Monday, November 18, 2013

Binding Arbitration Clause In Your Lease


I'm happy to say we have a great meeting lined up this week. Roanoke's real estate law expert, Ross Hart, will be at our meeting next week to talk about binding arbitration clauses in your lease.

REI of Virginia's interest came about a few years ago when member CB Knox mentioned his use of an arbitration agreement in his lease. Later Dan and I went to a meeting legal aid was holding on nursing home law and they mentioned how difficult it was for them to sue any of the nursing homes these days because it has become standard practice for them to include binding arbitration in all of their contracts with the elderly.

This further confirmed the benefit of these clauses. The benefit being protection against being sued and potentially losing a suit that could end up costing you treble damages. A law that permits the court to triple the amount of damages awarded in cases where the defendant willfully acted in a prohibited way. Kind of like tenants refusing to pay rent when they know they owe it. But it doesn't seem to go both ways. This law is most often used in landlord tenant law against the landlord. Not against the tenant.

So lets say that the court determines that what you did requires all of the rent paid to date to be returned to the tenant. Maybe they are saying you rented a place without a valid certificate of occupancy. And they are confusing the difference between a certificate of occupancy and a rental certificate. And the total to the date of court is $5,000. If treble damages are awarded, the court is allowing judgement against you for $15,000!

I can't think of a better person to come and talk about this to our group than Ross. His family has been heavily involved with legal aid in Roanoke since its inception.

This isn't a ploy to get around legal aid. It's nothing more than an attempt to protect your interest. REI of Virginia does nothing more than preach being a good honest and ethical business person and following the direction of the Virginia Residential Landlord Tenant Act, weather you feel it is right or not. It's best to attempt to change a law you don't agree with than to break it as breaking it can come with some pretty serious consequences at times.

Regarding the binding arbitration agreement, it's important that it exists in all cases with exception of nonpayment of rent as it wouldn't be advisable to hold up the termination of a lease knowing that in most cases you will never be paid. That's why most landlords don't do mediation when asked to in court. Under nonpayment of rent conditions it is necessary to go ahead and terminate the lease agreement and get the judges final stamp of approval if the residents don't move out of the place given the 5 day pay or quit notice as they are required to do.

Ross is going to cover benefits and disadvantages of a binding arbitration clause. Maybe he'll throw in some information that tells us what the difference is between arbitration and mediation in non compliance of the resolution. What happens if you have to go to arbitration when the tenant is causing neighborhood drama? Or when they brought unauthorized pets in the unit and refuse to pay a non refundable pet fee and pet rent? What are the steps required by the landlord? What happens if there is an agreement made in arbitration and the tenant doesn't comply? What are the next steps for the landlord?

How about if the tenant has a grievance with the landlord… What is the process they have to take to bring the landlord to arbitration to develop a solution to what they see as a breech of our agreement? What happens if they hold their rent via tenants assertion with the court when it clearly states in the lease that arbitration is required?

Who pays for the arbitration in both cases and what amount of time is involved in waiting for an arbitrator? I'll bet it could be much faster than court. What if the resident doesn't show up to arbitration?

Good stuff this week people. Come on out to our weekly shindig. The mic will be open and if you have any other real estate law questions, bring them along with you. Ross knows his stuff…

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