Avoiding Court, Limiting Costs Alternative Dispute Resolution

Turn on daytime television and you might get a false impression that people like to go to court to work out their differences. There are so many cookie-cutter judicial shows like “The People’s Court,” “Judge Judy,” and “Judge Joe Brown,” where the process is made to look simple and quick. The truth is, however, that going to court is expensive, often very time-consuming, and more complicated than it appears on television (although those who air out their differences on the tube do get a stipend).

Filing a lawsuit should really be considered as a last resort when it comes to problem solving. For those who’d rather not incur the expense and endure the lingering acrimony of a lawsuit, there are other, often more productive options to consider.

Why Don’t We All Get Along?

Of course, it would be ideal if there weren’t any problems between residents and the board or if any problems did crop up they were easily resolved. Ideal, yes. Realistic? Not so much. In any community, there are bound to be disagreements from time to time. In some cases, they are resolved on their own, with both parties coming to an agreement without the need for someone to step in. However, that’s not always the case and the next logical step might seem to head to the courts so a judge can decide on the outcome.

Fortunately, there is an alternative that attempts to solve problems and minimize the need to step into a courtroom at all. It’s called alternative dispute resolution and the concept is simple: all parties meet with a mediator—a neutral party—and try to solve whatever the problem might be. If mediation doesn’t work, the disgruntled residents meet with an arbitrator (similar to a judge who will render a verdict.) Still at a standstill? The next step may be litigation.

Alternative dispute resolution has been gaining popularity in recent years as an effective problem-solving method, with one reason being the abundance of court cases already in the system. In New Jersey, the state’s Condominium Act requires that boards offer mediation as an alternative before the feuding residents or resident and board head to court. To that end, the New Jersey chapter of the Community Associations Institute (CAI-NJ) offers its own ADR program as an alternative to the traditional justice system. CAI-NJ mediators are trained by an education program developed by the chapter. The fee for ADR for CAI members is $250, and $350 for non-members.

“There is a federal law, the Federal Arbitration Act, and each state has an arbitration law which create a federal and state policy favoring arbitration to resolve disputes,” says Eric P. Tuchmann, general counsel and corporate secretary of the American Arbitration Association. “Arbitration and mediation agreements are generally contractual in nature, however, and except for court annexed arbitration and mediation programs, they are processes that are not required under state or federal law.”

Common Problems

Simeon H. Baum, president of Resolve Mediation Services, Inc., in Manhattan, says that arguments over property damage are a common point of conflict between boards and residents that need assistance to be resolved. “The board would be the one that the tenant would ask to repair or clean up property damage,” says Baum. “However, the resident has a difference of opinion as to what they did or the costs that were involved. Generally they would litigate in a situation like this, but mediation is a softer much more inexpensive process than litigation and is ideal for these kinds of disputes.”

Marc A. Landis, chair of the real estate practice group at Phillips Nizer, LLP, in Manhattan says that the top points of conflict are generally neighbor versus neighbor, even though legally it turns into neighbor versus board. “For example, the upstairs shareholder is making too much noise and the downstairs neighbor contacts the board, who has to enforce the house rules and proprietary lease, so it becomes a problem with the upstairs neighbor and the board,” says Landis.

The problem-solving process should start with the property manager doing what he or she can to diffuse the situation. “We try to take a holistic approach and find out what the underlying cause of the problem is,” says Landis. “Say, for example it’s a noise problem. The upstairs neighbor might not have a requisite carpet, or the subfloor and floor have become detached and it’s a mechanical problem. Or perhaps we can get the parties to agree that the upstairs neighbor can play their music until 7 p.m., instead of the 9 p.m. rule, because the resident below has young children. You have to find out what the problem is behind the problem and get to a solution that is more practical and, of course, at a lower cost.”

If this approach is unsuccessful, a letter of complaint will be sent from the board to the person that the complaint is being made against. “A mediator should be brought in as soon as it appears as though the parties will not be able to resolve the disputes among them through direct negotiations,” says Tuchmann. “However, a mediator can be brought in at any time after a dispute has arisen, including after a demand for arbitration has been filed, or after a litigation has been commenced.”

The ADR process is a confidential one where parties can talk freely about what is bothering them. The process starts with a mediator who can use various techniques to help them to negotiate an agreement.

