Should You Sign an Arbitration Agreement When Buying a House in Florida?

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By Gary M. Landau, Esq.

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Should You Sign Arbitration Agreement When Buying House in Florida? | Call (954) 979-6566

Like many newcomers to Florida, Beverly could not wait to close on her beautiful new South Florida home and enjoy life in a tropical climate. However, when a friend asked if she’d signed an arbitration agreement alongside her home contract, her excitement gave way to anxiety. Beverly knew nothing about residential real estate closings and had never heard of arbitration agreements. How did they work exactly? Were there any downsides? Should she have signed one? Did she already, without knowing?

Having worked with clients for over 25 years, experienced South Florida real estate attorney Gary M. Landau and his team understand homebuyers’ concerns about all the legal aspects of their home purchase, including, sometimes, arbitration agreements.

An arbitration agreement can appear in any contract between two parties. This agreement binds participants to resolving any future disputes between them via an arbitration instead of by filing a lawsuit with the courts. Although it is not generally included in standard residential real estate contracts typically used in South Florida, some contracts do contain them.

Arbitrations can resolve disputes more quickly and prevent costly and time-consuming litigation in real estate transactions. However, arbitration agreements may also involve concerns, especially the lack of transparency by the arbitrator and limited protection of your legal rights.

Should you sign an arbitration agreement when buying a house in the Sunshine State? Below, we examine the pros and cons of agreeing to arbitration. Continue reading to learn more, then call us at (954) 979-6566 to schedule a free consultation about all aspects of your upcoming real estate deal.

What Does Arbitration in Real Estate Mean?

Arbitration is a speedier, more efficient, and less expensive alternative to a civil lawsuit in real estate transactions. If a purchase agreement includes a mandatory arbitration clause, this means that if a dispute crops up before or after the closing and the two sides can’t resolve it through negotiation or mediation, the conflict passes into the hands of a neutral arbitrator. A real estate arbitrator is often a qualified real estate attorney or a retired judge.

As a dispute-resolution method, arbitration is somewhat more formal than negotiation or mediation (where the parties come to a mutually satisfying resolution on their own) but is much less burdensome than civil litigation. The arbitrator (selected jointly by both parties) examines the facts of the case, sifts through relevant evidence, hears both parties’ arguments in an informal setting, and reaches a legally binding decision that a court typically won’t overturn.

Hiring an experienced real estate lawyer to represent your interests during a real estate arbitration is important, given the amount of money that is often involved.

The Advantages of Arbitration Agreements in Florida Real Estate Contracts

Why do some people include an arbitration clause in their Florida real estate contracts? And why may these clauses be beneficial to both buyers and sellers?

Arbitration can:

    • Avoid the high-cost, high-conflict process of civil litigation
    • Reduce the costs involved with resolving the dispute
    • Provide a more flexible and less formal dispute resolution process compared to a civil lawsuit
    • Resolve disputes much faster (especially important if you’re trying to sell your home or if you want to be free of a disputed deal so you can buy a different one)
    • Keep proceedings from the public record

Speed is the main advantage of arbitration over litigation. While arbitration may take as much as a few months for the dispute to be fully resolved, real estate lawsuits can take a year or longer. Arbitration also gives all parties better control over the proceedings, since the sides mutually agree on their choice of the arbitrator.

The Potential Pitfalls of Arbitration

With all its benefits, an arbitration clause may also prove problematic if a real estate dispute arises.

The arbitration process may:

    • Limit your legal redress options
    • Fail to provide full transparency
    • Raise objectivity concerns if the arbitrator has a history of favoring one type of party (such as the buyer or seller)
    • Leave you with no option to appeal a decision you disagree with

A civil court generally will not review or overturn an arbitrator’s decision unless the case involves fraud or other illegal means. Even if you’re confident that the arbitrator has decided wrongly and that a civil court would come to a conclusion in your favor, you probably won’t be able to appeal your case.

