This article examines the use and effectiveness of mediation as an alternative to litigation or arbitration.

The essence of mediation is familiar to real estate brokers.In negotiating contracts between buyers and sellers, the broker is constantly using the skills of a mediator to arrange offers and counteroffers, oral and written, between his client and prospective buyers. However, when communications break down between principals after they have entered into a binding real estate purchase agreement and the brokers can not resolve the impasse, it is then that several options become available to the feuding parties:

  • litigation;
  • arbitration; or
  • mediation.

Instead of immediately resorting to the costly and adversarial process of litigation, in recent years the trends in real estate sales indicate disputants favor the use of the alternative dispute resolution methods of mediation.

Many listing and purchase agreements contain binding arbitration agreements as an alternative method of litigation; however arbitration is final and unappealable and can be a double-edged sword: disputants have no assurance that the arbitrator’s award will be fair or correct. Only with mediation’s familiar arena of offer and counteroffer between the feuding parties, as encouraged by the mediator, do they have the ability to come to a mutually crafted and agreed-to solution.

How mediation works

Mediation is the process of having all parties to a dispute reach a mutually acceptable agreement with the help of a neutral third party, called a mediator. The mediator is responsible for facilitating the discussion, and unlike an arbitrator, does not have decision-making powers. The agreement in a successful mediation is reached by the parties in the dispute. [Calif. Evidence Code §1115]

The timeframe and process of mediation may be decided by:

  • in court-ordered mediations by statute;
  • the professional mediation association the mediator belongs to;
  • the government agency overseeing the mediation; or
  • circumstances surrounding the dispute or the disputants.

Thus, there are many variations of the mediation process, but the main components break down roughly into five steps:

  1. Agreeing to mediate;
  2. Choosing a mediator and consultation;
  3. Confidentiality rule;
  4. Formation of alternatives and negotiation; and
  5. Resolution and closing.

Agreeing to mediate

Mediation and the agreement to mediate can be accomplished in one of three ways:

  • voluntarily by both parties;
  • by contract provision; or
  • by statute (or court-ordered).

Voluntary participation

Mediation is always voluntarily available to parties in dispute without prior agreement to do so. As a voluntary proceeding, whether mediation commences, succeeds or fails is dependent upon the willingness of the participants to discuss the dispute and attempt to come to a mutually agreed-upon settlement.

Contract provision

Some listing and purchase agreements mandate the attempt to mediate as a precursor to an action, be it arbitration or litigation. Failure of the prevailing party in an action on the dispute to have offered or accepted mediation bars that party from recovering attorney fees. [See first tuesday Form 163]

Consider a buyer and seller with a signed purchase agreement containing a provision requiring mediation in an attempt to resolve a dispute prior to pursuing an action. The seller cancels the sale. The buyer requests mediation, which the seller declines. Later, the dispute is arbitrated or litigated, and the seller prevails. As the prevailing party, the seller seeks to recover his attorney fees from the buyer.

Is the seller entitled to attorney fees?

No!Even though the seller was the prevailing party in the action, he is not entitled to recover attorney fees. He declined the buyer’s mediation request prior to litigating the dispute. [Frei v. Davey (2004) 124 CA4th 1506]

Now consider the same case with the buyer as the prevailing party.Is the buyer entitled to recover his attorney fees from the seller even though the seller declined to mediate?

Yes!The buyer offered to resolve the dispute with the seller by requesting mediation. The seller’s refusal to mediate does not change the buyer’s fulfillment of the provision requirements to mediate or be barred from recovering attorney fees. The wording of the contract provision governs here, stating that the offer to mediate the dispute is enough to satisfy the provision.

Now again consider the same scenario. The seller refuses the buyer’s offer to mediate the dispute, but a year later and directly prior to trial proceedings, the seller requests mediation. The mediation undertaken fails, and the seller goes on to become the prevailing party in the litigation.

Can the seller recover his attorney fees from the buyer?

No!The mediation provision’s use is limited to a reasonable time for offering or agreeing to mediate, which ended when the seller first refused mediation. Furthermore, by delaying mediation until trial, the seller defeated one of the mediation provision’s main purposes:avoiding a long and costly litigation battle. [Frei, supra]


In the Los Angeles county court system and any other adopting counties, a civil case which requires arbitration may be ordered into mediation by a presiding judge. Such a case may not involve a dispute of more than $50,000 and is subject to further statutory rules. [Civil Code of Procedure §1775.3]

In addition, disputes involving the enforcement of documents of common interest developments (CIDs) must first go through mediation or arbitration prior to litigation. This does not include CID actions that involve:

  • small claims actions; or
  • assessment disputes.

The use of mediation as an ADR is also encouraged throughout many different branches of local, state and federal governments.

Choosing a mediator

Mediators must be neutral third parties to the dispute, and may be an individual, group of individuals, or an entity. [Evid C §1115]

For non-court ordered mediations, there are no universal qualifications for who may become a mediator in California. When choosing a mediator, disputants would be wise to check on the experience and training of potential candidates, as well as their knowledge of real estate law and transactions. Often, mediators are part of professional mediator associations. These mediator associations have their own experience and education requirements that vary from association to association.

Choosing a mediator is similar to choosing an attorney. A mediation consultation takes place, during which time disputants meet with the mediator to discuss the dispute and the mediation process. Parties to a dispute should keep in mind some basic guidelines for making their choice:

  • Do they have education or experience the field of real estate covering your dispute?
  • Do they belong to any professional mediator associations and if so, what education or experience do those associations require of their members?
  • Have they received any specific mediator training?
  • How long have they been a mediator and how many mediations have they assisted?
  • How many of those mediations ended successfully?
  • How much are they charging?
  • Can they provide references for their work as a mediator?
  • Do you feel comfortable with his or her personality?

