The parties to a construction dispute are the construction company (builder) and the building owner. Disputes arise over a variety of issues. These include whether the builder has adequately and timely performed its work under the contract. Issues may also include whether  the owner has timely paid the contractor for completed work. Construction contracts may require that the parties attempt to mediate a dispute. 

Unlike arbitration or litigation, mediation is not legally binding on the parties. If mediation is not successful, a party may then bring a lawsuit. Even if the contract does not require it, the parties may choose to mediate a dispute. Mediation is less costly and more informal than litigation.

How Should I Select a Mediator?

A primary consideration in selecting a mediator is ensuring the mediator is impartial and does not have a conflict of interest. The role of the mediator is one of neutrality. For mediation to be successful, each side must trust that the mediator is dealing fairly and truthfully with it. A mediator who is biased toward or against one party cannot secure this trust. 

In addition, for mediation to work, the mediator must not have a conflict of interest that may affect their impartiality. A conflict of interest arises when the mediator has a financial or other interest in one party’s success. For example, the mediator may be a good friend of the president of the construction company. Under these circumstances, the owner may believe the mediator’s neutrality has been compromised.

Parties seeking a mediator may request that a mediator be appointed through the court. Parties may also agree to select a private mediator. The American Arbitration Association employs private mediators. This organization provides a roster that lists mediators by type of expertise. Certain mediators have expertise in mediating construction disputes. While a mediator need not be a lawyer, having experience in handling construction disputes is useful. Construction disputes may involve multiple issues brought by one or more parties. 

If the parties select an inexperienced mediator, the mediator may not be able to provide effective assistance. The goal of mediation is for the parties to arrive at a compromise result that is mutually agreeable to both parties. This goal can be met by choosing a mediator with experience and training.

When selecting a mediator, parties must consider the cost of mediation. Mediators typically charge an hourly fee. An experienced and highly trained mediator can command a higher fee than a less experienced mediator. 

How Does Mediation Work?

Mediators have their own rules for conducting mediation proceedings. In a typical proceeding, the mediator typically consults with one side first. That side presents its introduction. The mediator then consults with the other side. That side then presents its introduction. Each side next offers its statement of the dispute (sometimes called “statement of the problem”) to the mediator. This consists of informing the mediator of what the facts issues are, and what  the parties’ settlement demands are. Once this process is over, the mediator then meets with each side to obtain additional information. 

At this point, the mediator can gauge how “far apart” the two sides are. The remainder of the mediation process consists of the mediator trying to broker an agreement. The mediator will obtain information from one side, and then relay that information to the other. The other side will inform the mediator of its response to that position. The mediator will then inform the first side of that response. The mediator will present each party’s offers and terms as they are made. The mediator will then present counteroffers. This process will continue until an agreement has been reached.

During the mediation, one or both sides may present legal authority, in the form of citations to cases or laws, to the mediator. The mediator may consider these authorities and bring them to the attention of the other side. In addition, each side may choose to be represented by an attorney. However, mediation is not a courtroom proceeding, It is not the role of the mediator to take sides with one party. Because mediation is informal, the rules of evidence that apply in court do not apply in mediation. The mediator may generally consider what evidence they believe is relevant. For example, the mediator need not discount a statement because it technically constitutes hearsay. 

The mediator’s “neutrality” means the mediator should not act as an advocate for either side. This does not mean, however, that a mediator cannot offer advice. If the mediator obtains sufficient facts, the mediator may learn one party’s case is stronger than the other. The mediator may advise one side that, based on the facts, that side may wish to settle as opposed to litigate. The mediator may advise each side as to the strengths and weaknesses of its case. It is up to the parties to use this information in making a decision in whether and how to settle.

If the parties reach an agreement, the mediator assists with reducing the agreement to writing. The agreement can then be filed with a court. If either side breaches a term of the agreement, the other may sue for breach of the mediation agreement. If the parties are unable to reach an agreement through mediation, they may next proceed to arbitration or litigation. Mediation discussions and offers generally cannot be admitted in litigation.  

It is in the interest of parties who wish to conduct future business, to mediate, as opposed to engaging in the adversarial process of litigation.

Are there Special Considerations to Consider When Using Mediation?

Because of the COVID-19 pandemic, many mediators now permit or require mediation to be conducted online. For an online mediation to be successful, each party must read the mediator’s rules on electronic proceedings. These rules will specify what type of meeting platform, such as Zoom or GoToMeeting, will be used. 

The rules will also specify when each side may speak, and when a side must let the other side speak. Parties should be familiar with how to use the electronic platform before mediation begins. This means the parties should be familiar with how to operate the “mute” and “camera” buttons. 

When Should Mediation Begin?

Parties should not immediately resort to mediation. Parties should try to resolve disputes informally. If, for example, one party alleges the other breached a term of the agreement, the parties should try to resolve the dispute between themselves. Many construction contracts require that informal attempts at resolution be made. Under these requirements, if, and only if, a compromise cannot be reached within a specific time frame, may the parties resort to mediation. Parties should only use mediation when they are unable to resolve a dispute on their own. 

On the other hand, parties should not wait too long to mediate. Sometimes, parties make no informal attempts to resolve issues. If multiple issues accumulate, and the parties have stopped communicating, one party may decide the only way to achieve satisfaction is through litigation. Talking through problems as they arise can prevent the parties from believing litigation is the only way to resolve a dispute.

Do I Need the Help of An Attorney for Construction Mediation?

 fIf you have a construction dispute issue and want to mediate, you should contact a real estate attorney. An experienced real estate attorney near you can assist you with selecting a mediator. The attorney can represent you at mediation proceedings. If mediation is unsuccessful, the attorney can represent you at arbitration or litigation.