What Is Real Estate Arbitration? A Guide for Hawaii Attorneys and Property Owners

Let's walk through what is real estate arbitration

A commercial dispute erupts between a Waikiki property owner and their long-term tenant over a lease escalation clause. Litigation could take years. The court docket is crowded. Both sides want a faster, more private resolution. And the lease itself includes a clause requiring disputes to be resolved outside the courtroom.

That clause points to real estate arbitration. And in Hawaii's commercial real estate environment, where leasehold structures, complex transactions, and specialized property types create frequent disputes, understanding arbitration matters for attorneys, property owners, and business partners.

Let's walk through what is real estate arbitration, how it works, why it matters, and what Hawaii commercial real estate professionals should understand about this alternative dispute resolution process.

The Basic Definition

Real estate arbitration is a form of alternative dispute resolution (ADR) where parties to a real estate dispute submit their disagreement to one or more neutral third-party arbitrators, who hear evidence and arguments and issue a binding decision. The process serves as an alternative to traditional court litigation.

Arbitration decisions are typically final and enforceable. The parties generally waive their right to appeal in court except in limited circumstances (procedural errors, fraud, arbitrator bias).

When someone asks what is real estate arbitration, the cleanest way to frame it is: it's a formal but non-court process for resolving real estate disputes, where parties present their case to neutral arbitrators whose decision they've agreed in advance to accept.

How Arbitration Differs From Litigation

Real estate arbitration differs from court litigation in several important ways.

Private forum: Court proceedings are generally public. Arbitration is typically private, with limited public disclosure of proceedings or outcomes.

Faster resolution: Arbitration typically resolves disputes in months rather than the years often required for commercial litigation to reach conclusion.

Chosen decision-makers: In arbitration, parties often have input into who serves as arbitrator, allowing selection of individuals with specific real estate expertise. In court, judges are assigned.

Simpler procedures: Arbitration procedures are typically less formal than court rules of civil procedure, though formal enough to ensure fairness.

Limited appeals: Court judgments can generally be appealed. Arbitration awards have very limited grounds for court challenge.

Cost differences: Arbitration costs vary but often (though not always) are lower than fully litigated commercial cases.

Understanding what is real estate arbitration at this level shows why parties often prefer it for commercial disputes where speed, privacy, and expertise matter.

When Real Estate Arbitration Is Used

Real estate arbitration comes up in several distinct contexts.

Commercial lease disputes: Disagreements over rent escalations, CAM charges, lease interpretation, or property condition. Many commercial leases include arbitration clauses.

Partnership disputes: Real estate partnerships (LLCs, LPs, joint ventures) often include arbitration provisions for disputes among partners.

Purchase and sale disputes. Contract disputes over property condition, disclosure, closing terms, or breach can be arbitrated when the purchase agreement includes an arbitration clause.

Boundary and easement disputes: Some property disputes involve narrow factual issues well-suited to arbitration.

Broker-client disputes: Real estate brokerage agreements often include arbitration clauses for commission disputes and similar matters.

Ground rent reset disputes: Particularly relevant in Hawaii, disputes over ground rent resets in commercial ground leases frequently go to arbitration.

Appraisal disagreements in specific contexts: Some contracts specify that disagreements over property value be resolved through arbitration involving appraisers.

Understanding what is real estate arbitration requires understanding these different contexts, each with its own dynamics.

The Role of Appraisal in Arbitration

Real estate appraisals play a central role in many arbitration proceedings.

Value in dispute: When the dispute involves property value (buyouts, ground rent resets, breach of contract damages), each side typically presents appraisal testimony to support their position.

Expert witness testimony: Appraisers frequently serve as expert witnesses in arbitration, presenting analysis and defending conclusions under questioning from opposing counsel.

Neutral appraisal: In some arbitration structures, the parties agree to accept the conclusion of a jointly-selected neutral appraiser rather than presenting competing appraisals.

Appraiser as arbitrator: For narrow valuation disputes, an experienced appraiser may serve as the arbitrator, bringing specialized expertise to the decision.

For attorneys handling commercial real estate arbitration matters, working with appraisers who have both strong analytical capability and experience in arbitration settings can be decisive.

Common Arbitration Structures

Arbitration proceedings can be structured in several ways.

Single arbitrator: One neutral arbitrator hears the case and issues a decision. Common for smaller disputes and where parties want efficiency.

Three-arbitrator panel: Three arbitrators (sometimes each side selects one, with those two selecting a third) hear the case. Common for larger, more complex commercial disputes.

AAA administration: The American Arbitration Association administers many commercial arbitrations under established rules, providing administrative support and arbitrator selection processes.

JAMS administration: JAMS is another major arbitration administrator, often used for commercial real estate matters.

Ad hoc arbitration: Parties conduct arbitration under their own agreed procedures without formal administration by an established organization.

