Arbitration in Minnesota Real Estate Transactions

The Minnesota Purchase Agreement for your new home will have a form titled:  DISCLOSURE STATEMENT: ARBITRATION DISCLOSURE AND RESIDENTIAL REAL PROPERTY ARBITRATION AGREEMENT

This form, while part of your paperwork, does not require that you sign it.  Arbitration is completely voluntary.  So let’s take a closer look at the form to better understand what Arbitration is, why you would use it, and how it is administered.

• Summary of lines 1-15
  • After purchasing a property the buyer may come across an issue that they feel the seller had prior knowledge of.
  • These disputes can be brought to a court of law or Arbitrated.
  • If all parties decide to sign this form, you give up your right to go to court on disputes over $15,000 and the matter will be decided by an arbitrator from the National Center for Dispute Settlement (NCDS).
  • Disputes that fall within the jurisdiction of the Conciliation Court shall be resolved within that court.

• Summary of lines 16-24
  • NCDS/Arbitration is not government-sponsored.
  • The rules for arbitration are developed by NCDS and the Minnesota Association of Realtors (not affiliated).
  • If you agree to arbitration you must use the services of NCDS.
  • Title Disputes are not covered by arbitration.
  • Arbitration does not limit your warranties if you are buying new construction (MN Statute 327A).
  • If you purchase a home warranty plan for your new home, arbitration does not affect that coverage.
  • Arbitration does not limit you from bringing up charges against your Realtor should you feel they were negligent.

• Summary of lines 25-32
  • There is a cost to bringing a dispute to arbitration.
  • Cost vary depending on the size of the issue, number of parties involved, and number of arbitrators present.
  • Because of these costs it may be less expensive to bring the matter to conciliation court if the claim would be less than $15,000.
  • In some cases it’s quicker and less expensive to arbitrate but…
    • The decision is almost almost always binding (limited appeal).
    • Pre-hearing discover rights are limited.
    • A request for arbitration must be filed within 24 months of closing on the property.
      • Only in some cases of fraud will a court or arbitrator consider extending this time frame.

• Summary of lines 33-44
  • The party with a dispute files a demand along with the fee.  The other party is notified and may file a response.
  • NCDS works with both parties to select an arbitrator.
  • A three-arbitrator panel may be requested, but the party requesting has to pay the additional fee for this service.
  • Arbitrators have backgrounds in law, real estate, architecture and other related fields.
  • Hearings are usually held at the home site.
  • Parties are notified of the hearing at least 14 days in advance.
  • You may choose to have a lawyer represent you at the hearing at your cost but you must give NCDS and the other party 5 days advance notice.
  • Each party may present evidence and testimony from witnesses.
  • The arbitrator will make a decision within 30 days of the hearing.
  • The award will be in writing, what they consider just and equitable and within the scope of the issue.  It will be without explanation to the reasoning behind the decision.
  • The arbitrator may require the losing party to pay/reimburse the administrative fee.

• Summary of lines 45-49
  • Page 1 of this form is only a summary of the arbitration process.  For the complete booklet on arbitration click here (MNAR – Guide to RRP Arbitration).  If you still have questions contact your Realtor, NCDS or your lawyer.

Finally, if you agree arbitration would best fit your needs, sign on page 2 of this form.

To best stay out of issues after the sale know what the seller needs to disclose and what buyers should look for during the inspection period.  Contact Minneapolis area Realtor Dan Kokesh for more information.