New Neighborhoods–Alternative Dispute Resolution

New Neighborhoods

By Gary A. Poliakoff and Ryan Poliakoff

Alternative Dispute Resolution

Dear Poliakoffs,

What is the difference between mediation and arbitration and is it true that I have to take part in mediation or arbitration before I can sue my condominium association?  Signed, A.T.

Dear A.T.,

Mediation and arbitration are both forms of alternative dispute resolution (ADR)—ways that a dispute between parties can be solved without resorting to costly litigation.  Before we address the specifics of how ADR works in condominiums, it would be helpful to explain the difference between mediation, arbitration and lawsuits.

Obviously, the first form of “dispute resolution” is to try and handle disputes directly, by having an open discussion between the two parties.  A friendly resolution is free and relatively stress free if the dispute has limited facts and both sides are willing to have an honest talk about the issues and are dedicated to solving problems.

Assuming that the direct method hasn’t worked, the next and least aggressive form of ADR is mediation.  A mediation (which can be either mandatory or voluntary) occurs when the two parties sit down, usually with their attorneys, in front of a trained mediator.  A mediator’s job is to help the two sides air their grievances in a productive manner.  Mediators are not judges—they do not decide what is right or wrong, or what the true facts of the dispute are.  Instead, mediators assist parties in reaching their own bargain, usually by serving as a shuttle between the two sides as they negotiate settlement terms.  Mediations are non-binding, unless the parties sign a settlement agreement at the end of the process.  Statistically, mediation is an extremely effective form of dispute resolution, and good mediators help the two sides come to an agreement that neither party is entirely happy with (which ordinarily signals a fair negotiation).

In an arbitration, an arbitrator will serve as a private judge who will determine which side is “right” and wins the dispute.  Both sides will present facts to the arbitrator (usually through attorneys, just as in a courtroom).  Witnesses may be interviewed, and documents reviewed.  Eventually the arbitrator will come to a conclusion of fact, just like a judge, and award relief to one or the other party.  Arbitrations can be either binding or non-binding—a non-binding arbitration is essentially a professional advisory opinion on the likely outcome if the dispute were to go to trial.  A binding arbitration, in contrast, is essentially a private, less costly form of courtroom litigation where both parties have agreed to abide by the arbitrator’s final decision.

Last, of course, is litigation, where a dispute is brought in a state or federal courtroom where judges or juries are presented facts (by attorneys, in large disputes) and render a decision that is binding on the parties and may only be appealed if there is an argument over an issue of law.  The fact finder’s determination of the truth of the dispute is generally written in stone after a trial ends.

Now, in the condominium arena, mediation is optional across the board.  Arbitration is mandated whenever there is a disagreement between two or more parties that involves either:

(a)        the authority of the board of directors, under the Condominium Act or condominium documents, to require any owner to take any action, or not to take any action, involving the owner’s unit or the appurtenances thereto; or to alter or add to a common area or element; or

(b)       the failure of a governing body, when required by the Act or condominium documents, to properly conduct elections, give adequate notice of meetings or other actions, properly conduct meetings, or allow inspection of books and records.

Expressly excepted from the requirement of non-binding arbitration are any disagreements that primarily involve title to any unit or common element, the interpretation or enforcement of any warranty, the levy of a fee or assessment, the collection of an assessment, the eviction or the removal of a tenant from a unit, alleged breaches of fiduciary duty by one or more directors, or claims for damages to a unit based upon the alleged failure of the association to maintain the common elements or condominium property.

It is also important to note that, prior to a board taking any action against a unit owner for an alleged violation of the Act or documents, the board must provide the unit owner with advance written notice of the specific nature of the dispute, a demand for relief and a reasonable opportunity to comply or to provide the relief, and notice of the intention to file an arbitration petition or other legal action in the absence of a resolution of the dispute.

So the short answer is that mediation is optional, but highly encouraged, as it is a very cost effective way to settle complex disputes and has an extremely good success rate.  Arbitration is mandated in certain specific instances, and in every other situation litigation is fair game.

Gary A. Poliakoff and Ryan Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living.  Gary Poliakoff is a founding principal of Becker & Poliakoff, P.A., and Ryan Poliakoff is the Vice President of Management at AKAM On-Site.  Email questions to condocolumn@becker-poliakoff.com.  Please be sure to include your hometown.

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