Before you can sue over a real estate dispute in California, there’s a step many buyers and sellers overlook — and skipping it can cost you the right to recover attorney’s fees, even if you ultimately win.
The mediation clause hiding in your purchase agreement
The standard California Association of Realtors (CAR) Residential Purchase Agreement includes a mediation clause. In plain terms, it says: before either party goes to court or arbitration over a dispute arising from the contract, they must first attempt to resolve it through mediation.
This isn’t a minor formality. The clause is directly tied to attorney’s fees. If a dispute ends up in litigation and the prevailing party never made a good-faith attempt to mediate first, they can lose their right to recover attorney’s fees under the RPA — even if they win the underlying case.
Why this matters more than people realize
Attorney’s fees in a real estate dispute can be substantial. A buyer who wins a nondisclosure claim but skipped mediation first may end up paying their own legal costs out of any recovery, dramatically changing the economics of the case. This is one of the first things to check at the very start of a dispute, not something to think about after a lawsuit is filed.
What “prevailing party” means under the RPA
The RPA’s attorney-fee paragraph awards reasonable fees and costs to the “prevailing Buyer or Seller” but does not define the term. That question is answered by Civil Code § 1717, under which the court decides who obtained the greater relief on the contract — and the court may find that neither side prevailed. Because the fee award is expressly subject to the mediation paragraph, a party who skipped or refused mediation can be the winner on the merits and still recover nothing in fees. Before assuming you’re entitled to fees (or exposed to paying the other side’s), it’s worth confirming how both paragraphs apply to your facts.
Who the mediation clause applies to
This fee-shifting mechanism runs between the buyer and seller, as parties to the RPA. It generally does not extend to the selling agent/brokerage or your own buyer’s agent, since they aren’t parties to that contract’s fee clause — claims against agents typically follow different rules.
How to satisfy the mediation requirement
- A formal demand to mediate should be made in writing, referencing the RPA’s mediation clause
- Mediation should be attempted before filing suit or initiating arbitration, not as an afterthought once litigation is already underway
- Using a mediator familiar with California real estate disputes — ideally one who also sits on a recognized panel, like CAR’s mediation panel — tends to produce more productive sessions than a generalist mediator
What mediation actually looks like
Mediation is not a trial. It’s a structured, confidential negotiation with a neutral third party helping both sides find common ground. Many real estate disputes resolve at mediation without ever reaching a courtroom — faster, less expensively, and with more control over the outcome than litigation offers either side.
How Jimmy can help
Jimmy Nguyen is both a real estate litigation attorney and a certified mediator on the CAR mediation panel. Whether you need representation in mediation or a neutral mediator to help resolve a dispute, he brings a real estate-specific understanding that generalist mediators often lack.
Jimmy’s mediation practice sits alongside his real estate litigation work, and the mediation precondition matters most in earnest money deposit disputes, where the fees can exceed the money in escrow.
Email jimmy@lawjn.com or use the form below to describe your situation.