The Legal Scan is a biennial research project undertaken by NAR Legal Affairs. The Scan systematically collects information on 94 issues in eleven major topic areas that involve the legal liability of real estate brokers, salespeople, and real estate managers. The Scan is a valuable tool not only because it tracks when real estate professionals are currently being held liable, but it also identifies emerging issues and trends, helping to reveal where additional training is needed.

The 2009 Legal Scan is the project’s seventh installment. As with the prior Scan, the 2009 version is organized into two parts: the NAR Scan (focusing on issues faced by real estate brokerages) and the IREM Scan (real estate management issues). The text of the 2009 Scan has undergone a renovation, as the Scan is now organized by issue rather than by research category. An addition to the 2009 Scan is the NAR/ARELLO Archive, a compilation of new types of laws collected over the prior two years.

The Scan is presented in an interactive e-book format that makes accessing the information much more user-friendly. The research underlying the Scan includes surveying key leaders in the real estate industry as well as traditional legal research, including judicial decisions and new legislation. The appendixes include lists of each case, statute and regulation found during the research.

http://www.realtor.org/letterlw.nsf/pages/scan?OpenDocument&WT.mc_id=LS070809&CAT=Legal

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“Better Safe Than Sorry”

As the New Year begins, I was thinking of something that I could share with the real estate community that might benefit them in the coming year and on in to the future.  One area of importance and relevance both to the real estate profession and to the legal profession is dispute resolution. 

As we all know, there are occasions when good people have differences of opinion.  One of the more important, or perhaps the most important area, is the payment of real estate commissions.  NAR and MAR have set up an excellent way to resolve these disputes – Board sponsored arbitration.  That process is conducted by panel members that usually have between 80-100 total years (or more) of combined experience.  The panel members who ultimately decide the disputes are experiences, successful, and educated in how the real estate world works.  They are all REALTORS® with specialized training, who know the important factors and ask the right questions.  In short, these “judges” know exactly what they are doing and what the issues are.  The existing arbitration process is relatively inexpensive.  It does not require expenditures for attorney fees or court costs, which can oftentimes make a collection matter economically unfeasible.  Board arbitration is a service to the REALTORS® that can be invaluable to the economics of a real estate practice and help in the settlement of honest disagreements.  

I have attended over twenty commissions arbitrations on the local and statewide levels and there is one fact that is, 100% of the time, always true.  There is only one winner.  The question, as with any lawsuit or arbitration, is will you win or will you lose?  Unfortunately, that answer is only available at the end of the process. 

In the legal community, there has arisen the relatively new practice of mediation. Mediation has evolved as a result of the rising expenses and time delays in the legal

system.  Cases were becoming more expensive, involved, and time consuming, and parties were often discouraged from seeking the relief they were entitled to because of costs.  These factors applied equally to plaintiffs and defendants.  Today, mediation is used, ore often then not to get resolution between the parties.  

What has followed with mediation has resulted in a substitute for “settling on the courthouse steps” which is where most of the cases got settled thirty years ago.  The primary reason cases settled on the courthouse steps is that by the time everybody got to the courthouse for trial, both attorneys knew their cases- the strong and weak points and already knew the uncertainties of trials. Both lawyers had already explained to their clients that they might win, which they like to hear, or that they might lose, which after spending a lot of money, they most certainly did not want to hear.  There are very few times where you can accurately predict the outcome or the amount of any result.  As is often said, uncertainty is a great catalyst for settlements, and almost all disputes have uncertainties. 

There have been two mediations concerning commission disputes locally, both of which settled the disputes.  As to all the others, at least half the parties wished they would have mediated. 

The mediation process is not binding.  It does not involve members who would later be on the arbitration panel, and is an informal process.  Any settlement reached must be by agreement of the parties.  The mediator cannot force anybody to settle, or do anything that the do not agree to do.  If the parties do not reach agreement at the mediation, then they can always go to the arbitration afterwards.  There is no downside or risk to either party by going to mediation.  All conversations, comments, negotiations are completely confidential and cannot be used later in any way, by anybody, for anything.  The mediator’s job is to gather the facts, listen to everybody’s position, then discuss the case with each party.  Since mediators are totally impartial, they view things in a different light than the interested parties.  

The mediator is an experienced REALTOR® who has sat through many arbitrations and knows the process.  The mediator continues conversations back and forth with the parties and works to find a common ground for resolution.  Agreement is reached when both parties come to the realization that each one could lose their case and could come away with nothing.  Since arbitration is a “winner take all” proceeding, either the respondent will have to repay the entire commission (that has already been paid out to the agent already) or the complainant will get absolutely nothing for their efforts in the underlying transaction.  Both results are equally unpalatable. 

Now, you probably wondering, how does this apply to me, and how can it make my real estate practice better or more profitable?  The answer is that it is time that brokers start using the mediation process every time before going to arbitration with the Board.  Most REALTORS® who have been in this situation immediately think “why would I want to go to mediation if I am justly and truly entitled to all the commissions”?  Not surprisingly, both parties always have that same question.  

Consider the following illustration.  Assume there is a $10,000 commission at stake in either a court case or an arbitration.  The complainant wants it all, ad respondents wants to keep it all.  If the complainant loses, he gets nothing except loss of time and effort both on his part and the part of his witnesses.  If the respondent loses he has to pay $10,000 and try to collect back from the agent who has already been paid.  However, if a case would settle for $2,500 (or you pick your own number) to be paid by respondent, that would result in some money for the efforts of the complainant.  Not a home run, but certainly a single.  Likewise, for the respondent, the payment of $2,500 is not exactly a great result, but a manageable one, and certainly better than writing a check for $10,000.  

I have found that almost always, the parties (who agreed to take the settlement at the mediation) are glad that the dispute has been resolved.  They have managed to minimize bad feelings between the parties and each have received some benefit from the process.  While it may not be the whole loaf,   certainly half a loaf, certainly half a loaf is a good day, and both parties are relatively happy. 

There are additional benefits to settlement.  Even when a party wins, there is a cost to their victory.  Lost time, bad feelings from the clients who had to be involved, sleepless nights, and bad feelings between REALTORS®.  Good will is a stock in trade in the real estate business.  It should be kept whenever possible, and mediation helps retain good will and relationships.  After every arbitration hearing, no matter how cordial it is, there are always bruised feelings that sometimes linger for years.  

In the legal field, well over 96% of my mediations have resulted in settlements.  Settlement at mediation is good for everybody.  You do no have to involve your buyers or sellers.  You do not have to prepare exhibits, testimony, and take a half day out of your life.  My wish for the New Year is that if you are ever involved in a commission dispute, that you will use mediation before you have to go to arbitration.  It is quicker, cheaper, easier, and promote a better relationship between REALTORS®.  Give it a try next time and make our existing process even better.

Written by:  Board Counsel