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DISCLOSURE STATEMENT: ARBITRATION DISCLOSURE AND RESIDENTIAL REAL PROPERTY ARBITRATION AGREEMENTThis form approved by the Minnesota Association of REALTORS®, which disclaims any liability arising out of use or misuse of this form.© 2019 Minnesota Association of REALTORS®, Edina, MN1. Page 12. ARBITRATION DISCLOSURE3. You have the right to choose whether to have any disputes about disclosure of material facts affecting the use or 4. enjoyment of the property that you are buying or selling decided by binding arbitration or by a court of law. By agreeing 5. to binding arbitration, you give up your right to go to court for claims over $15,000. 6. By signing the RESIDENTIAL REAL PROPERTY ARBITRATION AGREEMENT (“ARBITRATION AGREEMENT”) on 7. page two (2), you agree to the following:8. (1) disputes with demands which fall within the jurisdictional limits of the conciliation court shall be resolved in the9. applicable conciliation court; and10. (2) all other disputes shall be subject to binding arbitration under the Residential Real Property Arbitration 11. System (“Arbitration System”) administered by National Center for Dispute Settlement (“NCDS”) and endorsed 12. by the Minnesota Association of REALTORS® (“MNAR”). The ARBITRATION AGREEMENT is enforceable only 13. if it is signed by all buyers, sellers and licensees representing or assisting the buyers and the sellers. The 14. ARBITRATION AGREEMENT is not part of the Purchase Agreement. Your Purchase Agreement will still 15. be valid whether or not you sign the ARBITRATION AGREEMENT.16. The Arbitration System is a private dispute resolution system offered as an alternative to the court system. It is not 17. government sponsored. NCDS and the MNAR jointly adopt the rules that govern the Arbitration System. NCDS and 18. the MNAR are not afﬁliated. Under the ARBITRATION AGREEMENT you must use the arbitration services of NCDS.19. All disputes about or relating to disclosure of material facts affecting the use or enjoyment of the property, excluding 20. disputes related to title issues, are subject to arbitration under the ARBITRATION AGREEMENT. This includes claims 21. of fraud, misrepresentation, warranty and negligence. Nothing in this Agreement limits other rights you may have under 22. MN Statute 327A (statutory new home warranties) or under private contracts for warranty coverage. An agreement to 23. arbitrate does not prevent a party from contacting the Minnesota Department of Commerce, the state agency that 24. regulates the real estate profession, about licensee compliance with state law.25. The administrative fee for the Arbitration System varies depending on the amount of the claim, but it is more than initial 26. court ﬁling fees. In some cases, conciliation court is cheaper than arbitration. The maximum claim allowed in conciliation 27. court is $15,000. This amount is subject to future change. In some cases, it is quicker and less expensive to arbitrate 28. disputes than to go to court, but the time to ﬁle your claim and pre-hearing discovery rights are limited. The right to 29. appeal an arbitrator’s award is very limited compared to the right to appeal a court decision.30. A request for arbitration must be ﬁled within 24 months of the date of the closing on the property or else the 31. claim cannot be pursued. In some cases of fraud, a court or arbitrator may extend the 24-month limitation 32. period provided herein.33. A party who wants to arbitrate a dispute ﬁles a Demand, along with the appropriate administrative fee, with NCDS. 34. NCDS notiﬁes the other party, who may ﬁle a response. NCDS works with the parties to select and appoint an arbitrator 35. to hear and decide the dispute. A three-arbitrator panel will be appointed instead of a single arbitrator at the request 36. of any party. The party requesting a panel must pay an additional fee. Arbitrators have backgrounds in law, real estate, 37. architecture, engineering, construction or other related ﬁelds.38. Arbitration hearings are usually held at the home site. Parties are notiﬁed about the hearing at least 14 days in advance. 39. A party may be represented by a lawyer at the hearing, at the party’s own expense, if he or she gives ﬁve (5) days 40. advance notice to the other party and to NCDS. Each party may present evidence, including documents or testimony 41. by witnesses. The arbitrator must make any award within 30 days from the ﬁnal hearing date. The award must be 42. in writing and may provide any remedy the arbitrator considers just and equitable that is within the scope of the parties’ 43. agreement. The arbitrator does not have to make ﬁndings of fact that explain the reason for granting or denying an 44. award. The arbitrator may require the party who does not prevail to pay the administrative fee.45. This Arbitration Disclosure provides only a general description of the Arbitration System and a general overview 46. of the Arbitration System rules. For speciﬁc information regarding the administrative fee, please see the Fee Schedule 47. located in the NCDS Rules. Copies of the Arbitration System rules are available from NCDS by calling (866) 727-8119 48. or on the Web at www.ncdsusa.org or from your REALTOR®. If you have any questions about arbitration, call NCDS 49. at (866) 727-8119 or consult a lawyer.MN:DS:ADRAA-1 (8/19)

