Q: What is the Real Property Arbitration System and is it mandatory?

A: The Residential Real Property Arbitration System is a voluntary, optional means of dispute resolution about issues relating to disclosure of material facts affecting the use or enjoyment of a property. The system, which serves as an alternative litigation, is endorsed by the Minnesota Association of REALTORS® (“MNAR”) and is administered by the National Center for Dispute Settlement (“NCDS”). The option should be presented to the parties at or about the time the purchase agreement is signed. The agreement to arbitrate these disputes is enforceable only if all parties to the transaction and all brokers/licensees involved consent by signing the agreement form. (This is because any of those parties or broker/licensees could be named as parties in an arbitration.) By agreeing to arbitrate such disputes, the parties give up the right to resolve those issues in court. The Arbitration Disclosure and Agreement is a separate form, not an addendum to the purchase agreement, and failure to sign that form has no effect on the purchase agreement.

5 Significant Differences between Arbitration and Litigation

Brokers/Licensees should review the Rules under which the Arbitration System is administered (available from the NCDS). Arbitration is often a quicker, cheaper and simpler means of resolving disputes for buyers and sellers. Parties should be aware, however, of a number of significant differences between use of the arbitration and litigation systems to resolve a dispute, including the following:

  1. the initial cost of filing a claim is higher for arbitration than for filing a lawsuit. In some cases, conciliation court is cheaper than arbitration. The maximum claim allowed in conciliation court is $15,000.;
  2. the time deadline for filing an arbitration claim is more limited than in litigation;
  3. the probable length of time from filing a claim until an award or decision is made is often much shorter in arbitration than when litigating a dispute;
  4. the site of the arbitration hearing is usually at the subject property; and
  5. appeal and pre-hearing discovery rights in arbitration are very limited.

Find more common real estate questions and answers in the Desktop Reference Guide.

The Minnesota Association of REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry. 


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