Escrow services can be an essential part of the commercial buying and selling process, as it will help to keep the sale on track and ensure both sides uphold their legal obligations. When you work with a team like Commercial Partners that offers escrow services, you’re bringing a neutral third party into the fold to assist in some of the necessary processes required during a property sale. We can hold and disperse funds and outline how any potential disputes or disagreements are handled so that the sale remains on track.
If you’re unable to talk the matter out with the other side, your escrow agent will likely have outlined how a dispute process will be handled. Instead of jumping right to costly litigation, there’s a good chance your escrow agreement will say that the alternate dispute resolution method is mediation and/or arbitration. In today’s blog, we take a closer look at both mediation and arbitration as a form of alternative dispute resolution during an escrow disagreement.
Mediation For Escrow Disputes
Disputes can develop for a variety of reasons as you move through the process of the sale. Perhaps a portion of the property failed a necessary inspection, a new lien was discovered on the property or the buyer’s financing fell through. Oftentimes these common issues can be handled pretty easily by the language laid out in the escrow agreement, but let’s imagine that both sides assume that the other side has the responsibility to fix an issue that has developed. When they’ve reached an impasse over who is responsible, the alternative dispute resolution method may kick in.
In many instances, the first form of dispute resolution during a commercial property sale is mediation. Mediation is a more collaborative approach to dispute resolution, where both parties sit down with a neutral mediator to lay out their position and have an open dialogue about the matter. The neutral third party will typically try to get both sides to agree to a middle ground, or they may even agree that one side has a stronger case and would likely win should the matter proceed to arbitration or litigation. Nothing that comes out of mediation is legally binding, but it is a low cost option that can provide some guidance and help the two parties come to an agreement so that the sale doesn’t fall through.
Arbitration For Escrow Disputes
If mediation doesn’t work, or if the escrow agreement dictates that arbitration should be the primary form of alternative dispute resolution, you might jump right into the arbitration process following a disagreement. Arbitration is a more serious form of dispute resolution, in that both sides will take their turn laying out their arguments to a neutral third party arbitrator. The arbitrator will then render a decision on the matter, and this ruling is considered legally binding.
You can potentially appeal this ruling and take the matter before a judge, but it won’t be easy. Unless you can showcase that the process was unfair or there was a clear legal error, it’s unlikely that your appeal will be granted. Arbitration is a more permanent solution to an escrow dispute, and it is also a more costly form of dispute resolution than mediation.
At Commercial Partners, we work hard to draft escrow agreements that spell out how disputes are handled so that any disagreements are handled well before they go to mediation or arbitration, but we’ll have those boxes covered as well. We know how to protect your interests and keep a sale on track. For more information, or for assistance with your next commercial purchase, reach out to the team at Commercial Partners today at (612) 337-2470.