Can Mediation Save Our Deal?

Jack and Eliza searched Fayette county in Virginia for the right house. Not only must it be in good condition, have a nice yard, be in a good school district, but it had to also be a show place for entertaining. Both Jack and Eliza loved to have week-end dinner parties. They thrived on inviting the most educated and interesting guests. A four bedroom colonial home situated on an acre and a half of land became available and Jack made an offer which was accepted. A 30-day closing was agreed upon and the inspection period began. Everything seemed to check out. There were no major repairs needed and nothing looked out of the ordinary. One day prior to closing, Jack was reading through the settlement documents and came across an affidavit which he was asked to sign. It was a document from the seller, drawn on what looked liked legal letterhead, and it stated that the sale could only take place on condition that a chestnut horse, owned by the current owner, could continue to live in the small barn located in the back of the property. The new owner was moving to an apartment in the city and it would be impossible for him to take the horse with him.

Jack protested and the owner stayed firm. No horse, no deal. Nothing had been mentioned about the horse up to this point, and the realtor, the closing agent, and the buyers all scratched their head. No one could explain why the owner had remained silent about this non-negotiable issue until the day before closing. It seemed like the deal had reached an impasse. The owner offered to return the buyer’s deposit, he crossed his arms, and squared his jaw. He wouldn’t budge.

By now, Jack and Eliza had already moved into the house in their minds. They had arranged their furniture, picked out a new color of paint for the rooms, selected new appliances for the kitchen, and hired an artist to paint a scenic mural in the dining room. They had ordered the outdoor lighting for the patio and had the invitations prepared for their first party. Jack turned to his realtor and asked what he could do. Could he force the seller to sell? Did he have any legal rights?

Within the Purchase Agreement was a clause, which is common place in most real estate purchase agreements which stated

16. DISPUTE RESOLUTION: Unresolved controversies, claims and other matters in question between Buyer and Seller arising out of, or relating to, this Contract or its breach, enforcement or interpretation (“Dispute”) will be settled as follows:

Buyer and Seller will have 10 days after the date conflicting demands for the Deposit are made to attempt to resolve such Dispute, failing which, Buyer and Seller shall submit such Dispute to mediation under Paragraph 16(b). Buyer and Seller shall attempt to settle Disputes in an amicable manner through mediation pursuant to (state) Rules for Certified and Court-Appointed Mediators and Chapter 44, F.S., as amended (the “Mediation Rules”). The mediator must be certified or must have experience in the real estate industry. Injunctive relief may be sought without first complying with this Paragraph 16(b). Disputes not settled pursuant to this Paragraph 16 may be resolved by instituting action in the appropriate court having jurisdiction of the matter. This Paragraph 16 shall survive Closing or termination of this Contract.

17. ATTORNEY’S FEES – COSTS: The parties will split equally any mediation fee incurred in any mediation permitted by this Contract, and each party will pay their own costs, expenses and fees, including attorney’s fees, incurred in conducting the mediation. In any litigation permitted by this Contract, the prevailing party shall be entitled to recover from the non-prevailing party costs and fees, including reasonable attorney’s fees, incurred in conducting the litigation.