did, litigation was usually commenced. But we know that 90% of cases in Ontario settle without a trial anyway so why not try mediation at an early stage before or during litigation?
We are now seeing the real estate community and clients beginning to recognize the benefits of mediation which include lower costs, speed, confidentiality and resolutions tailor made to the dispute. This applies equally in commercial, industrial or residential real estate disputes.
Because many in the real estate industry do not want to risk damage to their reputation because of litigation, the confidential nature of mediation is very important. Court records are usually public while mediation is not.
Mediation allows parties to find mutually agreeable practical solutions to their dispute rather than having one imposed on them. Participating in mediation does not mean giving up any legal rights to take the case on to trial before a judge.
Depending on the particular transaction, the nature of the real estate and the uses of the property, a variety of disputes can arise. While people tend to take different positions in real estate disputes, there are almost always common interests in resolving the dispute. Getting the transaction closed or dealing with after closing issues are the most frequent. There may be commitments to purchase other property depending on the successful closing of a sale. Purchasers may have vacated other property and be in mid-move into the new premises. Mediation helps find and meet these interests in such a way that settlement can be achieved.
Almost any type of real property dispute can be resolved using mediation or arbitration. Common disputes include repair and inspection issues, costs for repairs, claims of misrepresentation about the condition of the property and professional negligence.
Real estate disputes are often different from other types of legal disputes in that they usually involve more than two parties. A dispute arising from the failed sale of a property may involve several parties including the buyer, the seller, the buyer’s real estate agent, the seller’s real estate broker and building inspectors. Other potential parties can include a title insurance company, and sometimes the lawyers who acted for the parties in the transaction.
Delay in resolution can lead to lost opportunities to relist or resell the property in question. Mediation can be held quickly often within weeks or months of the dispute arising rather than the usual one to two years plus that it takes to get to trial in traditional litigation. Since time is generally of the essence in contracts involving the purchase and sale of real property, using mediation makes good sense for counsel and their clients.
Approximately 80% of disputes are resolved in mediation. The success of mediation is because of the parties’ participation in and control of the process and outcome. In mediation, settlement can often be achieved in one meeting taking a day or less. And, if mediation is not successful then a decision can still be made to arbitrate or litigate the dispute.
Either at the time a contract is signed, or when a dispute arises in a real estate transaction, the parties can agree to mediation of disputes. This is a process involving a neutral third party who works with the disputing parties to examine all aspects of the dispute, discuss it and come to some mutual agreement.
The goal of mediation is to help the parties minimize the financial and other costs of a dispute by bringing about either a mutually satisfactory collaborative solution through mediation.