Like many newcomers to Florida, Beverly could not wait to close on her beautiful new South Florida home and enjoy life in a tropical climate. However, when a friend asked if she’d signed an arbitration agreement alongside her home contract, her excitement gave way to anxiety. Beverly knew nothing about residential real estate closings and had never heard of arbitration agreements. How did they work exactly? Were there any downsides? Should she have signed one? Did she already, without knowing?
Having worked with clients for over 25 years, experienced South Florida real estate attorney Gary M. Landau and his team understand homebuyers’ concerns about all the legal aspects of their home purchase, including, sometimes, arbitration agreements.
An arbitration agreement can appear in any contract between two parties. This agreement binds participants to resolving any future disputes between them via an arbitration instead of by filing a lawsuit with the courts. Although it is not generally included in standard residential real estate contracts typically used in South Florida, some contracts do contain them.
Arbitrations can resolve disputes more quickly and prevent costly and time-consuming litigation in real estate transactions. However, arbitration agreements may also involve concerns, especially the lack of transparency by the arbitrator and limited protection of your legal rights.
Should you sign an arbitration agreement when buying a house in the Sunshine State? Below, we examine the pros and cons of agreeing to arbitration. Continue reading to learn more, then call us at (954) 979-6566 to schedule a free consultation about all aspects of your upcoming real estate deal.
What Does Arbitration in Real Estate Mean?
Arbitration is a speedier, more efficient, and less expensive alternative to a civil lawsuit in real estate transactions. If a purchase agreement includes a mandatory arbitration clause, this means that if a dispute crops up before or after the closing and the two sides can’t resolve it through negotiation or mediation, the conflict passes into the hands of a neutral arbitrator. A real estate arbitrator is often a qualified real estate attorney or a retired judge.
As a dispute-resolution method, arbitration is somewhat more formal than negotiation or mediation (where the parties come to a mutually satisfying resolution on their own) but is much less burdensome than civil litigation. The arbitrator (selected jointly by both parties) examines the facts of the case, sifts through relevant evidence, hears both parties’ arguments in an informal setting, and reaches a legally binding decision that a court typically won’t overturn.
Hiring an experienced real estate lawyer to represent your interests during a real estate arbitration is important, given the amount of money that is often involved.
The Advantages of Arbitration Agreements in Florida Real Estate Contracts
Why do some people include an arbitration clause in their Florida real estate contracts? And why may these clauses be beneficial to both buyers and sellers?
- Avoid the high-cost, high-conflict process of civil litigation
- Reduce the costs involved with resolving the dispute
- Provide a more flexible and less formal dispute resolution process compared to a civil lawsuit
- Resolve disputes much faster (especially important if you’re trying to sell your home or if you want to be free of a disputed deal so you can buy a different one)
- Keep proceedings from the public record
Speed is the main advantage of arbitration over litigation. While arbitration may take as much as a few months for the dispute to be fully resolved, real estate lawsuits can take a year or longer. Arbitration also gives all parties better control over the proceedings, since the sides mutually agree on their choice of the arbitrator.
The Potential Pitfalls of Arbitration
With all its benefits, an arbitration clause may also prove problematic if a real estate dispute arises.
The arbitration process may:
- Limit your legal redress options
- Fail to provide full transparency
- Raise objectivity concerns if the arbitrator has a history of favoring one type of party (such as the buyer or seller)
- Leave you with no option to appeal a decision you disagree with
A civil court generally will not review or overturn an arbitrator’s decision unless the case involves fraud or other illegal means. Even if you’re confident that the arbitrator has decided wrongly and that a civil court would come to a conclusion in your favor, you probably won’t be able to appeal your case.
What’s more, an arbitration clause in a residential real estate contract doesn’t obligate Realtors, agents, and other real estate professionals involved in the deal to participate in the arbitration. This means it’s possible you can go through both arbitration and a lawsuit if your dispute involves you, the other party, and, for example, a Realtor.
Finally, an arbitration award isn’t self-executing. This means if an arbitrator awards you a certain amount of money, collecting your award may still need to ultimately involve a civil court. However, if an attorney or other closing agent is holding money in escrow, they will likely honor an arbitration agreement and release the funds according to the decision of the arbitrator.
Why You Should Consult an Experienced Florida Real Estate Attorney Before Signing an Arbitration Agreement or Residential Real Estate Contract
An arbitration agreement is a legally binding document with potentially serious financial implications. Buying a house is a major financial decision (as well as an emotional one), so it’s important to get expert legal advice before you include or sign such as clause in a real estate purchase agreement.
A seasoned Florida real estate lawyer can help you decide whether signing or deleting an arbitration clause that may appear in a real estate contract makes sense for you.
It’s always wise to have an attorney review your entire contract before you sign it, so they can also point out any other troublesome clauses too. Our law office typically reviews residential real estate contracts as a free service for clients who will be using our firm to handle their real estate deal, such as serving as a closing agent or representing a seller in a sale.
Specifically, your attorney can:
- Help you understand the terms of your agreement and their potential legal consequences
- Break down the advantages and possible risks of including an arbitration clause
- Explain how the arbitration process would work in case a dispute arises during or after your real estate transaction
- Suggest amendments to an arbitration clause in a real estate contract to protect your interests
- Represent you during an arbitration hearing
- Advocate for your rights throughout the real estate transaction
The Law Office Of Gary M. Landau, P.A.: South Florida Real Estate Attorney With Over 25 Years of Experience
“Should you sign an arbitration agreement when buying a house?” is a complex question with different possible answers. At the Law Office Of Gary M. Landau, P.A., we oversee purchase agreements to ensure your contract protects your interests and minimizes the possibility of future disputes. We also watch for our clients’ interests during the entire real estate transaction, from contract to closing.
With more than 25 years of experience and countless satisfied clients, Gary M. Landau and his team are uniquely positioned to help you with your probate and real estate needs in South Florida. Whether you’re ready to probate a loved one’s estate or to write your own will, or if you are purchasing a home, have inherited a home, or want a closing agent to handle title insurance and all documents for your closing or refinancing, the Law Office of Gary M. Landau is ready to work with you.
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The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction.