Posted:
Don't underestimate the complexity of ADR. You could end up litigating the arbitration or mediation process. It has to be done well and provide members a low-cost and effective way to resolve disputes with the board. The board doesn't need assistance, since the board uses the association's funds for attorney fees and litigation — part of the tipped playing field.
Maybe the most important consideration is for the association to pay the cost for ADR the same way a municipality pays for courts. This levels the financial playing field and will encourage the board to settle the matter to avoid the ADR costs.
A second question concerns acceptance of the findings. Unless either party files with the circuit court within a short specified time, the ADR findings shall be binding on the parties.
The broader question is enforcement which can be a complex legal question. Hence, the arbitrator or mediator must be qualified to correctly interpret the governing documents, the applicable statutes, and the common law. If there is only a question of fact, ADR can probably be straight forward. But if there are questions about how the facts should apply to interpretation of the governing documents, that is another question. The criteria for interpretation can be complex and ladened with common law.
In a recent case in Michigan for example, (DAVID RIBICK V INVERRARY LLC), the court of appeals restated the standard for interpreting CC&Rs as
“Restrictive covenants are to be read as a whole to give effect to the ascertainable intent of the drafter,” Mable Cleary Trust v Edward-Marlah Muzyl Trust, 262 Mich App 485, 505; 686 NW2d 770 (2004), citing Borowski v Welch, 117 Mich App 712, 716; 324 NW2d 144 (1982), and strictly construed against grantors and the parties seeking to enforce the covenants. All doubts are to be resolved in favor of the free use of property. O’Connor v Resort Custom Builders, Inc, 459 Mich 335, 341-342; 591 NW2d 216 (1999); Stuart v Chawney, 454 Mich 200, -5- 210; 560 NW2d 336 (1997). Courts should not infer restrictions that are not expressly provided for in the controlling documents. O’Connor, supra at 341, citing Margolis v Wilson Oil Corp, 342 Mich 600, 603;70 NW2d 8111 (1955)."
Each state likely has different common law. Bylaws are generally subordinate to the CC&Rs. The board's authority to write rules may have a very tricky interpretation. All of these are likely governed by common law which varies from state to state.
Part of a good ADR process for an association would be a document that describes the law, applicable common law, etc. so that all can be working from the same standards.
I have provided some discussion about Enforcement Considerations at http://swagman.typepad.com/poa_governance/2006/02/enforcement_con.html#more. This post contains links to information about ombudsman in Florida and Nevada, and a process in Montgomery County, Maryland, that seems to work well.
The Colorado Senate Bill 06-89, statute 38-33.3-124, is woefully inadequate. It may be worse than nothing since it creates the appearance of addressing the dispute resolution issue. but lacks the requirements to be effective. It is motherhood and apple pie. If the HOA creates a good process, the results may be okay. The law lacks the specifics to ensure a good ADR process that is low-cost and effective for individual property owners.
Don Nordeen
Governance of Property Owners Associations
http://swagman.typepad.com/poa_governance/