The below article is a re-print of an article which was previously published in the June 2010 issue of Community Trends Magazine.
The scenarios are predictable and common. Faced with a request for alternate dispute resolution (“ADR”), the association’s property manager digs up the ADR policy to find it is full of legal terms and confusing procedures. Often times, the ADR committee members do not know how to start or what is expected, and the property manager can spend hours preparing the ADR committee (the members of which will likely change before the next hearing). A call goes out to the Association’s legal counsel to guide them through the process. Scared of the procedures, both sides “lawyer up” and might as well be in litigation. In all of these cases, ADR is an annoying, time-wasting, costly enterprise for the Association and, too often, a disappointment for the homeowner involved because it elevates the dispute and polarizes the parties. It is time for community associations to implement practical ADR. If they do, they will find the ADR process much less painful, both financially and emotionally.
What is Practical ADR?
Practical ADR is a policy of dispute resolution that is easy, economical, and efficient. It is a common sense way to address disputes. It empowers the parties to participate in finding solutions to an issue instead of battling it out to find an ultimate winner. Practical ADR in community associations means do-it-yourself mediation.
There are two basic types of ADR. Mediation is a process in which a neutral third party, with no power to impose a decision, helps disputing parties to reach an agreement. (See Black’s Law Dictionary.) Arbitration, on the other hand, is a process which also uses a neutral third party but this third party, an arbitrator, has the power to render a decision after a hearing. (Id.) Both mediation and arbitration can be used for any type of dispute: from the very complex to the most basic. But simple mediation best meets the needs of community associations by providing a quick and easy process that focuses, not on establishing who is right and wrong, but on how to resolve differences. Ultimately, this is what the law requires.
New Jersey Law Requires ADR
The law in New Jersey is simple. Community associations are required to “provide a fair and efficient procedure for the resolution of disputes between individual unit owners and the association, and between unit owners, which shall be readily available as an alternative to litigation.” N.J.S.A. 45:22A-44(c); N.J.A.C. 5:26-8.2(c). The New Jersey Condominium Act (“Condo Act”) has a similar requirement. (See, N.J.S.A. 46:8B-14(k).) The Condo Act also prohibits board members from serving as a mediator or arbitrator by stating: “A person other than an officer of the association, a member of the governing board or a unit owner involved in the dispute shall be made available to resolve the dispute.” N.J.S.A. 46:8B-14(k). This prohibition constitutes a basic aspect of fundamental fairness and should be adhered to by all community associations, not just condominiums.
Because New Jersey law does not require any specific procedure for ADR, community associations should simply ensure they provide a fair process which also meets the requirements of the association’s governing documents.
The Association’s Governing Documents May Have Specific ADR Requirements.
The governing documents for most community associations do not address ADR except to say that it must be provided. In recent years, certain sponsors have been more specific with regard to ADR policies. These sponsors, and their lawyers, may believe highly detailed ADR policies help community associations or protect homeowners; more often than not, they are a burden that increase costs to all and help nobody. When the bylaws are very specific, practical ADR may not be possible without an amendment. Fortunately, homeowners are likely to see the benefit of a well written practical ADR policy.
Implementing Practical ADR
The first step in implementing practical ADR is to make a fresh start: with your attorney’s approval, toss out your association’s existing ADR policy. The second step is to review the association’s governing documents to determine what specific processes are absolutely required, if any. The third step is to develop a fundamentally fair policy utilizing simple mediation that adheres to the association’s obligations under the law and the governing documents.
Dos and Don’ts of Practical ADR
DO understand what the law and the association’s governing documents require. The ADR policy must be formed around those basic requirements. Use these as a framework.
DON’T adopt a policy you do not understand and cannot reasonably follow.
DO have a clear, simple, written policy. The ADR policy should describe notice and scheduling requirements, the hearing process, and what happens when the hearing is completed. If, after an ADR hearing, you find the process is deficient in some way, revise the policy.
DON’T let the lawyers litigate during ADR. While a homeowner should be entitled to have a lawyer at his side during the ADR hearing, and the Association may want to do the same, the lawyers should allow the parties to mediate the dispute.
DO keep the association’s lawyers informed. While an association’s lawyers should always be kept informed about disputes, the lawyers need not be involved in every single ADR hearing.
Disputes involving serious legal issues like housing discrimination, handicapped parking or access, violent or criminal acts, and threats of litigation should always be vetted by legal counsel before moving to ADR.
DO consider using the board members as a valuable first step in resolving disputes. While the Condominium Act does limit the participation of officers and board members in the dispute resolution process, the board can serve an important role. Often a disgruntled homeowner will just want to vent or simply does not understand a policy; spending 15 minutes with the board may lead to resolution of the dispute. Such a meeting will not discharge the Association’s obligation to provide ADR, however, so if a meeting with the board does not resolve the problem, ADR will still have to be offered.
DON’T put the homeowners on trial. Using a process with a finder of fact, such as an arbitrator or ADR panel inevitably leads to a mini trial. When a “verdict” is at stake, the focus is on “winning” and not resolving the dispute.
DO focus on resolving the dispute through simple mediation. Each party can present a position and support for that position. The neutral mediator can talk to the parties separately and together and try to find common ground or areas of compromise. If the dispute cannot be resolved after a fair and efficient procedure, the parties simply go their separate ways–sometimes the dispute fades away and sometimes it moves to litigation–but the obligation for ADR will have been properly discharged.
DON’T assume you need a professional mediator; dispute resolution is a fact of life and something we all do every day. Professional mediators are an extremely valuable asset in many situations but they are not necessary for most community association ADR hearings.
DO set time limits and enforce them. Practical ADR for a community association, unless very complicated, should rarely take more than an hour.
DO start implementing practical ADR for your practical association now.