In California, most buyers and sellers of residential and multifamily real estate use the California Association of Realtor’s standardized purchase and sale agreements and accompanying deal documents. While these forms can be customized, many of the typewritten (boilerplate) terms rarely change. One such term is the mediation provision. The mediation provision requires the parties to participate in mediation before filing a lawsuit. If a party fails to participate in mediation prior to filing or defending a lawsuit, then that party will be barred from recovering their prevailing party attorneys’ fees (being reimbursed their attorneys’ fees spent in the litigation or arbitration) in the event they win the whole case.
Mediation can be thought of as a settlement conference. Here are 5 important things to know about mediation:
- Decision Makers Must Be Present. In order for the mediation to be successful the parties who control the decision-making must be present. Typically for real estate related mediations this means the buyer and seller or the landlord and tenant. We have participated in mediations where the parties were located out of state and the mediator and parties stipulated to a mediation by webconference.
- It is Not Binding Unless The Parties Reach an Agreement. During a mediation the mediator does not rule on the case or reach an actual decision as to who wins and who loses. Instead, the only decision the parties make is whether they will agree to settle the case on terms that all parties can mutually agree upon at mediation. That means that if one party does not like the terms they are free to leave, to not settle and to pursue the matter in court or in arbitration. If, however, the parties can all agree on the terms of a settlement, then the settlement is converted into a binding contract (a settlement agreement) that is enforceable.
- Communications During Mediation Are Confidential. In California, in order to encourage settlement, the legislature enacted Evidence Code section 1115-1128. These code sections codified the general rule that statements made at mediation are inadmissible at trial. The idea behind this rule is that it encourages parties to talk freely at mediation and to consider settlement, including admission of liability, without fear that any statements or admissions made at mediation will be used against them at trial. Of course, if a party discloses something at mediation that can be then confirmed outside of mediation that can be problematic.
- A Mediation Brief is Typically Required. In order to have an effective mediation, most mediators require a mediation brief. A good mediation brief gives an overview of the facts and the law at issue so that the mediator can become very familiar with the nature of the dispute and help the parties resolve their dispute.
- It Is Better to Finalize the Settlement Agreement at Mediation. If the parties come to terms on a potential settlement agreement, we think it is far better that the parties finalize the terms of the settlement at the mediation. Otherwise, parties continue to fight over settlement terms and sometimes the parties even have settlor’s remorse. We recognize that time constraints and extraneous factors sometimes prevent the settlement agreement from being finalized, in those circumstances a deal point memorandum can help resolve future disputes.
Schorr Law’s lead attorney, Zachary Schorr, has participated in hundreds of mediations and knows how to effectively steer parties towards resolving their dispute. Schorr Law offers representation in mediation and mediation services itself where we use our highly specialized knowledge to help third parties resolve their disputes. For more information, contact us today.