of course, disagreed and wanted to remove the equipment. Rather than slog through an expensive and time-consuming trial in front of a judge who knew nothing
about commercial real estate, the parties agreed to hire an
experienced real estate lawyer. An arbitration was set up,
and a decision was rendered in less than 30 days.
With arbitration, be careful of clauses that would require
the arbitration take place in another state instead of the
location of the property. The other side might prefer to
litigate in its “home” state before a familiar judge to obtain
what lawyers call a “home cooking.” Also check if a “
prevailing parties” attorneys’ fees clause exists, which allows
an arbitrator to award fees and arbitration expenses.
Some companies might prefer private arbitration as
opposed to arbitrating through an administrative agency
like the American Arbitration Association (AAA). This
may save money on arbitration filing fees, but private
arbitration has its own set of problems that should be
thoroughly discussed with counsel.
An efficient and successful private arbitration takes the
full cooperation of both sides and their attorneys because
the parties must agree upon an arbitrator. In an administered arbitration, however, there is a selection process,
much like jury selection, and an agency like the AAA
chooses an arbitrator after receiving input from both
Arbitration and mediation are not panaceas. Companies should think long and hard about how they would
prefer to resolve future disputes for every real estate project and contract.
Any company should not charge headfirst into litigation, but should insist their counsel fully explain all
available alternatives to efficiently and quickly resolve a
legal dispute. With very few exceptions, going through
an expensive, delay-ridden trial in court is not in the best
interests of any company.
If the dispute can be resolved through mediation or
arbitration, companies can be assured proceedings in
most instances will be faster, confidential, more predictable and less expensive than litigation. n
placing alTernaTive dispuTe
provisions in commercial
real esTaTe conTracTs
that Mandate any conflict
be resolved through
or binding arbitration is
a growing Trend.
rights in court, choosing to rely instead upon the arbitrator’s sense of fair play.
The arbitrator is usually someone with knowledge and
expertise in the industry, such as a real estate or construction lawyer. However, many non-attorney arbitrators
exist. Properly selected arbitrators are able to focus on
the real issues, and already understand industry practices
and standards that are so often overlooked by judges and
Because conforming to a crowded court docket is
unnecessary, arbitration can be set for a hearing in a
matter of months. In most arbitrations, the absence of
prehearing motions and depositions, as well as the finality
of the decision, significantly reduces the attorneys’ fees
and costs. One day of arbitration typically equals two to
three days in court, again saving money for both parties.
Finally, it is also almost impossible to successfully appeal
an arbitration award. Unlike litigation, finality is the rule
rather than the exception.
Still, arbitration has its drawbacks. For example, most
commercial landlords do not want to arbitrate rent disputes with tenants since most states provide a quick and
inexpensive procedure to evict a nonpaying tenant.
However, an arbitration clause may be efficient in
deciding common area maintenance, lease options, rent
escalation disputes or fights about the condition of the
premises after the expiration of a lease.
For example, in a recent case, a landlord claimed that
certain pieces of restaurant equipment were “fixtures”
and therefore should remain on the premises. The tenant,
David K. Taylor, Esq., is a partner in the Nashville, Tenn. office of Bradley Arant Boult Cummings, PLC, and has a
national construction law practice. David can be reached at email@example.com or 615.252.2396.