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DISCLOSURE STATEMENT: ARBITRATION DISCLOSURE AND RESIDENTIAL REAL PROPERTY ARBITRATION AGREEMENT 50. Page 251. THIS IS AN OPTIONAL, VOLUNTARY AGREEMENT.52. READ THE ARBITRATION DISCLOSURE ON PAGE ONE (1) IN FULL BEFORE SIGNING.53. RESIDENTIAL REAL PROPERTY ARBITRATION AGREEMENT54. For the property located at .55. City of , County of , 56. State of Minnesota, Zip Code .57. Any dispute between the undersigned parties, or any of them, about or relating to material facts affecting the use or 58. enjoyment of the property, excluding disputes related to title issues of the property covered by the Purchase Agreement 59. dated , including claims of fraud, misrepresentation, warranty and negligence, shall 60. be settled as speciﬁed in the Arbitration Disclosure above. National Center for Dispute Settlement shall be the arbitration 61. service provider. The rules adopted by National Center for Dispute Settlement and the Minnesota Association of 62. REALTORS® shall govern the proceeding(s). The rules that shall govern the proceeding(s) are those rules in effect 63. at the time the Demand for Arbitration is ﬁled and include the rules speciﬁed in the Arbitration Disclosure on page one 64. (1). This Agreement shall survive the delivery of the deed or contract for deed in the Purchase Agreement. This Agreement 65. is only enforceable if all buyers, sellers and licensees representing or assisting the buyers and sellers have agreed to 66. arbitrate as acknowledged by signatures below. For purposes of this Agreement, the signature of one licensee of a 67. broker shall bind the broker and all licensees of that broker.68. (Seller’s Signature) (Date) (Buyer’s Signature) (Date)69. (Seller’s Printed Name) (Buyer’s Printed Name) 70. (Seller’s Signature) (Date) (Buyer’s Signature) (Date)71. (Seller’s Printed Name) (Buyer’s Printed Name)72. (Licensee Representing or Assisting Seller) (Date) (Licensee Representing or Assisting Buyer) (Date)73. (Company Name) (Company Name) 74. THE RESIDENTIAL REAL PROPERTY ARBITRATION AGREEMENT IS A LEGALLY BINDING CONTRACT75. BETWEEN BUYERS, SELLERS AND LICENSEES. IF YOU DESIRE LEGAL ADVICE, CONSULT A LAWYER.MN:DS:ADRAA-2 (8/19)DRAFT

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A Guide to Residential Real Property Arbitration Minnesota REALTORS endorses the Residential Real Property Arbitration program administered through the National Center for Dispute Settlement NCDS NCDS is a private impartial organization that provides arbitration services The following is an explanation of the program how it works and the pros and cons of utilizing arbitration THIS EXPLANATION IS NOT LEGAL ADVICE SHOULD YOU HAVE QUESTIONS ABOUT ARBITRATION CONSULT WITH YOUR LEGAL COUNSEL Deciding if Arbitration is Right for You What is arbitration Arbitration is dispute resolution process that is used as an alternative to the court system Rather than suing the opposing party in a court of law a complainant would file a demand for arbitration with NCDS and an arbitrator would be assigned to the case The arbitrator would oversee the procedural and substantive issues that arise and issue a decision that is binding upon all parties What s the difference between arbitration and the courts for dispute resolution Arbitration is typically less complex less expensive and faster however these are generalizations Conciliation court can be more expeditious for claims under 15 000 the current limit and be less expensive and complex even than arbitration That is why the Minnesota REALTORS program excludes claims under the current Conciliation Court limit 15 000 see below for more information Be sure to do your own comparison of costs filing fees attorneys fees etc before deciding An attorney can be useful in helping determine whether arbitration is right for you Is there a minimum or a limit for the dollar amount of the Demand in an Arbitration There is no limit to the amount that a claimant can make in a Demand however no Demand for less than 15 000 or the current Conciliation Court limit in Minnesota can be heard through the NCDS arbitration process The Arbitration Agreement specifically excludes any claims that are less than the Conciliation Court limit because Conciliation Court is often even simpler and less expensive than arbitration in those cases If I have a claim for 2 500 against a seller who failed to disclose a problem would this go through arbitration if I sign the Arbitration Agreement No Any claim for 15 000 or less or the current Conciliation Court limit would be brought in Conciliation Court instead Only claims more than 15 000 could be submitted to arbitration through NCDS page 2

