MASTERING COMMUNITY CONFLICT: A GUIDE TO EFFECTIVE DISPUTE RESOLUTION

BY: STEVEN A. ROSEMAN, ESQ.

Although community associations may wish to avoid conflicts with members, the reality is that disputes and disagreements are inevitable. This is why community associations should have a playbook for addressing and resolving disputes when they arise. This article aims to provide you tools and information to manage conflicts effectively in your community association.

WHAT IS DISPUTE RESOLUTION?

Dispute resolution encompasses various methods for resolving disagreements or conflicts. Dispute resolution ranges from informal discussions between the parties to formal legal action. The various types and stages of dispute resolution serve as tools to efficiently and amicably resolve conflicts before resorting to formal legal action.

FORMS OF DISPUTE RESOLUTION

In California, there are 3 primary forms of dispute resolution: (1) Internal Dispute Resolution (“IDR”); (2 Alternative Dispute Resolution (“ADR”); and (3) Litigation.

1. Internal Dispute Resolution (“IDR”)

IDR usually takes the form of an informal meeting between the association and a member. The goal of the meeting is to facilitate direct conversation between the parties with the goal of resolving the dispute. The association or a member can initiate IDR by submitting a written request to the other party. If initiated by a homeowner, an association may NOT refuse to participate. Moreover, a homeowner cannot be charged a fee for initiating or participating in IDR and may bring someone to assist, even an attorney.

When engaging in IDR, associations should consider a few important points:

(i) Selective attendance. One or two board members are often appropriate and choosing the board member most familiar with the situation is preferred.

(ii) Establish a timeframe for the IDR. In most circumstances 30 minutes will be more than enough time for the association and the member to convey their points and discuss the matter.

When a conflict arises, the dispute resolution process can be initiated by either the association or a member. Although there is some flexibility, once initiated, the dispute resolution process and the association’s and member’s rights and obligations are governed predominantly by the Civil Code. There are many forms of dispute resolution and understanding the advantages (and disadvantages) of each can help associations better resolve conflicts.

(iii) Take notes and ask questions. An IDR meeting can serve as a fact-finding exercise and can help associations better understand the issue(s). Taking notes and asking questions of the member can help narrow the scope of the association’s subsequent actions.

Generally, associations should refrain from agreeing to a resolution or opining on issues during an IDR meeting. There is no privileged communication in the IDR process. Associations should take the information gathered back to the whole board and deliberate on the best course of action. In some cases, a resolution can be reached – be sure to consult legal counsel for your individual scenario.

Please note that associations are required to provide a fair, reasonable and expeditious procedure for resolving a dispute between the association and a member involving rights, duties or liabilities under the Civil Code, the Corporations Code, or the governing documents. Associations may adopt their own IDR procedure, which must comply with the Civil Code. If an association does not adopt its own policy, the procedures set forth in Civil Code § 5915 will apply.

Importantly, pursuant to Civil Code § 5910.1, if a member has requested IDR, an association cannot file a lawsuit unless and until it has first engaged in a good faith IDR meeting with the member.

2. Alternative Dispute Resolution (“ADR”)

More formal than IDR, but still not litigation, ADR involves the use of a neutral third party to help an association and member resolve their dispute. Unlike IDR, attorneys are often involved when a dispute rises to ADR.

There are two primary forms of ADR – mediation and arbitration.

(a) Mediation

Mediation is a voluntary process in which the parties to a dispute agree to submit their arguments to a neutral, third-party (mediator) who attempts to guide the parties to a mutually agreeable resolution. Everything discussed at or in preparation for mediation is confidential. Information may be shared with the other side with a party’s prior consent; however, such information may not be used against that party as evidence in a subsequent trial or arbitration. Mediation is more cost effective than arbitration or trial; however, professional mediators charge large hourly fees and there is no guarantee that a dispute will settle. The cost of mediation is shared equally by the parties. If the nature of a dispute does not lend itself to resolution by potential compromise, mediation may not be an effective use of time and resources.

(b) Arbitration

While arbitration may be binding or non-binding, binding is most common. Binding arbitration is akin to a trial in a private court system where a neutral third party (arbitrator) issues a binding decision that can be entered by the court as a judgment and enforced in the same manner as a court judgment. Unlike in civil litigation, there is no right of appeal in binding arbitration and discovery may be limited. The parties can agree, in writing, to a limited appeal right for errors of law or legal reasoning committed by the arbitrator. Arbitration costs are split, subject to reallocation by the arbitrator. Attorney fees and costs may be recoverable by the prevailing party. Generally, binding arbitration will result in final resolution of the dispute.

Please note that neither an association nor a member may file an “enforcement action” in Superior Court unless the parties have first endeavored to submit their dispute to ADR. (Civil Code §§ 5925-5965). A party receiving a request for ADR must respond within 30 days after receipt or the request will be deemed rejected and the requesting party will be free to file suit. Refusing to participate in ADR could be costly. Civil Code § 5960 directs the court, in determining the amount of an award of attorney fees and costs, to consider whether a party’s refusal to participate in ADR was reasonable.

3. Pros and Cons of IDR and ADR

Although IDR and ADR are similar, each has their own distinct advantages and disadvantages. The table below is a non-exhaustive list of the pros and cons of using each of these respective dispute resolution proceedings.

Pros

IDR

• Provides a forum for members to vent and be heard.

• Serves as a discovery tool.

• Allows association to analyze whether it has a “good” case.

ADR

• ADR communications are generally privileged.

• Use of neutral third-party can facilitate more practical analysis of issues and solutions.

• Quicker resolution than years-long litigation

Cons

IDR

• Discussions are NOT privileged.

• Non-binding. A member is not obligated to adhere to the resolution agreed upon at IDR.

ADR

• Expensive and time consuming (discovery, pre-hearing conferences, evidentiary hearings, etc.)

• Limited (and possibly no) right to appeal decision.

• Premature disclosure of the strengths or weaknesses of an association’s case.

4. Litigation

As a last resort, if a dispute cannot be resolved through IDR or ADR, an association can proceed to litigation. In the case of a homeowner’s violation of the governing documents, the decision whether to institute litigation to enforce the governing documents is a matter of business judgment, and a board should consider not only the likelihood of success, but the costs and benefits. The Davis-Stirling Act declares the covenants in the CC&Rs to be enforceable as equitable servitudes (Civil Code § 5980), meaning a court may grant injunctive relief. Although the norm in enforcement proceedings is an action for injunctive relief, occasionally applications for declaratory relief or monetary damages from breach of the CC&Rs are also appropriate.

Conclusion

Although conflicts in community associations are inevitable, a difficult, confusing, and frustrating dispute resolution process can be avoided. By understanding the different forms of dispute resolution and the pros and cons of each, community associations can better position themselves to resolve conflicts before they escalate to years-long lawsuits. Moreover, by using the strategies discussed above, community associations can put their best foot forward when disputes arise and work efficiently and tactfully to resolve them.

Steven A. Roseman is the founder and managing partner of Roseman Law, APC. He can be reached at roseman@ roseman.law.