The Arbitration Process in the Post-Settlement World

In the event of certain types of disputes (both contractual and specific non-contractual disputes), as defined in Article 17 of the Code of Ethics, Realtors® associated with different firms shall mediate or arbitrate the dispute, rather than litigate the matter. Members of the public may also seek to resolve qualified disputes against Realtors® via the arbitration process.

At the Northern Virginia Association of Realtors® (NVAR), arbitration claims are commonly filed by a principal broker and their firm against another principal broker and their firm. Whether or not respondents are required to participate in mediation or arbitration is dependent upon what parties are named as the claimant(s) and respondent(s) in the claim. When the claimant and the respondent are both principal brokers and both members of NVAR, NVAR will require the parties to participate in mediation.

Beginning in Summer 2024, offers of compensation via the MLS will no longer serve as a basis for contractual disputes in an arbitration claim. Arbitration and mediation remain options for different types of contractual (and specific non-contractual) disputes and for buyers’ agents seeking relief based upon a claim that they are the procuring cause. While we may see changes to the related procedures or even to the Realtor® Code of Ethics in the future, it is important for Realtors® to understand that their duty to arbitrate in accordance with Article 17 remains in effect.

Most NVAR members will never encounter the arbitration process because by and large, agents and brokers do a wonderful job ensuring that all parties are on the same page regarding representation, compensation, and the relative (agreed to) terms. But sometimes, even with the best of intentions and efforts, disputes arise, and the arbitration process exists to assist members find resolution outside of a costly civil court proceeding.

 

Can you relate to the following scenario?

Realtor® Lara has been working with Buyer Bryan for three months and she has shown him over 30 properties. Bryan signed an Exclusive Representation Agreement with Lara for a term of six months, so Lara is shocked to learn that Bryan submitted an offer on a property (that she had shown to Bryan) with a different Realtor®. Unfortunately, many Realtors® may have experienced a similar situation with their own clients.  And depending on how the rest of this scenario plays out in the real world, agents and their brokers must decide whether to enforce the agreement they had with their client or to argue that they were the procuring cause.

The National Association of Realtors® defines procuring cause as “the uninterrupted series of causal events which results in the successful transaction.” Remember, whether a broker was the procuring cause  is determined by an unbroken chain of events and not solely because of a valid representation agreement or whether the agent showed the client the subject property. An arbitration hearing panel is empowered to determine which broker was the procuring cause in a sale. But what happens if a broker, who had a valid Exclusive Representation Agreement with the client in question, is not determined to have been the procuring cause? Then they are left to enforce the agreement they had with their client.

Arbitration and mediation are incredibly helpful processes available to Realtors® in the event they ever require this type of assistance from their Realtor® Association. But when brokers take steps to resolve these issues amicably outside of formal processes, doing so remains the best option. Open and consistent communication, with both your clients and the other parties involved, will prevent most issues and ensure that your hard work is compensated!

For additional information about NVAR’s dispute resolution processes, please contact proservices@nvar.com.