What’s more, an arbitration clause in a residential real estate contract doesn’t obligate Realtors, agents, and other real estate professionals involved in the deal to participate in the arbitration. This means it’s possible you can go through both arbitration and a lawsuit if your dispute involves you, the other party, and, for example, a Realtor.

Finally, an arbitration award isn’t self-executing. This means if an arbitrator awards you a certain amount of money, collecting your award may still need to ultimately involve a civil court. However, if an attorney or other closing agent is holding money in escrow, they will likely honor an arbitration agreement and release the funds according to the decision of the arbitrator.

Why You Should Consult an Experienced Florida Real Estate Attorney Before Signing an Arbitration Agreement or Residential Real Estate Contract

An arbitration agreement is a legally binding document with potentially serious financial implications. Buying a house is a major financial decision (as well as an emotional one), so it’s important to get expert legal advice before you include or sign such as clause in a real estate purchase agreement.

A seasoned Florida real estate lawyer can help you decide whether signing or deleting an arbitration clause that may appear in a real estate contract makes sense for you.

It’s always wise to have an attorney review your entire contract before you sign it, so they can also point out any other troublesome clauses too. Our law office typically reviews residential real estate contracts as a free service for clients who will be using our firm to handle their real estate deal, such as serving as a closing agent or representing a seller in a sale.

Specifically, your attorney can:

    • Help you understand the terms of your agreement and their potential legal consequences
    • Break down the advantages and possible risks of including an arbitration clause
    • Explain how the arbitration process would work in case a dispute arises during or after your real estate transaction
    • Suggest amendments to an arbitration clause in a real estate contract to protect your interests
    • Represent you during an arbitration hearing
    • Advocate for your rights throughout the real estate transaction

The Law Office Of Gary M. Landau, P.A.: South Florida Real Estate Attorney With Over 25 Years of Experience

“Should you sign an arbitration agreement when buying a house?” is a complex question with different possible answers. At the Law Office Of Gary M. Landau, P.A., we oversee purchase agreements to ensure your contract protects your interests and minimizes the possibility of future disputes. We also watch for our clients’ interests during the entire real estate transaction, from contract to closing.

With more than 25 years of experience and countless satisfied clients, Gary M. Landau and his team are uniquely positioned to help you with your probate and real estate needs in South Florida. Whether you’re ready to probate a loved one’s estate or to write your own will, or if you are purchasing a home, have inherited a home, or want a closing agent to handle title insurance and all documents for your closing or refinancing, the Law Office of Gary M. Landau is ready to work with you.

Call our office at (954) 979-6566 or complete our online form today to schedule a free consultation. We work with our clients in person, over the phone, or on Zoom.

Copyright © 2023. LAW OFFICE OF GARY M. LANDAU, P.A. All rights reserved.

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction.

LAW OFFICE OF GARY M. LANDAU, P.A.
7401 Wiles Road, Suite 204
Coral Springs, FL 33067
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Frequently Asked Questions

A will is the simplest way to ensure that your funds, property and personal things will be distributed after your death the way you want them to. Even if you have very few assets, you will benefit from having a will. About half of all Americans die without a will (known in legal terminology as dying intestate). Without a will to indicate your wishes, the court steps in and distributes your property according to state law. A will ensures that your assets will be given to family members or other beneficiaries you designate.

 

Having a will is doubly important if you have young children. One section of the will allows you to designate a guardian for them in the event of your death. Without a will, the court will appoint a guardian for your children, who may not be the person you desire.

Many Florida residents have out-of-state wills, drawn up while they were still living among the hills of North Carolina or the hubbub of New York. If the will was valid according to your old state’s laws at the time you made it, it is still legal in Florida. However, if you are a Florida resident, you may benefit greatly by having a new will drawn up in Florida, because it will likely be more easily admitted to probate.

