Commercial Real Estate Expert, Receiver, and Assignee, Arthur van der Vant Calls for Change in NAR’s Arbitration Program
In this brief article, commercial real estate expert and Illinois Receiver and Assignee Arthur van der Vant provides a summary of the issues that arise within NAR’s Arbitration procedures.
According to Arthur van der Vant, the first serious problem with the National Association of REALTORS (NAR) arbitration program is that NAR arbitrations are done between the wrong parties (individuals). Real estate transactions out of which most arbitration result are not between individual REALTORS, but companies those individuals work for, says Arthur van der Vant. Most REALTORS work for real estate companies. Arthur van der Vant says that these include corporations, LLCs, partnerships, or entities other than individuals (sole proprietors). Companies are not allowed to be members of the Realtor Associations, points out Arthur van der Vant; therefore, companies are not bound by the arbitration clause obscured in the Bylaws of the Realtor Association. For that reason no Arbitration Agreement exists between companies that sell and lease real estate, expresses Arthur van der Vant.
Arthur van der Vant notes that in the absence of an agreement to arbitrate issues in dispute according to the Federal and/or State Uniform Arbitration Act (“Act”), NAR cannot enforce arbitration against companies.
1. Disputes often arise out of transfer of a real estate.
2. Real Estate transactions are subject to State Law in which the real estate is located, notes Arthur van der Vant.
3. According to Arthur van der Vant, real estate companies are most often principals in real estate transactions where properties are offered for sale and/or lease, not individuals. Brokerage companies offer cooperative commissions to other real estate brokerage companies, not agents.
4. Companies are not members of the REALTOR Associations. Again Arthur van der Vant reminds us that only individuals can obtain REALTOR membership.
5. According to the Illinois Statute of Frauds (740 ILCS 80/2), all contracts concerning transfer of real estate must be in writing, says Arthur van der Vant.
6. The Illinois Uniform Arbitration Act 710 ILCS 5/ requires a valid Arbitration Agreement between parties in order to submit any controversy to arbitration.
7. No written arbitration agreement exists between companies because, as Arthur van der Vant points out, they are not members of NAR.
8. A company cannot file a request to arbitrate, and a company cannot respond to arbitration under the NAR arbitration procedures. Arthur van der Vant notes that they are non-members.
9. The Code of Ethics and Arbitration Manual of NAR, Part 10, requires conducting arbitration and issuing an arbitration verdict in strict conformity with the law.
10. NAR arbitrations resulting from disputes in transactions between companies cannot be legal. Arthur van der Vant notes that this is because a valid arbitration agreement does not exist. NAR distorts and confuses the identity of individual members (REALTORS), with identity of real estate corporations’ he/she/they work for. Real estate brokerage companies are actual principals and parties to real estate transactions, says Arthur van der Vant. It is the brokerage company that earns and pays the commission. If an individual was not a principal in a transaction; how could he or she be named in NAR’s arbitration as a party? The Federal and State Laws recognized a difference between individual and a company.
According to Arthur van der Vant, there are several references cases which acknowledge that individuals vs. corporations are separate.
(a) “Although plaintiff’s three complaints involve the breach of the same contract **30 ***569 and arise out of the same transaction, they are not the same cause of action because they involve different defendants, an individual and a corporation.” Don Saffold Enterprises v. Concept I, Inc., 316 Ill.App.3d 993, 739 N.E.2d 27 Ill.App. 1 Dist., 2000.
(b) “The different nature of corporations as opposed to individuals justifies our different conclusions.” Lehnhausen v. Lake Shore Auto Parts Co. (1973), 410 U.S. 356, 93 S.Ct. 1001, 35 L.Ed.2d 351.
(c) ”It would seem to us that the legislature has quite clearly placed individuals and corporations in entirely different categories in using our courts for the prosecution or defense of their own affairs.” Remole Soil Service, Inc. v. Benson, 68 Ill.App.2d 234, 215 N.E.2d 678, Ill.App. 4 Dist., April 12, 1966.
In my opinion, says Arthur van der Vant, the National Association of Realtors (NAR) fails to provide adequate and necessary facilities and services to members in arbitration. NAR arbitrations are conducted and awards are entered by unqualified individuals who have no knowledge of the state laws and regulations. NAR arbitrations are conducted without arbitration agreement, notes Arthur van der Vant.
According to Arthur van der Vant, all arbitration proceedings are ruled by applicable federal laws and state laws. In Illinois the 710 ILCS Illinois Uniform Arbitration Act. The State of Illinois regulates arbitration through the variety of laws that govern issues pertaining to arbitration, says Arthur van der Vant, such as: (a) The law governing the arbitration agreement; (b) The law governing the arbitral tribunal and its proceedings (lex arbitri – procedural law); (c) The law governing the substance of the dispute; and (d) The law governing recognition and enforcement of the award. Arthur van der Vant notes that Illinois Courts exercise jurisdiction over the seat of arbitration and have a supervisory role over the conduct of the arbitration. Arthur van der Vant points out that all arbitrations must be conducted in strict conformity with the Illinois Law (710 ILCS Illinois Uniform Arbitration Act).
(710 ILCS 5/3) (from Ch. 10, par. 103)
Sec. 3. Appointment of arbitrators.
If the arbitration agreement provides a method of appointment of arbitrators, this method shall be followed. In the absence thereof, any method of appointment of arbitrators agreed upon by the parties to the contract shall be followed. An arbitrator so appointed has all the powers of one specifically named in the agreement. When an arbitrator appointed fails or is unable to act, his successor shall be appointed in the same manner as the original appointment. If the method of appointment of arbitrators is not specified in the agreement and cannot be agreed upon by the parties, the entire arbitration agreement shall terminate.
Without an Arbitration Agreement, states Arthur van der Vant you are NOT able bound parties to arbitration. Arthur van der Vant sites the following court rulings:
(a) “Arbitration is consensual and is a creature of contract.” Bd of Managers of Courtyards at Woodlawn Condominium Assn v. IKO Chicago, 697 N.E.2d 727, 183 Ill.2d 66 (1998). “The parties to an agreement are bound to arbitrate only those issues they have agreed to arbitrate, as shown by the clear language of the agreement and their intentions expressed in that language.” Salsitz v. Kreiss, 198 Ill.2d 1, 761 N.E.2d 724, cert. denied, 1912 U.S. 1055 (2001).
(b) “The issue whether a contract to arbitrate exists must be determined by the court, not an arbitrator”. Menard Cnty Housing Auth. v. Johnco Const., 341 Ill.App.3d 460, 793 N.E.2d 221 (4th Dist. 2003).
I encourage you, Arthur van der Vant continues, to research this subject and to familiarize yourself with the Arbitration Act in your State and any arbitration regulations.
Arthur van der Vant is a commercial real estate expert, Receiver and Assignee in the State of Illinois. He has participated in or overseen the closing of more than 10,000 transactions nationwide. In addition to his role as a Receiver and Assignee, Arthur van der Vant is a corporate turnaround management professional. Currently, he serves State and Federal Courts of Illinois. He has written numerous publication and articles on improving the transparency of the industry. For more information, contact Arthur van der Vant by calling 800-496-9107.
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