The specific structure often depends on the arbitration clause in the underlying agreement, which was typically negotiated when the underlying contract was signed.

What Happens in a Real Estate Arbitration

The typical arbitration process follows a general pattern, though specifics vary by administrator and structure.

Notice and demand: The party seeking arbitration provides formal notice, invoking the arbitration clause.

Arbitrator selection: Parties select the arbitrator(s), often through administrator processes or negotiated selection.

Preliminary conference: Arbitrators typically hold a preliminary conference to set schedules, define procedures, and address preliminary issues.

Discovery: More limited than court litigation, but arbitrators typically permit sufficient discovery for parties to prepare their cases. This may include document production, depositions, and expert disclosures.

Pre-hearing submissions: Parties typically submit written statements of their positions, supporting evidence, and expert reports before the hearing.

Hearing. Parties present evidence, examine witnesses, and make arguments. Real estate arbitration hearings typically last from one to several days depending on complexity.

Post-hearing submissions: Parties may submit written post-hearing briefs summarizing their positions.

Award: The arbitrator(s) issue a written decision. The award becomes binding on the parties, subject to very limited grounds for court challenge.

Understanding what is real estate arbitration at this procedural level shows why the process, though less formal than court, is still substantial and requires careful preparation.

Why Hawaii Real Estate Arbitration Deserves Special Attention

Hawaii's commercial real estate environment creates specific arbitration considerations.

Ground rent reset arbitrations: Hawaii's prevalent leasehold structures include many ground leases with periodic rent resets. These resets frequently go to arbitration, and outcomes depend heavily on appraisal work quality. This is one of the most common types of Hawaii commercial real estate arbitration.

Leasehold and fee simple interactions: Arbitrations involving Hawaii ground lease properties require appraiser and legal expertise in ground lease structures, remaining lease term analysis, reversion considerations, and market rent determinations for reset purposes.

Thin transaction data: Arbitration analyses depend on defensible market data. In Hawaii's thinner commercial market, this requires broader search criteria, market interviews, and creative analytical approaches to build support that withstands arbitrator scrutiny.

Special-use properties: Hotel disputes, marina disputes, and specialized commercial arbitrations require appraisers and legal counsel with matching specialized expertise. Generic commercial arbitration capability doesn't automatically translate.

Small and interconnected business community: Hawaii's commercial real estate community is relatively small and interconnected. Reputational considerations, ongoing relationships, and long-term business dynamics affect how parties approach arbitration.

Cultural considerations: Some Hawaii commercial disputes involve properties with kuleana rights, cultural designations, or family history considerations that affect both legal analysis and appraisal work.

Pacific territory arbitrations: For disputes involving commercial property in Guam, Saipan, or other Pacific jurisdictions, arbitration participants need appraisers and counsel with genuine local expertise in each specific market.

For all these reasons, what is real estate arbitration in the Hawaii context typically requires specialized local expertise on both the legal and appraisal sides.

What Attorneys and Parties Should Do

A few practical takeaways.

Understand your arbitration clauses: Before disputes arise, understand what your lease, partnership agreement, or purchase contract requires. Arbitration clauses vary significantly, and the specific terms matter enormously.

Engage qualified counsel early: Commercial arbitration is specialized. Attorneys experienced in real estate arbitration understand the procedural dynamics, evidentiary considerations, and strategic approaches that maximize outcomes.

Choose the right appraiser: For disputes involving property value, appraiser selection may be as consequential as attorney selection. Work with appraisers who have both strong analytical capability and experience testifying in arbitration settings.

Prepare thoroughly: Arbitration is faster than litigation but not less demanding. Thorough preparation of evidence, expert testimony, and legal arguments is essential.

Understand the finality: Arbitration awards are generally final. Prepare with the understanding that appeal options are very limited.

The Bottom Line

So, what is real estate arbitration? It's the alternative dispute resolution process where parties to a real estate dispute submit their disagreement to neutral arbitrators, whose binding decision resolves the matter outside traditional court litigation. It offers privacy, speed, chosen decision-makers, and simpler procedures compared to court proceedings, but requires the same careful preparation and defensible expertise.

For Hawaii attorneys, property owners, and business partners facing real estate disputes, arbitration is often the preferred (and sometimes contractually required) resolution method. Ground rent reset disputes, commercial lease matters, partnership disputes, and specialized property disputes all frequently involve arbitration in Hawaii's commercial market. That's where credible expert testimony and defensible valuation work make the difference, and it's the standard The Benavente Group has delivered for attorneys and property owners since 2017. Our MAI- and SRA-designated appraisers provide defensible valuations, expert witness testimony, and arbitration support across Hawai'i, Guam, Saipan, the Marshall Islands, and the wider Pacific. Call (808) 784-4320