 

It is important to know that each state has its own requirements for what makes a will a legally binding document. For example, Florida doesn’t recognize handwritten wills that haven’t been witnessed (known as “holographic wills”), or oral wills not put into writing, even if other states okay them. There’s also the matter of Florida estate law. In this state, for example, your surviving spouse is entitled to 30 percent of your net probate estate, regardless of what you say in your will. The spouse may also have a “Homestead” interest in property you share here, even if you want your house to go to someone else. In fact, all real property owned in Florida will be subject to this state’s laws, even if you’re a snowbird maintaining a residence in the state where your will was drawn up. Other peculiarities also exist, which is why a Florida will could make things much easier for your heirs.

 

If you would like to have me review your current out-of-state will, I am happy to do so without charge. If it turns out to be in accordance with Florida state laws and procedures, you can continue to rely on it. If not, however, your heirs would rather you discover that now.

It is a good idea to re-read your will every few years to be sure it reflects up-to-date realities (you may not want to leave your heirloom to a niece you are no longer speaking to, nor have someone be named your child’s guardian if they have taken seriously ill since you drafted your will). It is especially important to reexamine your will if:

 

  • You have gotten married since it was last drafted;
  • You have made bequests to people who have fallen out of your favor or are no longer living (I recently updated the will of a man who had left everything to his first wife, who was long deceased), or you have not included people who are now dear to you;
  • You would like to change the person named as the personal representative of the estate. (Note: Florida law does not allow a nonresident of the state to serve in this position, unless it is an immediate family member or certain other relatives);
  • You have acquired pricey or sentimental items that are not accounted for in your will. Do note, though, that Florida law allows you to attach a separate personal property memorandum to your will, detailing who will get which specific items. This list can be changed whenever you want.

Perhaps I should answer this question with where not to store it: in a bank’s safety deposit box. Although it may seem logical to put this with your other important papers, it is often difficult for your heirs to gain access to the box once you die, since the box is sealed then and must be opened in the presence of a bank employee.

 

One good option is to leave your original will with the attorney who drafted it, making copies for your personal representative and other important relatives and letting them know who has the original. For my clients who prefer that I store their original will, I keep it in a fireproof will vault in my office, or in the vault in my bank.

 

As an alternative, you could store the will in a fireproof box or vault in your own home.

 

Wherever you store it, be sure to let your personal representative and other close relatives know where you have put it!

Probate is when the court oversees your assets and liabilities after your death. During probate, the court makes sure that your will is valid and acceptable; that all debts, bills, creditor’s claims, and taxes are paid from your estate’s assets; and that your remaining assets are distributed to your beneficiaries according to your will (or, if no will exists, by Florida law).

 

Probate usually does take longer than most beneficiaries would like. But in order to ensure that everyone with a right to a claim is included in the process, the court requires several steps. If the size and complexity of your estate are minimal, however, the entire process of probate can take as little as a few months. Larger estates that are subject to IRS estate taxes or those involving litigation on the part of creditors or heirs generally take longer, often one or more years.

 

To speed the process along for simple and small estates, the courts allow a shortened form of probate, known as “summary administration,” which requires much less paperwork and time.

A personal representative (PR) is a friend or relative, or an attorney or bank, who is put in charge of the estate until all matters regarding the probate are resolved. (In other states, this person is sometimes called an executor or administrator.) The job of the PR includes identifying all assets, searching for creditors and paying valid claims, filing required estate tax returns if the estate is large enough (the figure escalates over time, according to Congressional laws), coordinating with the probate court and attorneys, and overseeing the distribution of assets–all done under the guidance and assistance of a qualified attorney.

 

Serving as a PR is an important role, and such a person should be selected with care as to who is most willing and best able to serve in this position. By Florida law, your personal representative must be over 18 years of age, and be a blood relative, your spouse, the parent or child of your spouse, or a Florida resident.

Generally, no. If you co-own all property via such legal structures as “tenancy by the entirety” or by “joint tenancy with right of survivorship” the property immediately passed to you upon your spouse’s death. Proof of death is usually all that is needed to pass such jointly owned title for cars, stocks, and other personal property to the surviving spouse.

 

But if even one asset was held solely in the deceased person’s name, or any property is owned in the form of a “tenancy in common,” that estate will be required to go through probate. If the assets are limited, the shorter, simpler form of probate is generally all that is required.
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