Mediation and settlement of real estate matters | JAMS
Just as there are a myriad of real estate interests, there can be disputes involving either of those interests. Controversies over rights and interests in property include circular priority among lien holders,  boundary disputes, unregistered instruments, probate issues, validity of lien, forgeries, erroneous legal descriptions, insurance coverage, Uniform Commercial Code and claims between buyers and sellers, to name a few. These cases run the gamut from complex legal issues to strong emotions concerning the houses of the parties. Here are some things to keep in mind when resolving these types of mediated disputes and negotiating a settlement.
Parties. Anyone with an interest in the property should be a party to this lawsuit or settlement. In boundary disputes, for example, the beneficiaries of the trust deeds must be named, even though the property in dispute may have no bearing on the value of the lender’s collateral. If the beneficiaries of the trust deeds are not named, and the owners of the royalty titles come to an agreement to adjust the boundary between them, that agreement could essentially be canceled if the lender later cancels their trust deed, which still weighs heavily. on the entire property. as originally described. Generally, a title insurance product such as litigation guarantee should be purchased in order to ensure that all interested parties are named.  Many lenders have a process in place to approve boundary line adjustments before or otherwise outside of litigation. In all cases, the parties with charges on the title should be parties to the dispute or the settlement for it to be fully effective.
Risk analysis. The settlement of contentious cases is generally based on risk management. In analyzing a given settlement offer, parties typically compare that offer to the best, worst, and most likely outcomes at trial. It is difficult to predict the outcome of contentious cases in general, even when the issues are limited to liability and damages. In real estate matters, the court can decide on a myriad of property rights and has a wide discretion to do so. For example, in an access dispute, a court may decide whether a registered easement is valid, the intent of the drafters, the historical use, whether a certain use is implied, the width of the easement, the number of lots benefiting of the easement, and the nature of the use. Therefore, the large number of possible outcomes, as well as the broad discretion of the court, make predicting outcomes in these cases extremely difficult, if not impossible. Therefore, best and worst case scenarios generally inform risk analysis in real estate litigation more than in other types of cases.
Solutions. In real estate disputes, there are more resolution options than a typical two-party liability / damages lawsuit. There are many ways to structure a settlement. The most common and quick decision is which party will get the property in question and pay consideration to the other in exchange for a release of title and interest in the property. I have often seen that there was agreement on this aspect from the start, which is often a positive step in the negotiation. And, the creativity here helps. For example, the parties may agree to an easement that can only be used if one party sells. This can be a solution when the easement is acceptable to one party, but not if it is used by the opposing current owner. If the use of the contemplated easement is not critical for that owner, it may resolve an issue regarding the value of the property that suffers without an easement. In negotiated settlements, we can create solutions like these that fall outside the realm of the possibility of a trial outcome.
Title insurance. Often, one or more parties to a real estate dispute are covered by an American Land Title Association (ALTA) policy. Title insurance is an indemnity policy with an obligation to defend itself. The ALTA recently made a series of significant changes to policy forms, effective July 1, 2021 (and later as adopted by each title insurer).  Since real estate disputes lend themselves to relatively old transactions, there are many different historical policies that can apply to a dispute, although I will note that it has been a long time since I came across a 1972 policy! When negotiating a settlement, there are several dynamics to consider when insurers are involved. Some of them include the following:
- Opponents insured by the same title insurer
- Reservations of rights, possibly accompanied by a concurrent declaratory judgment in terms of coverage
- Covered and uncovered claims with different attorneys / law firms representing the same party on each
- Policy limits
Any of them can add complexity to a negotiation, and they can also provide options. For example, when I was retained by a title insurance company to represent a client, I was careful to discuss whether my client was interested in receiving the payment that the title company was considering offering to the opposing party. on behalf of the insured. Under this structure, the client would have to live with the title defect at issue, unlike what the title company pays the opposing party to fix it. As negotiations progress and the monetary component increases, it is worth reviewing this option with the insured.
Purpose. Given the number of issues involved, real estate disputes are not only subject to multiple appeals, referrals, and trials, but they can also be subject to multiple lawsuits once a case is closed. During a mediation, be in favor of a joint session, even if it is only at the end after a settlement is reached. This is a good way to start the settlement on a solid footing – it helps discourage future disputes if the parties continue to have assets next to each other, especially if future interactions are necessary or likely. .
Mediator. It can be very useful to have recourse to a mediator with significant experience in real estate litigation. A mediator who has substantial experience can provide parties not only with efficiency in risk analysis discussions, but can also partner with them to create solutions. This is an important added value to the mediation process.
Settlement Agreement. It is recommended that you have a full settlement agreement ready to be executed during mediation. In real estate disputes, settlements typically have multiple substantive elements that go beyond payment and release of claims. There may still be a lot to negotiate between a terms sheet and a full settlement agreement. And a party may have doubts about the settlement and oppose all version of a final settlement agreement that is proposed. Some additional work cannot be avoided; for example, a legal description may need to be written by a surveyor for a final instrument after the parties have agreed on the location of a boundary with reference to the physical monuments located on the land. But the more detailed a settlement agreement signed during mediation, the more likely it is that the agreement will be considered complete and binding. In addition, it may be advisable to comply with the fraud statute by including a legal description or reference to it and having the agreement recognized by a notary since these agreements release and / or transfer interest on real estate.
Real estate affairs are as unique as the goods and the parties involved. There is usually an interesting story to explore beyond the recorded documents. These disputes also have the potential to cause enormous disruption to business interests as well as to people’s daily lives. And they give us the opportunity to find solutions using legal analyzes and practical solutions.
 Circular priority occurs when lien holder A takes precedence over B, B takes priority over C, but C takes priority over A, usually resulting from subordination agreements between some, but not all, lien holders. If you have a circular priority case, the most critical action is to take the headache pain reliever of your choice early and often.
 This is not necessarily a high cost as the amount of insurance on this product is discretionary and under the buyer’s control.
 A good description of ALTA policies can be found here: https://www.alta.org/policy-forms/