Full Disclosure: The right and wrong way to discuss SPDS disputes
June 3, 2022
One of the most common errors people make when handling disclosure disputes is getting the initial notice wrong. The Arizona Association of Realtors Residential Resale Real Estate Purchase Contract requires a specific procedure for providing notice of disputes relating to the transaction and mediating or litigating them. These procedures are technical, and one of the most common mistakes I see among people handling these disputes is a failure to properly follow procedures. The most commonly missed provisions include:
Notice of Breach— Most disclosure disputes begin with informal communication channeled through one or both REALTORS®. If the parties can resolve the matter that way, there’s nothing wrong with doing so. But if the dispute isn’t promptly settled, then the buyer needs to follow the notice of breach procedure.
Section 7(a) of the contract governs the notice of breach, cure period, and when a failure to cure becomes a breach. Significantly, a “failure to comply shall become a breach” three days after the other party delivers a notice. Nothing in the contract indicates that this provision expires after closing or doesn’t apply to post-closing disputes. But it’s one of the most overlooked provisions relevant to SPDS disputes.
Mediation Request Form— The AAR contract incorporates a set of rules for mediation, called the REALTORS® Dispute Resolution System. That system includes a rule on how to initiate mediation and a form to do it on. In fact, the contractually proper way to initiate mediation is “completing and mailing or emailing the Request to Initiate Mediation/Arbitration form to the mediator and all other parties.”
One of the most common errors people make while handling these transactions is failing to use the appropriate form. People will send letters and emails requesting mediation without ever properly using the form.
Proper Notice— One additional mistake is a failure to send notice in the manner required by contract. Section 8(m) governs notice. That includes the notice of breach parties need to send to properly initiate a SPDS dispute. Your clients will need to comply with this provision to ensure their notices are valid and properly served. The most common errors regarding this clause are sending notices or breach by mail, emailing them when emails are not listed in the AAR contract, and failing to copy the escrow officer when required by the contractual language.
These may seem like picayune distinctions. But getting them right can set a case up for success and give a fraud victim a straight shot to victory instead of a circuitous and uncertain odyssey through the court system.
Samuel Doncaster is a trial lawyer who’s very active in real estate fraud cases. He routinely helps people get their money back when they’ve been cheated in real estate deals. If you have a client who needs help with a disclosure issue, you can help them set an appointment by calling 480-666-4054 for a strategy session. Mention this article to get the strategy session fee waived.