Code Words-November/December 2012

Must I arbitrate?
Try mediation first

By Michele Di Donato
Vice President Risk Management


Arbitration could be mandatory or voluntary. In either case, there is a $250 filing fee for each party required with the Arbitration request. Since there is a cost involved, we encourage anyone who inquires about arbitration to first mediate the dispute (if both parties are willing) with one of our trained volunteer mediators. The mediation process is a free option that takes less time than the arbitration process. Often a resolution is reached and arbitration is not necessary. However, if the parties do not resolve the issue through mediation, arbitration may be invoked.

Article 17 of the Realtor® Code of Ethics stipulates that if disputes arise between Realtor® principals associated with different firms, the Realtors® shall submit disputes to arbitration (mandatory arbitration). This also holds true if the dispute is between Realtor® agents with different firms if the Realtor® principals join the arbitration request.

The obligation to participate in arbitration, as outlined in Article 17, includes the obligation of Realtor® principals to be bound by the award of the hearing panel.

Generally, arbitration settles disputes between Realtor® principals of two different real estate firms concerning entitlement to commission or to a cooperating broker’s compensation. In most instances, the decision awards the disputed amount to one party or the other. In certain cases, and if not precluded by state law, the disputed amount might be divided between the parties if the hearing panel determines that without the efforts of both parties the transaction would not have been successful.

Arbitration is voluntary only under the following circumstances:

  • Arbitration between Realtor® principals and Realtor® agents (non-principals) who are or were affiliated with the same firm, provided each party voluntarily agrees to the arbitration in writing
  • Arbitration between a Realtor® principal with a non-Realtor® broker, provided each party agrees in writing to be bound by the decision
  • Arbitration between a Realtor® principal and a customer if a written contractual relationship has been created by the Realtor® principal between a customer and a client, and provided all parties to the dispute (i.e., the customer and the Realtor®) agree in writing to arbitrate the dispute

Realtors® who participate in MLS through any association in which they do not hold Realtor® membership have the same rights and responsibilities as any association member relative to the Code of Ethics and arbitration.

Article 17 requires Realtors® to arbitrate their disputes. If you file suit against a Realtor® in a court over an arbitrable matter and you refuse to withdraw that suit and participate in arbitration when requested, you would be in violation of Article 17 and subject to an ethics violations fine. Any Realtor® found to be in violation of the code pays an automatic $500 fee, and may face additional sanctions, suspension or expulsion from the association or CarolinaMLS.

Once an association has arbitrated a matter, neither party can initiate a second arbitration with a different association over the same issue.

Note: If Realtor® A had filed litigation against Realtor® B and Realtor® B then requested arbitration with the Grievance Committee determining that an arbitrable issue of a mandatory nature existed, Realtor® B might have successfully petitioned the court to remand the matter to the association for arbitration. In that case, there would have been no violation of Article 17 because the association’s arbitration process would have been maintained.