How to Use Mediation to Resolve Lease Disputes

If attorney Jerry Slusky could create the perfect commercial lease, it would always include language about mediation. And in an ideal commercial leasing environment, mediation would be used to resolve nearly all disputes.

“Real estate, in particular, lends itself to mediation,” says the Omaha, Neb., partner of SmithGardner Slusky Law. “There's not as much emotion as you see in personal injury or divorce.”

Having successfully mediated more than 40 cases, Slusky sees firsthand how the process can work effectively. He believes that if the mediation process was better understood, it might be more widely used.

“A lot of people use the word, but don't know what it really means,” he says. “Simply, it's a way to solve a problem that has become a dispute with the help of a trained facilitator, to facilitate negotiation between the two parties.”

Faster and “Friendlier”

Slusky likes mediation for several reasons. First, he says, it's faster. In the cases where he has served as a facilitator, the average time to conduct the mediation session to a successful conclusion is three to five hours. Litigation, on the other hand, is much more time consuming, he says.

“We have not had a mediation go longer than a day and a half,” he says. “Litigation takes time away from one's business, for depositions, to respond to questions, etc. It cripples your focus on your business.”

Mediation also is less costly than litigation, by Slusky's definition. Each side might spend a couple of thousand to come to a complete resolution of the problem, he says.

But the most important aspect of mediation, in Slusky's view, isn't the time or cost savings. “With mediation, you have preserved the relationship between the owner and tenant,” he explains. “The process takes into account the interests of both parties.”

Another plus for mediation, when compared to arbitration, is that the parties develop the solution themselves as opposed to having a solution determined for them by a third party. “In arbitration, the arbitrator makes the decision for you,” Slusky says. “In mediation you make the decision for yourself.”

How It Works

Slusky, who is trained as a facilitator for mediation, calls the process he uses “interest-based mediation” because it focuses on balancing the interests of both parties while finding solutions that both sides agree can work. He describes the process step by step:

• The two parties agree to meet with one another and a facilitator. Sometimes they bring along an attorney, but not always, and it's not necessary to do so.

• The most significant ground rule for the meeting is to allow each side to tell its story, without interruption. “The point is to listen and search for a way to settle the dispute that both sides agree to,” Slusky explains.

• Together, the assembled group brainstorms solutions. “People need to feel unrestrained and able to talk freely,” Slusky says. “Everything is kept in confidence. Even if the case went to litigation, by law in most states, what is said in mediation can't be used in a court of law.”

• The next step is one that Slusky says often can move the process along even more. “I caucus with just one party and their attorney if one is present,” he says. “Sometimes that's where you learn what the real issue is. Then I do the same with the other party. I can go back into the room and use that information to help us reach a resolution.”

• The facilitator captures the agreed-upon terms, and both parties sign-off.

• An amendment to the lease is drawn up—usually by the initiating party's attorney—and both parties sign it. “It's a binding agreement,” Slusky points out.

Process Gains Foothold

Of course, the process can work only if both parties had agreed to mediate in the first place, should a dispute arise. That's where it all starts, Slusky says. Language to that effect can be easily incorporated into any lease, he says.

“It can be as simple as stating, ‘In the event of a dispute, each party shall subject the dispute to mediation, before litigation.’ Just include a clause to that effect,” he says. For sample lease language, see our Model Lease Language: Add Dispute Resolution Language to Lease.

Slusky sees a growing use of mediation in commercial transactions, including leasing, and points to a recent move by the American Institute of Architects. The professional organization has been a leader in encouraging resolution of disputes in construction projects without litigation.

“They have revised all of their documents to require mediation first, then arbitration if needed, and finally litigation if absolutely necessary,” Slusky says.

Even as he embraces the value of mediation, Slusky does agree that not every situation lends itself to resolution with the process. “There are some cases where the parties are such polar opposites, they are so far apart on the dollars and so strong on their feelings, that mediation can't help,” he says. “But really, it can't hurt. That's what I tell people. Even if you think it can't help, what do you have to lose by trying?”

Insider Source

Jerry M. Slusky, Esq.: Partner, Smith Gardner Slusky Law, 8712 W. Dodge Rd., Omaha, NE 68114; (402) 392-0101; jslusky@smithgardnerslusky.com.

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