There are different theories on conflict[i] that suggest that human beings are inherently conflictual.  Against this background, it is not unusual to have dispute resolution clauses in real estate transactions.   In fact, it is largely recognized that a substantial fraction of disputes in the Nigerian courts bother on real estate. Common causes of disputes in real estate transactions include but are not limited to breach of contract, fraudulent misrepresentations, boundary disputes, title disputes, and recovery of premises, amongst others.

Alternative Dispute Resolution (ADR) is a method that allows parties to a dispute to use a neutral third party to help them reach an agreement without going to trial. This article seeks to discuss ADR and its suitability or otherwise to real estate transactions in Nigeria.

What is Alternative Dispute Resolution and Types

There is no universally accepted definition of ADR. However, simply put, it refers to settling disputes outside of a courtroom[ii];  rather than going to trial. Section 19(d) of the 1999 constitution of the Federal Republic of Nigeria (as amended) recognizes the settlement of disputes by ADR, particularly: Arbitration, Mediation, Conciliation, Negotiation, and Adjudication.

Indeed, ADR is a broad term that encompasses different methods of dispute resolution, which include arbitration, mediation, conciliation, negotiation, early neutral evaluation, facilitation, and mini-trials [iii]  amongst others.

• Arbitration: Arbitration is the most common type of ADR, it offers a simplified approach to dispute resolution, without the complexities of courtroom litigation. It is a procedure where a mutual third party known as the arbitrator is appointed by the parties to the dispute.[iv] The arbitrator hears and considers the evidence and legal principles before making a binding decision known as the award. Arbitration can only take place if both parties have agreed to it, and the decision of the arbitral tribunal is final and easy to enforce.[v] Arbitration is governed in Nigeria by the Arbitration and Conciliation Act (CapA18, LFN 2004).
• Mediation: This is a process in which a neutral third party helps the parties to reach a settlement. The mediator does not have the authority to impose a decision on the parties. Unlike arbitration which presents a binding decision by a third party, mediation prioritizes collaboration and empowers parties to come to a mutual agreement.
• Conciliation: Conciliation is a method of settling disputes by consensus rather than by adjudication. It is the process in which parties, through a third party, identify the disputed issues, formulate options, explore alternatives, and then try to reach an agreement.
• Negotiation: Negotiation is an informal bargaining process in which parties and their legal advisors in dispute communicate directly or indirectly to reach an agreement that is mutually satisfactory. It is a private, efficient, and cost-effective way to resolve disputes.
• Mini-Trial: This is a non-binding ADR process.  It gives room for disputants to be represented by their respective legal practitioners, who in turn present the matter to the representatives of the parties; usually, the executives, who are authorized to enter into a settlement.

Generally, ADR processes focuses on collaborative solutions that attempts to satisfy everyone involved in the dispute. ADR often offers speedy resolutions, confidentiality, flexibility, it is less formal, less stressful, and cost-effective.

Suitability or otherwise to real estate transactions in Nigeria

The Nigerian real estate sector is growing rapidly and so is the increase in disputes. Litigation has been the most popular mode of dispute resolution in Nigeria for decades, but with its shortcomings, it is becoming less attractive.  In Nigeria, despite best efforts, a litigated matter is vulnerable to a number of setbacks such as overcrowded courts leading to lengthy delays, slow pace of justice leading to extended litigation proceedings, propensity for the matter to be appealed on slightest or perceived justification for same, strained social and business relationships between the parties involved and financial burdens.

Thankfully, Nigeria has a legal framework that supports ADR[vi], therefore establishing a foundation for its application. This has become a viable medium of solving disputes including those emanating from real estate transactions. ADR offers several advantages for real estate transactions in Nigeria. As earlier stated, compared to litigation, ADR is generally more cost-effective due to reduced legal fees and faster resolution. Additionally, ADR proceedings are confidential, unlike public court cases which can be sensitive for real estate matters. Properly drafted ADR agreements [vii]can be enforced by courts, providing security for both parties involved.

Real Estate Disputes can arise in different forms and between different parties; such as between Landlord and Tenant, Tenant and Property Management Company, Landowner and Developer, Broker and Client relationship, amongst others. The suitability of ADR and the specific mode will depend on the specific situation. For instance, mediation can be ideal for resolving disagreements on contractual terms, such as discrepancies in property conditions. ADR can be effective in boundary disputes, in resolving lease violations and issues regarding real estate as a whole. In view of this, it is imperative that the ADR clause for different real estate transactions be tailored to fit. Some transactions may be more suited to mediation, while others may be more suited to negotiation or to arbitration. A number of considerations such as value of the transaction, enforceability, cost, among others must be carefully taken into account. Furthermore, some particular subject matters within the transaction can be noted for ADR while others can be slated for litigation. For instance, it will be a laughable mismatch to have an arbitration clause imposing high financial obligations when the deal value is low.  Despite its advantages, ADR may face some challenges such as enforceability of agreements, particularly if a party refuses to comply.

Conclusion

ADR’s benefits are being recognized globally. Many courts are now encouraging ADR before litigation. This not only reduces the court’s workload but also empowers parties to explore solutions outside the courtroom and get timely reliefs.

On the whole,  ADR has proven to be a suitable option for settling disputes that in the real estate industry offering rapidity, confidentiality, flexibility, and cost-effectiveness. The role of ADR in solving disputes in the real estate realm cannot be overemphasized. ADR must be embraced so as to safeguard rights and obligations of contracting parties.

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[i] https://egyankosh.ac.in/bitstream/123456789/63227/1/Unit-8.pdf accessed on 21/4/2024, https://cbpbu.ac.in/userfiles/file/2020/STUDY_MAT/PHILO/408%20(3).pdf accessed on 21/4/2024

[ii] In Halsey v Milton Keynes General NHD Trust (2004) WLR 3002 Justice Dyson defined ADR as; “a collective description of methods of resolving dispute otherwise than a normal trial process”

[iii] Michaelmas Chambers (2020) Alternative Dispute Resolution in Nigeria

[iv] Black’s Law Dictionary (5^th ed;1979)

[v] World Intellectual Property Organisation: Alternative Dispute Resolution; Arbitration

[vi] Arbitration and Conciliation Act (CapA18, LFN 2004)

Written by Deborah Onafadeji for The Trusted Advisors

Email us: info@cms.trustedadvisorslaw.com

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