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Can arbitration decisions be appealed Typically there is no right to appeal an arbitration decision in the same way that a decision from a district court can be appealed to a higher court However there are limited appeal rights related to certain procedural failures that might have denied a party a fair hearing or other issues Typically decisions issued by arbitrators are final What is the scope of the disputes that could be resolved through the Minnesota REALTORS arbitration program The Minnesota REALTORS program is solely related to the disclosure of material facts relating to the property that is the subject of the Purchase Agreement Material facts could include anything from those contemplated in Minn Stat 513 55 to failure to make other mandatory disclosures under other law e g Wells Septic Methamphetamine etc What would I hav have to prove to win an arbitration You would have to prove that 1 There is fact about the property that is material affecting the ordinary purchaser s using or enjoyment of the property generally 2 That the seller and or licensee knew about this fact and 3 That the seller and or licensee did not disclose this fact despite knowledge When do I have to decide whether I ll use arbitration The Disclosure Statement Arbitration Disclosure and Residential Real Property Arbitration Agreement Arbitration Agreement may be presented at the time when a consumer enters into a representation or facilitation agreement with a REALTOR to give the consumer time to review the form and ask an attorney any questions they might have That way when it comes time to sign a Purchase Agreement the consumer knows whether he or she wishes to participate in the voluntary arbitration program In order to have a binding agreement to arbitration it must be fully executed at the time that the Purchase Agreement is executed Can I use an attorney if I chose arbitration Yes Choosing arbitration is simply choosing a dispute resolution process Just like in the court system you can choose to hire an attorney to assist you in your claim or in defending you or you can represent yourself However like the court system an attorney is not required to proceed page 3

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A Guide to Residential Real Property Arbitration Who must sign the Arbitration Agreement to make it valid and binding Both the buyer and the seller and both licensees representing or assisting the buyer and seller must sign to have a valid agreement to arbitrate If one party is not represented by a licensee then only the party s signature is necessary However if a party is working with a licensee the licensee must also sign If only the buyer and seller sign then the agreement will not be binding Parties may still voluntarily elect to arbitrate rather than utilize the court system at any time once a dispute arises When would I file an arbitration claim An arbitration claim just like any legal claim should be a last resort You may want to reach out to the opposing party prior to filing to see if you can work out your dispute Often settlements leave both parties feeling better about the resolution rather than taking a chance that the arbitrator will decide against you in an all or nothing type of decision The Minnesota REALTORS also provides mediation services to parties in advance of an arbitration should they decide that a mediator might help foster a settlement In any case if an arbitration is filed it is after the purchaser identifies a material fact that was not disclosed and identifies that the seller and or licensee was aware of this fact and failed to make the proper disclosure Typically this is after the closing In any case all claims must be filed within 24 months of the closing except if fraud is alleged What is the deadline to file an arbitration claim An arbitration must be filed within 24 months of the closing date on the property unless fraud is alleged Seek legal advice regarding whether you may still have a claim if more than 24 months have passed since your closing This is the deadline regardless of any longer applicable statute of limitations that might be given in Minnesota Law Can parties go to court after the arbitration time period expires No The parties elect their remedy at the time of the purchase agreement court or arbitration Once arbitration is chosen a party cannot decide instead to wait until the 24 months has run and start a court action instead If I ve since sold the property that I purchased from the seller can I still file an arbitration without being the current owner Yes so long as you are within the 24 month deadline What if I am the seller and or licensee and a purchaser files an arbitration against me and loses Can I recover some of my expenses for having to participate Yes it s possible to file a counterclaim You ll want to talk with legal counsel about whether the counterclaim makes sense in your case page 4

