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Dear Anne: I Lost My Arbitration – Now What?

Most commission disputes involve two agents who are absolutely certain they deserve the money – but one must lose out. What happens next? Can a local board ask for the funds? Does a procedural review give the losing agent a do-over and new chance to keep the money?  

ORLANDO, Fla. – Dear Anne: I sat through a four-hour arbitration with my broker and, to my shock, the arbitration panel found in favor of the cooperating agent. I was the listing agent on this deal, and I am the procuring cause of the sale.

You would think a panel of five experienced real estate agents could get it right. But apparently not. It should have been a slam-dunk decision in my favor.

I won’t bore you with the details, but I found it offensive when I learned my local board is helping the so-called “winners” collect their commission. My broker received an email from board staff reminding him to deposit my commission into the board’s escrow account so they can hold the money while I decide if I want to file a procedural review or take this thing to court. If I don’t do either, they will disperse the money to the complainant.

I’m going to file a procedural review that I understand is an appeal of sorts for arbitration because the board needs to be put on notice their arbitration panel got it wrong. But one thing is for sure: Neither the board nor the complainant will see a dime of my commission under any circumstance. I earned it, it’s spent, end of the story.

There is nothing they can do to me. So, what do you think of this escrow debacle? Signed, It’s My Money

Dear, It’s My Money: Apparently you like using “I” and “my” a lot. You’re right there is nothing they can do to you, assuming the “they” you are referring to is your local board. Here’s an overview of the process:

  • Arbitration is between brokers because compensation is offered and accepted by brokers; therefore, your broker is the one on the proverbial hook – not you. And yes, you participated in the arbitration hearing only because you have a financial interest in the outcome, but you are not a party to the arbitration. Filing for arbitration and procedural reviews must be done by your broker.
  • Your broker has 10 days from the transmittal of the award to pay the prevailing party or deposit the disputed funds into the board’s escrow account for safekeeping. Absent a request for a procedural review or notice of intent to initiate a legal challenge within the timeframes specified under the National Association of Realtors®’ (NAR) Code of Ethics and Arbitration Manual, the award becomes final and the board releases the money to the prevailing party.
  • Failure to deposit the funds into the board’s escrow account will result in your broker receiving an invitation to appear before the board of directors to explain why they did not comply with this policy, which means your broker could be found in violation of a membership duty and the Board of Directors may impose disciplinary sanctions or be given more time on the clock to pay the award or deposit it into the Board’s escrow account. If the deposit isn’t paid within the time set by the Directors, discipline may be imposed automatically. If you don’t believe me, click here to learn more.

A lot of folks seem to think a procedural review is a second chance to have their case heard all over again before a new panel. It is not.

Quite the contrary, the purpose of the procedural review is to address alleged procedural deficiencies or irregularities that could constitute a deprivation of due process. The question is: Did something go wrong that resulted in depriving your broker of his due process rights? The laundry list of procedural deficiencies or irregularities could include:

  • Fraud
  • Coercion
  • Bias
  • Prejudice
  • Evident partiality and more

For example, your broker is entitled to have his case heard before an impartial panel. If a panelist’s manner of questioning appeared to bias in nature, the board of directors could overturn the award and send the matter to a new hearing panel or release the parties to go to court. Another possible flaw: The arbitration hearing officer didn’t allow your broker enough time to review and prepare for evidence he was not aware of prior to the hearing.

When your broker files for a procedural review, the board president or his/her designee will review the request to see if there is a legitimate basis (procedural deficiencies) for the review, like those I have already identified. If the request for a procedural review is based on the undesired outcome of the arbitration, it will be returned to your broker because it’s not a legitimate basis for the procedural review.

Hint: A procedural review is just that – a review of procedures and not a review of the decision itself.

However, if your broker insists that the request goes as written, the matter will be forwarded to the board of directors anyway. Why? Because it is the broker’s due process right to appear before the board of directors. If the board of directors concludes that there was no significant deprivation of due process, the arbitration panel’s award will more than likely be upheld.

The board is not trying to be difficult or take sides. It’s simply following NAR’s policies of enforcement. I suspect, if the tables were turned and you were on the side of the prevailing party, you would be in favor of the board having an escrow account.

Your comments about those who sat on the arbitration tribunal are unfair. These members take time away from their businesses to serve on tribunals. They attend annual training and want to make a positive difference by making the best decision possible based on the facts, testimony and evidence you presented to them.

The quality of your presentation before a panel falls on your doorstep, not the panel’s. And who knows what the outcome of the arbitration will be. One thing that is sure: The panel didn’t see this as a slam-dunk case in your favor.

If you go in believing you’ve got a win in the bag, you’re likely doing yourself a disservice. It’s an attitude that could end up getting you where you are today.

Anne Cockayne is Director of Local Association Services for Florida Realtors

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