Arbitration of Appeals from Resident Claims Against Housing Providers in Small Claims in North Carolina

By: Kevin Raus

     In North Carolina, appeals from Small Claims court for money judgments (such as suits filed against a housing provider by a resident) first go to non-binding arbitration (in all counties in North Carolina pursuant to NCGS § 7A-37.1). [1] Arbitration is an alternate form of dispute resolution where a neutral third party, called an arbitrator, hears arguments and evidence from both sides and decides whether the defendant has any liability based on their findings. Unlike a court of law, the arbitrator is not bound by the rules of evidence, including hearsay, authentication, character evidence, etc., and the decision of the arbitrator is non-binding. In this blog post, we will discuss the pros and cons of arbitration in small claims appeals and the frustrations litigants may feel when going through the process.

     One significant advantage of arbitration in small claims appeals is that it is a more informal process than going to court. The parties are not required to follow the same procedures as in a court of law. This can make the process less intimidating and more accessible for people who may be unfamiliar with the legal system or uncomfortable with traditional court proceedings. Additionally, the relaxed rules of evidence mean that parties can present their arguments and evidence in a more flexible manner.

     However, this flexibility can also be a disadvantage at times. In traditional court proceedings, the parties are required to follow strict rules of evidence. Lack of adherence to these evidence rules can be frustrating as it leads to the admittance of evidence that would not be allowed in a more formal setting.

     One benefit of arbitration in small claims appeals is that it can be a faster and more cost-effective process than going to court. Traditional court proceedings can be lengthy and expensive, requiring significant time and resources from both parties. In contrast, arbitration is a more streamlined and efficient process, often resulting in a quicker resolution of disputes. Additionally, the parties can agree to limit the scope of the dispute and the length of the arbitration process, which can further reduce costs and time.

     Another drawback of arbitration in small claims appeals is that the arbitrator’s decision is not binding. Although the arbitrator’s decision serves as a recommendation or guidance to the parties, it is not a legally enforceable judgment. If a party disagrees with the arbitrator’s decision, they can still appeal the award to District Court within thirty (30) days of the entry of the Arbitration Award. This lack of finality may be frustrating for parties who are seeking a definitive resolution to their dispute.

     Another potential disadvantage of arbitration in small claims appeals is that the parties may have less control over the outcome than they would in a court of law. In traditional court proceedings, parties have the right to a jury trial or a bench trial and can exercise various procedural rights. In contrast, the parties in arbitration have less control over the process and the outcome. The arbitrator has much more discretion than the standard trial court judge does.

     Arbitration of small claims appeals is an alternative method of dispute resolution in North Carolina that has both pros and cons. While it can be a more informal, faster, and cost-effective process than traditional court proceedings, litigants may find it frustrating that the arbitrator is not bound by the same rules of evidence as in a court of law. Additionally, the lack of finality and control over the outcome may be a disadvantage for some. It is crucial for litigants to understand the differences between traditional court proceedings and arbitration and prepare accordingly.

[1] It is important to note that arbitration is not mandatory in small claims money-owed cases in South Carolina and Georgia, though the parties may consent to arbitration in those states. This is unique in that only Texas and California have the same requirements for their small claims appeals.