Many lawyers and judges become mediators in their field of expertise. It is important to note that a judge acting as a mediator may not use his judicial status to influence the mediation proceedings in any way beyond his duty as a mediator. [Travelers Casualty and Surety Co. v. Superior Court (2005) 24 CA3d 751]

The confidentiality rule

Before the mediation begins, all parties to the mediation must be made aware of the confidentiality rule surrounding mediation proceedings. All communications, whether written or oral, made during a mediation consultation or mediation may not be:

  • revealed by the mediator to another party in the dispute without authorization;
  • disclosed to any third party not involved in the mediation proceedings; or
  • used as evidence in any civil (non-criminal) proceeding. [Wimsatt v. Superior Court (2007) 152 CA4th 137; Evid C §1119]

Examples of confidential communications include:

  • emails;
  • reports on the mediation;
  • photographs; and
  • oral recordings.

The confidentiality rule is in place to encourage the success of the mediation by allowing free discussion of the dispute without concern of any forthcoming liability caused by a disclosure during the mediation. In other words, it is in place to prevent a chilling effect on mediation proceedings.

There are two exemptions to the confidentiality rule. Disclosures may be exempt from confidentiality:

  • by statute; or
  • if all parties to the mediation have orally or in writing agreed to a waiver of confidentiality. [Evid C §1122]

In addition, if any party seeks to compel a mediator to testify on confidential communications made during or in regards to a mediation proceeding, the ruling court may award reasonable attorney fees and costs to the mediator against the party. [Evid C §1127]

Resolution and closing

Mediation ends when one of the following conditions is met:

  • all disputants execute a written settlement agreement fully resolving the dispute;
  • all disputants reach an oral agreement fully resolving the dispute which includes a sound recording, to be produced in writing and signed by the parties within 72 hours of recording:
    • the terms of the agreement;
    • the presence and agreement of all disputants; and
    • all disputants stating the agreement is enforceable.
  • the mediator provides a written statement to the disputants stating the mediation is terminated;
  • one disputant provides a written statement to the mediator and the other disputant stating the mediation is terminated, if there are only two disputants; or
  • there is no communication regarding the dispute between the mediator and any of the disputants for ten calendar days. [Evid C §1125(a)]

A dispute in mediation may be terminated with partial resolution if:

  • all disputants execute a written settlement agreement partially resolving the dispute; or
  • all disputants reach an oral agreement partially resolving the dispute which includes a sound recording, to be produced in writing and signed by the parties within 72 hours of recording:
    • the terms of the agreement;
    • the presence and agreement of all disputants; and
    • all disputants stating the agreement is enforceable.

Costs of mediation

Mediators typically charge anywhere from $150 to $600 per hour with a minimum number of hours required.Keep in mind, though, that this cost is shared between the disputants. Compare this with attorney fees for litigation or arbitration which can hover around the same range and are not shared between disputants.

Additionally, the presence of attorneys is optional in mediation; one of the advantages of mediation is the reduction or elimination of attorney fees. As the resolution decided by mediation is crafted by the parties in dispute, attorney fees (if any) in successful mediations are paid for by each party separately, unless agreed otherwise.

The pros and cons of mediation

The main advantage mediation has over actions in litigation or arbitration is that the parties have the ability to come to a mutually agreeable solution.Litigation is, at its heart, a deeply adversarial process which ends with a spurned “loser” who can then move on to draw out the dispute in a time-consuming appeals process.

Arbitration is a similar action, shunting the disputants into “winner” and “loser” roles. In arbitration, all the power of the decision is placed upon the arbitrator. Even if the arbitrator bases his decision on an incorrect interpretation of the facts or the law, neither party has recourse to change the erroneous decision. [Hall v. Superior Court (1993) 18 CA4th 427]

The cost of mediation has been deemed a benefit of the process. Consider also the time involved in mediation versus the time involved in litigation or arbitration. Litigation can be drawn out for years with various pre-trial, discovery and appeal processes, all while the attorney’s billable hours soar. Arbitration may also last years and in addition to contracted for attorney fees, the loser is responsible for paying the arbitrator’s fees.

However, mediation is often a quick process lasting a few hours to a few months, depending on the number of disputants and the complexity of the dispute. There are no lengthy waits for court hearings or the need for witnesses since the resolution is in the hands of the disputants.

In addition to these benefits, the use of mediation also provides a solution to a dispute without adding to and falling subject to the backlog of cases burdening the legal system.

And, mediation works:the LA Superior court system reports that 63% of courses ordered into mediation are resolved. Nationwide, the mediation success rate ranges from around 60% to 90% and upwards. [Final Report of Colorado Governor’s Task Force on Civil Justice Reform, Exhibit 7]

Mediation does have some drawbacks. Since mediation depends entirely on the willingness of the disputants to participate, mediation will only be successful if the disputants can agree to set aside their emotions and come to an agreement together. Additionally, mediation’s intentionally harsh confidentiality statute leaves all mediations set in stone since nothing divulged in mediation may be used as evidence in a later action.

In real estate matters, mediation is limited to resolving disputes involving buyers and sellers. Since landlord-tenant disputes and trust deed defaults are largely based on very specific statutory requirements for performance which are either satisfied or unsatisfied, there is little room for negotiation. Mediation is a tool best used by disputants in sales of property and agency disputes.