Title 9.4. Real Estate Contract Arbitration · Last amended 2025 · Last verified July 29, 2026
In one sentenceSection 1298 requires arbitration clauses in real estate sales, lease, and agency contracts to be clearly titled, printed in bold or red type of a set size, and preceded by a capitalized notice next to the signature space, while preserving court jurisdiction over matters like probate and eminent domain.
(a)Whenever any contract to convey real property, or contemplated to convey real property in the future, including marketing contracts, deposit receipts, real property sales contracts as defined in Section 2985 of the Civil Code, leases together with options to purchase, or ground leases coupled with improvements, but not including powers of sale contained in deeds of trust or mortgages, contains a provision for binding arbitration of any dispute between the principals in the transaction, the contract shall have that provision clearly titled "ARBITRATION OF DISPUTES."
If a provision for binding arbitration is included in a printed contract, it shall be set out in at least 8- point bold type or in contrasting red in at least 8-point type, and if the provision is included in a typed contract, it shall be set out in capital letters.
(b)Whenever any contract or agreement between principals and agents in real property sales transactions, including, but not limited to, listing agreements, as defined in Section 1086 of the Civil Code, and buyer- broker representation agreements, as defined in Section 2079.13 of the Civil Code, contains a provision requiring binding arbitration of any dispute between the principals and agents in the transaction, the contract or agreement shall have that provision clearly titled "ARBITRATION OF DISPUTES."
If a provision for binding arbitration is included in a printed contract, it shall be set out in at least 8- point bold type or in contrasting red in at least 8-point type, and if the provision is included in a typed contract, it shall be set out in capital letters.
(c)Immediately before the line or space provided for the parties to indicate their assent or nonassent to the arbitration provision described in subdivision (a) or (b), and immediately following that arbitration provision, the following shall appear:
"NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY."
"WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION TO NEUTRAL ARBITRATION."
If the above provision is included in a printed contract, it shall be set out either in at least 10-point bold type or in contrasting red print in at least 8-point bold type, and if the provision is included in a typed contract, it shall be set out in capital letters.
(d)Nothing in this section shall be construed to diminish the authority of any court of competent jurisdiction with respect to real property transactions in areas involving court supervision or jurisdiction, including, but not limited to, probate, marital dissolution, foreclosure of liens, unlawful detainer, or eminent domain.
(e)In the event an arbitration provision is contained in an escrow instruction, it shall not preclude the right of an escrowholder to institute an interpleader action.
Plain-English Summary
Real estate deals move through deposit receipts, listing agreements, and leases with purchase options, and this section makes sure an arbitration clause tucked into any of them stands out. A clause covering disputes between the principals in the deal, or between principals and their agents, has to carry the heading "ARBITRATION OF DISPUTES" so nobody mistakes it for routine boilerplate.
Formatting rules back up that heading. A printed contract needs the clause in at least 8-point bold type or in contrasting red print, and a typed contract needs it in capital letters. Right next to the space where the parties initial their agreement to arbitrate, a longer notice -- again set out in bold or red type, or in capitals for typed contracts -- has to warn that initialing gives up the right to a jury trial and to full judicial discovery and appeal, unless the clause itself preserves those rights, and that agreeing is voluntary.
None of this cuts into the authority courts already have over real property matters that require judicial oversight, such as probate, divorce, foreclosure, unlawful detainer, or eminent domain. And if an arbitration clause shows up in escrow instructions, it does not stop the escrow holder from filing an interpleader action when competing claims to the same funds arise.
Frequently Asked Questions
What heading must a real estate arbitration clause use?
"ARBITRATION OF DISPUTES," clearly set out so the provision cannot be mistaken for ordinary contract language.
What has to appear next to the signature space for the clause to be enforceable?
A notice, in the same bold or red or capitalized format, warning that agreeing to arbitrate gives up the right to a jury trial and to full discovery and appeal unless those rights are preserved elsewhere in the clause.
Does this section limit a court's authority over matters like probate or eminent domain?
No. Section 1298 expressly preserves court authority over real property matters involving judicial supervision, including probate, marital dissolution, foreclosure, unlawful detainer, and eminent domain.
Can an escrow holder still file an interpleader action if the escrow instructions include an arbitration clause?
Yes. An arbitration provision in escrow instructions does not preclude the escrow holder's right to institute an interpleader action.
Amendment History
Amended by Stats 2024 ch 516 (AB 2992),s 6, eff. 1/1/2025. Title head amended by Stats 2007 ch 130 (AB 299),s 38, eff. 1/1/2008. Amended by Stats. 1989, Ch. 22, Sec. 1. Effective May 25, 1989. Operative July 1, 1989, by Sec. 2 of Ch. 22.
Source & verification. Section text is reproduced verbatim from
the Deering's California Codes Annotated / vLex. Enacted by the California Legislature.
Last verified July 29, 2026.
· Official source
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