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Arbitration is an informal hearing in front of a neutral third party, the arbitrator, who discovers the facts of the dispute through testimony and documents and then renders a final determination of the dispute, called an arbitration award. The basic structure of an arbitration process is as follows:
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Part Ten of the Code of Ethics and Arbitration Manual details the procedures for conducting arbitration hearings. Traditionally, and pursuant to the procedures in the Manual, hearings have been conducted by panels of REALTOR
members of the Professional Standards Committee, with a panel chair appointed by the Chair of the committee.
Any of the following four (4) hearing officer options may be adopted locally to supplement the hearing procedures in the Manual. It is important to note that authorizing use of hearing officers supplements and is not a substitute for the Manual’s arbitration hearing procedures.
Role of hearing officers
Local boards/associations electing to implement the hearing officer concept in their arbitration processes will need to choose one of the following:
1) REALTOR hearing officer(s) who chairs arbitration hearing panels of the Professional Standards Committee (either as an employee or as a volunteer).
2) Staff hearing officer(s) who chairs arbitration hearing panels of the Professional Standards Committee.
3) REALTOR hearing officer(s) who sits alone and conducts arbitration hearings.
4) Staff hearing officer(s) who sits alone and conducts arbitration hearings.
Right of respondent to hearing before a hearing panel
Where a board/association routinely utilizes hearing officers (either REALTOR or staff) sitting alone, complainants and respondents retain the right to have arbitration requests considered by a panel composed of members of the local Professional Standards Committee.
Qualification and criteria for hearing officers
Boards and associations have considerable latitude in establishing criteria that hearing officers must satisfy on an ongoing basis.
At a minimum, hearing officers must be thoroughly familiar with the arbitration procedures outlined in the Code of Ethics and Arbitration Manual, state real estate regulations, and current real estate practice. Hearing officers may also be required to periodically complete procedural training determined locally (e.g. seminars conducted by state or national associations, “distance learning” programs, including the Professional Standards component of NAR’s Advanced Administrative Concepts program, etc.).
Since enforcement of the Code of Ethics (including dispute resolution pursuant to Article 17) is an expressed duty of the local Professional Standards Committee, hearing officers will act on behalf of and under the supervision of the Professional Standards Committee.
Conduct of hearings
The procedures for hearings under the hearing officer concept are those established in the Code of Ethics and Arbitration Manual. In boards and associations using hearing officers sitting alone, references to “hearing panels” shall be construed as meaning the hearing officers.
Errors & Omissions Insurance Coverage
Compensated hearing officers, whether REALTORS or staff, are covered under the board’s blanket errors and omissions insurance if they are full or part-time employees of the board. Hearing officers who are not full or part-time employees are not covered and should consider securing their own professional liability insurance.
Under the NAR arbitration program, associations need to review the information contained in these guidelines and decide whether to develop and implement an arbitration program. Because of the various state arbitration statutes, associations will need to develop their own arbitration programs. This should be done following the guidelines set forth in this manual and in conjunction with the association's legal counsel. The mandatory arbitration guidelines below have been developed by NAR and must be followed by each association in their development of their arbitration program in order to maintain professional liability insurance coverage for the administration of an arbitration program.
The guidelines have also been adopted to ensure the integrity of the arbitration program on a national basis. The guidelines are requisite to association participation in the NAR arbitration program. The intent of the guidelines is not to discourage or exclude associations from participating in the program, but rather, to make certain that an association's leadership, staff, and members know and understand the level of commitment and resources that are required to effectively initiate and administer an arbitration program as an ongoing service of the association.