When Arbitration Clauses Can Be Negotiated or Stricken in Real Estate Deals — Without Appearing Litigious

Intro

Arbitration provisions are now routine in many California real estate contracts, and buyers or sellers who question them are sometimes told that “everyone signs these” or that changes will derail the deal. In reality, arbitration clauses are contractual terms like any other. They can often be modified or removed—without signaling distrust or an intent to litigate—if addressed thoughtfully and early. Presidio Law Firm LLP advises clients on how to approach these provisions in a way that preserves flexibility while keeping transactions on track.

Why Raising Arbitration Early Matters

Timing is critical. Arbitration provisions are easiest to address before escrow momentum builds. Raising the issue at the outset allows it to be framed as part of routine contract review rather than a reaction to concern or suspicion.

When arbitration is raised late in the process, counterparties may infer adversarial intent that does not exist, even where the concern is purely structural or financial.

Framing the Issue as Risk Management, Not Litigation

The most effective approach is to frame arbitration as a risk-allocation question rather than a litigation strategy. Buyers and sellers routinely negotiate inspection rights, contingencies, timelines, and allocation of costs. Dispute-resolution terms fit naturally within that same category.

Neutral explanations—focused on clarity, predictability, or alignment with other agreements—help keep the discussion professional and non-confrontational.

Using Neutral, Commercially Reasonable Explanations

Statements such as “we prefer court resolution for complex factual issues” or “we want consistent dispute-resolution provisions across all transaction documents” are common and reasonable.

Avoid framing the request around anticipated disputes or misconduct. The objective is to manage process, not accuse the other party of future wrongdoing.

Targeted Modifications Instead of Wholesale Removal

In many transactions, the most practical solution is not striking arbitration entirely, but narrowing its scope. Common approaches include excluding fraud or misrepresentation claims from arbitration, preserving the right to seek injunctive or equitable relief in court, or removing class-action waivers while leaving arbitration otherwise intact.

These targeted modifications often meet less resistance while still preserving important rights.

Consistency Across Transaction Documents

Another effective justification for modifying arbitration provisions is consistency. Listing agreements, buyer-broker agreements, purchase contracts, and related documents may contain different dispute-resolution mechanisms.

Aligning these provisions reduces confusion and risk. Courts and arbitrators alike view consistency as commercially sensible rather than adversarial.

Arbitration Requires the Parties to Pay the Decision-Maker

One practical difference between arbitration and court litigation is cost structure. Judges are publicly funded. Arbitrators are not.

In arbitration, the arbitrator is typically paid by the parties—often on an hourly or daily basis—along with administrative fees charged by the arbitration provider. In real estate disputes, particularly disclosure, fraud, or misrepresentation cases, hearings may span multiple days and require significant pre-hearing management.

These costs are incurred regardless of outcome and are in addition to attorney fees, expert costs, and other litigation expenses. For individual buyers or sellers, the obligation to fund the decision-maker can affect leverage, strategy, and settlement timing. Understanding this dynamic is part of evaluating whether arbitration aligns with a party’s resources and risk tolerance.

When Counterparties Are Most Receptive

Requests to modify arbitration provisions are more likely to be accepted when they are made early, presented cleanly, and limited in scope. Market conditions, property desirability, and transaction leverage all play a role.

Over-lawyering the issue or presenting extensive redlines can undermine an otherwise reasonable request.

Brokerage and Agent Considerations

Agents may be hesitant to deviate from standard forms, particularly where brokerage policies are involved. Framing the change as client-driven and narrowly tailored often allows agents to support the request without internal friction.

In some cases, agents will defer to legal counsel when dispute-resolution provisions are involved, particularly where waivers of jury trial or class actions are implicated.

When Arbitration Provisions Are Difficult to Change

Some large brokerages are resistant to altering arbitration clauses, especially in buyer-broker agreements. Even when removal is not feasible, raising the issue clarifies risk and ensures the provision is knowingly accepted rather than assumed.

Where arbitration remains in place, understanding its scope becomes especially important.

Why Striking Arbitration Does Not Signal Distrust

Dispute-resolution preferences do not imply an expectation of conflict. Sophisticated parties routinely prefer judicial resolution for complex or high-value matters.

Treating arbitration as a negotiable business term—rather than a loyalty test—keeps negotiations professional and focused on structure rather than suspicion.

Legal Review as a Quiet Value Add

A targeted legal review focused on arbitration and waiver provisions can often be completed quickly and without delaying the transaction. The goal is not to litigate the deal, but to understand how disputes would be handled if they arise.

Small adjustments at the outset can preserve significant rights later.

Closing

Arbitration clauses are often treated as routine formalities in real estate contracts. In reality, they shape cost, leverage, and outcomes if disputes arise. When raised early and framed properly, these provisions can often be modified or removed without friction. Presidio Law Firm LLP works with buyers and sellers to evaluate arbitration clauses and to approach negotiation in a way that preserves rights while keeping transactions moving forward.