Purchasing a new home may come with a lot of excitement and anxiety. Even the most careful or experienced buyers sometimes face hurdles throughout the process. These alerts often come in the form of Sellers Property Disclosure form. Fortunately, there are well established methods of dispute resolution to resolve disagreements between buyers and sellers.
In today’s market Sellers Property Disclosures are a staple of the home buying process. These forms are used to satisfy the requirements of KRS 324.360 that mandates a “seller’s disclosure of conditions” relevant to the listed property, when utilizing a real estate agent or broker. The disclosure is based on the seller’s personal knowledge of the property’s condition and improvements, however that knowledge was gained. Buyers are encouraged to arrange their own professional inspection of the property. Unfortunately, inspections arranged by buyers may be limited since home inspections cannot be invasive or destructive in nature. This sometimes allows undisclosed defects to go unnoticed. These undisclosed defects frequently compel buyers to pursue legal options leading to dispute resolution.
Typically, a Greater Louisville Association of Realtors (“GLAR”) purchase agreement is used. If a dispute warrants further action, the GLAR requires it to be resolved through an alternative dispute resolution process versus litigation in Circuit Court. Differences between mediation and arbitration have previously been discussed in an SLG Blog. The GLAR does not administer the mediation or arbitration process. Instead, its role is to facilitate the selection of a mediator and/or arbitrator if both parties cannot come to an agreement on their own.
According to GLAR guidelines, notices of demand for mediation must be made within 365 days after the party raising the claims knew or should have known of the existence of the claim(s) in question. If a respondent fails to respond after reasonable notice, the mediator will notify the claimant and make a record of the respondent’s refusal to cooperate with the contractual mediation requirement. Mediators may also determine whether the mediation can be completed in a reasonable time frame. At this point, a claimant is now free to pursue the matter in arbitration. If it cannot be completed and the parties have received notice from the mediator, either party is free to proceed to arbitration.
Kentucky Association of Realtors (“Kentucky Realtors”) operate within a slightly different timeframe. Per Kentucky Realtors guidelines, a request for arbitration must be filed within 180 days after the closing of the transaction or within 180 days after the matter could have been known by the complainant in the exercise of reasonable diligence. Whichever one comes latest begins the 180-day window. Once the Grievance Committee has approved a request for arbitration, a mediation conference will be scheduled for a time and place that is acceptable for both parties. If both parties agree on a mutually acceptable solution, they should sign a written agreement that includes the terms of the settlement. Following the signing of an agreement, both parties are legally bound to adhere to its terms. When opposing parties are not able to reach an initial agreement, an arbitration hearing is scheduled so the arbitration hearing panel can determine the outcome.
Arbitration encompasses full participation of parties through opening statements, presenting arguments, examination and cross-examination of witnesses, use of expert witnesses, and introduction of relevant evidence, similar to a court of law. If a party elects not to participate in an arbitration, the Arbitrator would conduct the hearing with only the parties in attendance, where the Arbitrator would hear evidence and make an award. An award by an Arbitrator can include liability determination, money damages, non-monetary damages, attorneys’ fees, and costs. Grounds for an appeal to the Circuit Court of an Arbitration award is usually limited.
Disclosure issues are common and often frustrating for home buyers. Mediation and arbitration provide methods to settle disputes in a potentially quicker, more cost-efficient manner. If you have questions or legal issues regarding a residential real estate transaction, contact Strause Law Group to schedule a consultation. The knowledgeable attorneys at Strause Law Group have ample experience with the home buying process in Kentucky.