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What are the pros and cons generally of arbitration vs court PROS OF ARBITRATION Less formal and not as complex as litigation Decided by an arbitrator private citizen Generally less expensive than litigation except in cases of Conciliation Court Discovery of documents is restricted so it will be less cumbersome The decision of the arbitrator is final and binding with very limited appeal rights Decisions in arbitrations made more quickly than in court hearing is usually scheduled within 90 days of the receipt of demand 30 days for arbitrator s decision Party can participate in choosing the arbitrator s CONS OF ARBITRA ARBITRATION Give up your right to go to court Give up your right to have a judge jury Give up access to the courts appeals rules Discovery of documents is restricted so it may be harder to access all of the evidence you might want to discover Give up rights to an appeal Court hearing and appeal process can take many months if not years to be final Assigned a judge to hear the matter Do the Rules cover commission disputes No The Rules are solely for residential real property arbitration Article 17 of the Code of Ethics provides for the resolution of arbitrations related to commissions as between REALTOR members The Minnesota REALTORS administers this process Commission disputes between brokerages and their clients must be settled outside of the arbitration process as well and may be settled by the Minnesota REALTORS if the client agrees page 5

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A Guide to Residential Real Property Arbitration Deciding if Arbitration is Right for You What is the role of NCDS and what does the case administrator do NCDS functions as the administrative agency for the arbitration program The case administrators arrange for the appointment of the arbitrator s and the scheduling of hearing s They also handle all communications between the parties and the arbitrator except at the actual hearing s The case administrator is available to answer general and procedural questions concerning the arbitration process NCDS does not evaluate the validity of claims or make any substantive decisions about a case Who is the arbitrator The arbitrator s is the impartial decision maker whose authority comes from the Residential Real Property Arbitration Rules Rules the Minnesota arbitration law and the Arbitration Agreement The arbitrator s is not an employee of NCDS rather he or she will have experience in a field related to real estate e g real estate law architecture building inspection property management etc After accepting testimony and evidence presented by the parties the arbitrator s makes the decision The only direct communication the parties will have with the arbitrator s is at the hearing At no time should the parties contact the arbitrator s directly All correspondence must go through NCDS who will forward it to the arbitrator s How many arbitrators will there be One will be appointed to hear the case However any party can request a panel of three to hear the case in which case an additional fee will be charged How do I file a demand for arbitration Contact NCDS to request a submission form and other basic information about the process NCDS contact information can be found at www ncdsusa org or by calling 866 727 8119 What do I need to file 4 copies of the demand for arbitration or submission form 2 copies of the Purchase Agreement 2 copies of the fully executed Arbitration Agreement 2 copies of any and all inspection reports prepared for the claimant The appropriate administrative fee as described in the NCDS fee schedule These documents must be filed by mailing to NCDS at 12900 Hall Road Suite 401 Sterling Heights MI 48313 page 6

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How is the respondent notified of the arbitration NCDS will serve a copy of the demand to all respondents named The claimant is required to provide up to date contact information address and telephone number for the respondent s NCDS will not proceed if the respondent s cannot be found After the initial service of the demand on the respondent s if the parties wish to proceed by email notice the parties may do so Can the respondent ask the arbitrator to review a demand to see if it is deficient or unable to be arbitrated Yes NCDS as an administrative agency does not evaluate the validity of claims submitted for arbitration However arbitrator s themselves can evaluate a demand based on whether it is untimely or whether it lacks specificity with respect to allegations made by the claimant An arbitrator may make this review with or without the request of a respondent If a respondent makes the request it must be made through NCDS who will notify the arbitrator The arbitrator may give the claimant an opportunity to modify or clarify the demand and may ultimately dismiss a demand prior to a hearing in the event it is deemed untimely or lacking in allegations against one or more respondents Can a claim be changed after it is submitted Yes it may be changed in writing up to 14 days prior to the hearing Within 14 days of the hearing any new or different information may only be submitted with an agreement of the parties When will the hearing occur A hearing date will be set within 90 days and within 30 days of receipt of the parties calendars of conflicts Each party will be given the opportunity to provide his or her availability and a hearing date will be scheduled on a day everyone is available Where is the arbitration hearing Almost all of the time the hearing is held at the property in question However on occasion the arbitrator s may name a different location The date time and location of the hearing will be provided at least 14 days in advance of the hearing unless late notice is waived by the parties page 7