The first step is mediator selection. “The parties are free to select whoever they think would most effectively resolve the dispute among them,” says Tuchmann. “Frequently, but not always, mediators are selected who have some background in the subject matter of the dispute. So in the case of a dispute involving a cooperative or condominium, the parties may want a mediator with a real estate background. If there are legal issues in disputes, there may be a particular interest in having a lawyer serve as the mediator.”

To find a mediator and start the process rolling, any party or parties to a dispute may voluntary initiate a mediation under the auspices of the American Arbitration Association (www.adr.org) or work with a private ADR company. Through the AAA, there is no filing fee to initiate a mediation or a fee to request the AAA to invite parties to mediate. The cost of mediation is based on the hourly mediation rate published on the mediator’s AAA profile. This rate covers both mediator compensation and an allocated portion for the AAA’s services. All expenses of the mediation, including required traveling and other expenses or charges of the mediator, are borne equally by the parties unless they agree otherwise. The expenses of participants for either side are paid by the party requesting the attendance of such participants. Private mediation companies may charge differently, so be sure to ask.

The mediator reaches out to the parties independently or together to learn more about the subject matter of the dispute. In some cases, the mediator requests a brief written positions from the parties. The next step is for the actual mediation to take place.

“The parties and their lawyers, if they have any, come together to present their positions and views to the mediator,” says Tuchmann. “Most commercial mediations take place with the mediator meeting separately with each side in a process know as “caucusing.” During the caucus, each side can speak on a confidential basis with the mediator. The mediator’s job is to take what he or she has learned about the case and the parties’ respective views and to facilitate a mutually agreeable resolution that each side can agree upon.”

“However, if mediation doesn’t work, the board can write another stronger letter, followed by a third letter mentioning that the resident is in default of the proprietary lease or house rules and may be fined,” says Landis.

The parties can then continue from mediation to arbitration. “Arbitration is an informal judicial hearing where the parties at odds with one another meet before an arbitrator who hears their arguments and makes a judgment similar to what the judge would say in a courtroom,” says Wendell Smith, a senior partner at Greenbaum, Rowe, Smith, Davis, LLP, in Woodbridge, New Jersey and the lead author of New Jersey Condominium and Community Association Law, a guidebook on the rules and regulations governing condos and HOAs in the Garden State. “The decision from the arbitrator is binding. Non-binding arbitration is when the arbitrator makes a decision that isn’t binding, but if it’s not appealed within 45 days, it becomes binding.”

The entire mediation process is meant to be quick. “If they can’t agree within two to four hours, it’s probable that they won’t,” says Smith.

It’s always in the best interest to resolve any conflicts with neighbor and neighbor or neighbor and board members as soon as possible, through clear communication. Like any argument, the more it sits and isn’t solved, the more it begins to fester and cause tension among tenants. That tension then starts to mount between other residents and the possible solution begins to become more expensive. Letting the tenants know that alternative dispute resolution is available could help to calm the situation down and get it solved before it gets out of control. It’s giving the tenants their ‘day in court’ without actually having to step into one.

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Lisa Iannucci is a freelance writer and a frequent contributor toThe Cooperator.

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2 Comments

  • Those TV court shows ARE arbitration, a form of ADR. They don't make that clear to viewers. I support the Arbitration Fairness Act in congress now, because it allows people in a dispute to choose what form of dispute resolution they want, AFTER a dispute arises. When a consumer gets a cell phone, phone service, a car, house, computer, nursing home care, etc, they often have no choice but to agree to the non-negotiable contract that prevents suing and forces industry friendly arbitration--they either have to take it as it is, or do without that product or service. And, these arbitration clauses are industry wide so there's little if any real option to go elsewhere in many cases. When the industry hires the arbitrators over and over, or states in a contract who will do the arbitration, the chance for bias is huge. Plus, since it's private and not run thru the courts, it hides a multitude of complaints from the public who has a right to know a company's complaint history so they can make informed decisions on who to do business with. The corporations love arbitration for the above reasons.
  • Safe Horizon Mediation Program on Tuesday, March 10, 2009 1:56 PM
    There is another option for professional mediation services in New York - try your local Community Dispute Resolution Center! The Safe Horizon Mediation Program offers confidential mediation and conflict resolution services in Manhattan and Brooklyn at absolutely NO COST. Just call us at (212) 577-1740 or (718) 824-6671 for more information.