“Difficult” business partners, separated spouses, or spouses in the midst of a divorce must cooperate on ongoing real estate operations or transactions despite their differences. While they may be able to agree on big-picture goals, they often can't agree on anything else. Those parties should consider the alternative of engaging a third-party ‘on-call’ Neutral to resolve those ongoing operating or transactional disputes privately and to make and execute business decisions.

A Neutral can effectively resolve significant matters such as the terms of substantive transactions like acquisitions, leases, dispositions and loans. Smaller issues can also benefit from the involvement of a Neutral. For example, a Neutral can consummate transactions where one of the partners is just unresponsive, unavailable or unreliable when it comes to promptly making decisions or signing documents.

A Neutral may motivate the parties to cooperate (albeit reluctantly) when they otherwise would not. The parties can structure the Neutral agreement to provide that the Neutral will only be authorized to make decisions and take actions when the parties can’t agree and one of the parties requests the Neutral to act. For example, separated spouses could agree to refinance their apartment building, but could engage a Neutral to facilitate the transaction in the event one spouse just can’t seem to get around to signing the loan documents. The Neutral could be called upon sign those documents, allowing the property to be refinanced without interruption. Each time a business decision is needed, each party has to decide whether they are more likely to get what they want by trying to reach agreement with their partner, or to call on the Neutral and take the chance that the Neutral may or may not agree with them.

Some of the benefits of engaging a Neutral are:

The Neutral can be engaged by mutual private agreement of the parties, and is therefore within the control of the parties - no judge need be involved.
The Neutral’s engagement and work can remain discrete, confidential and private (as opposed to a receiver or provisional director whose activities are generally public record).
A Neutral does not have to file a bond to begin his work, or file a final account and report with the court in order to be discharged.
The scope of the Neutral’s work can be tailored to the specific requirements of the parties.
The Neutral is only billing when called upon by a party to make a decision or take an action.

Some possible obstacles that may be encountered in engaging a private Neutral are:

Can the parties agree whom to engage as the Neutral?
What is the scope of the Neutral’s authority?
Who will indemnify the Neutral?
Who pays for the Neutral’s services?

If the dispute is already in court but business operations must go on, a Neutral could be engaged by stipulation (and court approval). A stipulation could include the terms and compensation of the Neutral's engagement, allowing the parties to conduct business operations out of court while related litigation continues.

The Neutral’s engagement would typically automatically terminate upon the wind-up of all of the partners’/spouses’ business and the distribution of the assets, or by consent of all parties, or order of the court.

*David Wald is President, Wald Realty Advisors, Inc. and has been a fiduciary for nearly 20 years as a state and federal court receiver, custodian and referee. His experience covers over $3 billion of real estate and other business assets.