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A Guide to Residential Real Property Arbitration How does arbitration deal with evidence The parties may offer evidence both exhibits and witness testimony that is relevant and material to the controversy presented Parties may also be required to produce evidence specifically requested by the arbitrator if the arbitrator s deems that evidence necessary to understand the case and make a determination An arbitrator s is also legally authorized to subpoena witnesses and may do so independently or upon a request from a party who wants the witness present The arbitrator s determines the admissibility of evidence the court rules of evidence do not apply Evidence must be taken in the presence of the parties except in accordance with Rule 13 Expenses related to witnesses or reports must be paid by the party producing the witness or report All witness lists with expected testimony of each party and exhibits must be provided by the parties to NCDS and all other parties no later than fourteen 14 days prior to the scheduled hearing or as directed by the arbitrator s If a party presents any witness lists exhibits or witnesses fewer than fourteen 14 days prior to the scheduled hearing the arbitrator shall have the sole discretion regarding the resolution of Rules violation When is the hearing closed The hearing is closed when both parties have had adequate opportunity to present all witnesses and other proof they wish to submit Could the Rules ever be waived by a party Yes if a party proceeds with the arbitration after having knowledge that a Rule has not been followed If the party fails to object to the fact that the Rule was not followed in writing to NCDS then the party has waived the right to object Do I have the right to object Any party who becomes aware of a violation of these rules during the arbitration process may file a written request for an arbitrator review of the violation with NCDS or raise the issue verbally at the hearing if the issue occurs during the hearing If NCDS receives a written request it shall forward the request for review to the case arbitrator s to investigate and take any necessary action to provide for the proper implementation of these Rules If the issue is raised at the hearing the arbitrator s shall address the issue then Such a request must be made as soon as practicable or the violation shall be deemed waived How are the Rules interpreted The arbitrator s shall interpret and apply the Rules as they apply to the arbitrator s powers and duties Otherwise NCDS will do so as administrator of the process The Rules are also subject to Minnesota arbitration law found in Chapter 572B of the Minnesota Statutes Statutes page 8

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When will I be notified of an award made by the arbitrator and what will the award contain Not later than 30 days from the date the hearing is closed The award will be given in writing and will be signed by the arbitrator s If the parties settle their dispute during the course of the arbitration case the parties may request that the arbitrator set forth the settlement in a settlement award The arbitrator may make any award that is just and equitable and consistent with the Minnesota Uniform Arbitration Act Chapter 572B 572B The award may be delivered by mail to the party or attorney at the last known address by personal service or by filing of the award in any other legally allowable manner How is the award determined The arbitrator s determines the award based on what is just and equitable and within the scope of the purchase agreement The arbitrator s may assess the arbitration fees and expenses against any party generally each party must bear its own attorney s fees except that the arbitrator shall be allowed to award a prevailing party attorney s fees if allowed by statute Although it s within the arbitrator s discretion often the winning party is awarded their costs from the losing party What happens with an arbitrator makes an award and the party doesn t pay Minn Stats 572B 22 through 572B 25 state that the award may be filed and confirmed in district court and then a judgment may be granted by the court After a judgment is in place a party can collect the judgment in numerous ways including wage garnishment levying bank accounts and more Collection of the award is outside of the scope of the arbitration and neither Minnesota REALTORS the arbitrator s nor NCDS will assist in collection of the award What should I know about the court actions pertaining to the arbitration No court proceeding related to the subject matter of the arbitration shall be a waiver of the party s right to arbitrate Neither NCDS Minnesota REALTORS nor any arbitrator may be named in any court proceeding related to the arbitration And none of the same shall be liable to any party for an act or omission in connection with any arbitration conducted under the Rules NCDS will provide certified copies of the papers related to the arbitration for use in a court proceeding Any party wishing to do this must make a request in writing and pay for NCDS expenses Unless applicable law or the arbitration agreement states otherwise the parties are deemed to have consented to entry of an arbitration award as a judgment in a federal or state court with jurisdiction page 9

Arbitration Agreement

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