Nobody wants to buy a lawsuit. But most people want to buy a house. So what happens when home buyers discover they bought the house of their dreams—but one of their dreams is a nightmare?
The first step is often to call the seller. If the home is new, the seller is usually a developer, and most developers provide a warranty with their homes. In these cases, a buyer can sometimes have construction problems fixed at the expense of the seller.
But what happens when the seller is another homeowner instead of a developer? Homeowners often don’t have the resources to repair major problems. In some cases, sellers claim they didn’t know of problems (when they actually might have). In other situations, even a developer may be unwilling to acknowledge a problem or repair it.
If buyers and sellers can’t agree about repairing problems with a house, they often involve lawyers. The lawyers may exchange several phone calls and letters. If agreement can’t be reached, the lawyers file a lawsuit.
Are lawsuits effective? They can be. Every lawsuit is eventually resolved either by agreement between the parties, or by a judge or jury at trial. Are lawsuits expensive? They can be, and they typically are. The expense depends on how the lawsuit is handled and the length of time before it is resolved. Many trials are held approximately one year after the lawsuit is started. The cost of a lawsuit through trial can be surprisingly high. Is there any way to reduce the costs of a lawsuit? Yes, through binding arbitration.
Binding arbitration is dispute resolution without a lawsuit. In arbitration, a dispute is submitted to an arbitrator who is often an attorney or a retired judge. Both sides present their case at an arbitration, which is similar to a trial. “Binding” means the result is final and generally there is no right to appeal.
Arbitration is similar to a trial in that both processes use a hearing before a decision maker. At arbitration, the decision maker is an arbitrator. At trial, the decision maker is a judge (or a jury). In both processes, the decision is legally binding between the parties.
Arbitration is different from trial in several ways. Arbitration is often less intrusive. In many arbitrations, neither side has the right to ask the other side any questions before arbitration. This can make the process less expensive than a lawsuit, because in a lawsuit both sides have the right to ask the other side many questions. Arbitration is often concluded in a matter of months instead of nearly a year or more. Arbitration is usually thought of as faster and less expensive than a trial.
One of the primary differences between trial and arbitration is the right to appeal. Because arbitration is designed to be final, there is usually no right of appeal (although there can be exceptions). Because arbitration usually has no right of appeal, the process can be much shorter. But if an arbitrator makes an error, the parties often have no recourse. This means that arbitration may be faster and less expensive than trial, but it may also be less predictable.
There is no general answer as to whether trial or arbitration is better in any given situation. Each situation must be evaluated separately. Persons considering whether to choose trial or arbitration should contact a lawyer.