By Mike Lewinski
In the curriculum for business ethics that I teach to students at Butler University’s Lacy School of Business, we cover John Locke and his notion of private property rights – natural rights that existed for each individual in the state of nature. Locke contended that men left that state of nature, in part, because the challenge of enforcing those rights led to a state of war. In more than 30 years of real estate litigation practice, I have seen what often looks like that state of war play out between litigants.
Whether it is a dispute between a commercial landlord and tenant, a complex commercial receivership and foreclosure, a dispute over representations in a sales disclosure for residential home purchases, an attempt by a condemning authority to acquire property that the property owner does not want to sell, a boundary line dispute between neighbors, or a generational family dispute over farmland owned by tenancy in common, emotions can, and often do, run high. While a trial is the ultimate dispute resolution, the parties in these cases are often best served by working through the mediation process. But that process can be difficult.
Property rights are so much a part of our culture and heritage that a challenge to those rights can become very personal. The situation can be made even more difficult when the dispute is between individuals who are family members or close friends (either social or business). There can be a sense of disbelief, disappointment and downright betrayal. This can be followed by anger and resentment. Each of these emotions can make a mediated resolution seem unattainable.
I recall having a discussion in a pretrial conference with the judge and opposing counsel about court-ordered mediation in a boundary line dispute between neighbors. Opposing counsel represented an elderly client who had lived in the neighborhood most of her adult life. My client was a 30-something who, as it turned out, had inadvertently built a shed on his neighbor’s property. Opposing counsel was adamant that mediation simply would not work — his client wanted her day in court. The judge, noting he had heard the same arguments in divorce cases only to have those cases settle through mediation, ordered the parties to mediate.
The mediation did not start off well. The neighbor was so emotional about the situation that, during my opening statement in a joint session, she stood up and walked out — apparently offended by merely hearing my client’s position. The mediator noted it would a tough day, and he was right. It took most of the day and my client’s written apology, but the case settled, and the neighbors could return to their role of neighbors rather than adversaries.
Similar issues arise in the complex situation of multiple generations owing tenant in common interests in what was once a family farm. What was once a farm owned by a grandfather and grandmother, when passed down through inheritance to subsequent generations, can become a single (though large) property owned by multiple individuals with vastly different interests and intentions. One group may want to continue to operate (or at least receive income from) the farm. Another group may want to “cash out” its interest.
Indiana partition laws provide for the sale of the property and the division of the proceeds according to the respective percentage interests, but that result can lead to even greater division among family members. Creating an atmosphere in mediation which allows for a civil discussion of options can help preserve at least the potential for the family sitting down together at a future Thanksgiving dinner.
Even if the parties are not neighbors or family, they may want to maintain a business relationship after the dispute is resolved. Proceeding to a “winner take all” contest at trial is hardly the recipe for an amicable continuing business association.
Understanding the emotions involved in property disputes, understanding biases (explicit or implicit) and being willing to think outside the proverbial box are often the keys to reaching a solution to what may be a very personal dispute between neighbors, family members and/or business associates.
In avoiding, or de-escalating, the state of war that Locke describes with regard to protection of property rights, a few techniques may be helpful:
• Chose a mediator with experience in property disputes. The ability of that individual to relate to factual, legal and emotional issues presented can go a long way in resolving the dispute.
• Recognize pessimism, but encourage your client to be open to the possibility that the parties may, indeed, reach a common ground.
• Recognize that the mediator will likely ask your client to empathize with the other side, to see the dispute through different lenses or a different frame, or to consider how an impartial observer/decision maker, not burdened with the emotions of the situation, might react to the dispute.
• Appreciate that the parties might not yet be ready to reinvest in their relationship, but leave the door open to the opportunity to do so in the future.
While traditional post-filing mediation affords the opportunity to resolve property disputes in a way that can renew relationships, pre-suit mediation can be particularly effective in property disputes. In some cases, it is sometimes helpful to file a lawsuit prior to mediation (for example, in eminent domain cases when the condemning authority needs the actuality of litigation to obtain more flexibility to negotiate compensation), but in other cases it can be equally, if not more, effective to suggest that the parties proceed to mediation prior to the initiation of litigation.
I find parties are often receptive to the suggestion that they need not spend the time and money on attorneys and litigation, but that they can, instead, focus their efforts on reaching an economic and efficient resolution during pre-suit mediation. And, of course, if pre-suit mediation does not result in a settlement, there is always the ability to renew mediation efforts once a suit is filed and the case is more fully developed.
Parties can choose to leave the state of nature with its natural property rights in order to avoid the inevitable state of war described by Locke. Mediation can be an effective means to resolve real estate disputes.•
• Mike Lewinski is a partner at Lewis Wagner LLP and serves as a faculty member in Butler University’s Lacy School of Business. Opinions expressed are those of the author.