Although the duty to arbitrate is addressed in the new member orientation of many boards and associations, often the reality of that obligation does not become truly apparent until the first time a REALTOR® initiates the process, or the first time a REALTOR® is named as respondent in an request. To better understand the duty to arbitrate, it may help to understand who is required to arbitrate, and the circumstances under which it is mandatory, and the circumstances under which it is voluntary.
The duty of REALTORS® to arbitrate is based in the Code of Ethics, specifically Article 17 which provides:
- In the event of contractual disputes or specific non-contractual disputes as defined in Standard of Practice 17-4 between REALTORS® (principals) associated with different firms, arising out of their relationship as REALTORS®, the REALTORS® shall submit the dispute to arbitration in accordance with the regulations of their Board or Boards rather than litigate the matter.
- The obligation to participate in arbitration contemplated by this Article includes the obligation of REALTORS® (principals) to cause their firms to arbitrate and be bound by any award.
While many disputes that arise between REALTORS® will involve contractual questions, under certain circumstances there also may be related "non-contractual" issues or questions that arise. For that reason, the duty to arbitrate encompasses not only contractual issues, but also a number of specific non-contractual issues enumerated in Standard of Practice 17-4.
While the duty to arbitrate is shared by all REALTORS®, as a practical matter most arbitration hearings take place between REALTORS® who are principals in their firms or who "stand in the shoes" of principals (often branch office managers). An important point to remember is that REALTOR® membership and the duty to abide by the Code of Ethics is personal to each REALTOR®. The same is true for the duty to arbitrate which is personal though it includes the duty to “cause” REALTORS®’ firms to arbitrate. The National Association of REALTORS® Code of Ethics and Arbitration Manual includes all of the policies established by the NAR Board of Directors that relate to arbitration. These policies require that real estate-related disputes between REALTORS® (principals) in different firms, must be arbitrated if arbitration is requested by any appropriate party and it is subsequently determined that an arbitrable dispute exists.
A frequently asked question is why require arbitration under any circumstances? Why shouldn't arbitration be entirely voluntary? The answer is simple and straightforward. The foundation for the Code of Ethics is the protection it affords the public - those who take advantage of and rely on the services REALTORS® provide to their clients and customers. The Code is premised on the principle that cooperation advances the best interests of those clients and customers. If cooperation is the norm which is not only expected but demanded of REALTORS®, if REALTORS® are going to work closely and cooperatively with others who are at the same time their competitors, then there must be an efficient, economical, and reliable method to resolve the disagreements that will inevitably arise. Litigation is cumbersome, adversarial, time-consuming, and expensive. In comparison, arbitration is less formal, faster, less expensive and, if conducted in an appropriate atmosphere, less contentious and confrontational. Put plainly, arbitration is the "grease" that makes the "wheels" of cooperation between REALTORS® turn smoothly.
The Arbitration Hearing
Participation in a professional standards hearing - arbitration or ethics - can be an intimidating experience for first time participants, witnesses and even new panel members. Knowing what will likely happen can make it a less stressful experience.
Although the arbitration hearing process is based on the judicial model of a civil trial, there are important differences between a trial and an arbitration hearing. While parties to any professional standards proceeding are entitled to fundamental due process, technical rules of evidence and procedure do not apply in an arbitration hearing. While the burden of proof rests with the parties, arbitration panel members can ask questions (directly or through the chair) to ensure that they have a clear understanding of relevant issues and facts. This is key to rendering a fair decision.
Despite the guidance provided in the Code of Ethics and Arbitration Manual, questions continue to arise as to what constitutes an arbitrable issue, who are the appropriate parties to arbitration requests, etc. To provide guidance to board grievance committees in their review of arbitration requests, the Professional Standards Committee of the National Association provides the following information. Arbitration by boards of REALTORS® is a process authorized by law in virtually every state. Arbitration is an economical, efficient, and expeditious alternative to civil litigation. Jurists, including the former U. S. Supreme Court Chief Justice Warren Burger, have endorsed arbitration as a method of reducing the litigation backlog in the civil courts.
Filing a Request for Arbitration
Complainants must submit along with the Request and Agreement to Arbitrate Form #A-1 (or Interboard Request and Agreement in situations where the respondant is a member of a different REALTOR® association), a narrative description of the events that lead to the request. You must also include copies of all relevant real estate documents in your possession such as Listing Agreement, Purchase Agreement, MLS tickets, Agency Agreements or any other documents which support your claim.
The time limitation for filing an Arbitration complaint as written within the National Association of REALTORS® Code of Ethics and Arbitration Manual states:
Arbitration must be filed within one hundred eighty (180) days after the closing of the transaction, if any, or within one hundred eighty (180) days after the facts constituting the arbitrable matter could have been known in the exercise of reasonable diligence, whichever is later.
There is a $250 arbitration-filling fee to be submitted along with the Request for Arbitration payable to GMAR. Once we receive your completed Form #A-1, narrative, pertinent documents and filing fee, we will forward it to the Grievance Committee for review at their next monthly meeting.
The function of the Grievance Committee is to make only such preliminary review and evaluation of the request for arbitration as is required to determine (1) whether the matter is properly arbitrable; (2) whether arbitration is mandatory or voluntary based upon the requirements of Part Ten, Section 44 of the Manual; and (3) whether the proper parties are named in the request for arbitration. The Grievance Committee does not hold hearings and does not determine entitlement to awards.