Conflict is inevitable when people live in close proximity to each other. Oftentimes, this conflict manifests itself in disagreements between a board of directors and one or more homeowners. Maybe someone put up a fence without approval. Maybe someone is making too much noise. Maybe someone isn’t following a particular deed restriction. Whatever the reason, tensions can quickly rise on both sides of the fence.
As boards in Texas and Colorado strive to uphold property values while keeping the peace, they often feel as though they have only two options when an informal conversation doesn’t cut it. In reality, there are at least three.
Lawsuits are costly, public and stressful for everyone involved. They can decimate an association’s reserves and leave years of bad blood that festers in the community like mold. Thankfully, there is another option specifically designed to settle these disputes quickly and privately. It also provides a clear path to resolution with the residents you serve.
What is Alternative Dispute Resolution?
Alternative dispute resolution (“ADR”) is a collective term used to describe several practices that allow people to settle disputes without a formal trial in front of a judge. When applied to community associations, ADR is really just an advanced toolkit for getting problems solved. Rather than having some judge hand down a final judgment against someone, the parties work together (with guidance) to come to a conclusion.
Homeowner associations actually have to provide alternative dispute resolution ADR in many states before they can even file a lawsuit over their governing documents. Texas and Colorado encourage (and in some cases require) associations to offer some form of ADR before resorting to litigation. The idea is that courts have too many cases on their dockets, and people who live next door to each other shouldn’t have to litigate like corporate opponents.
ADR Allows Boards to Address Complaints
For the purposes of HOA conflict resolution, these tools allow boards to address the concerns of the proverbial homeowner advocate who “doesn’t feel heard.” It takes the power dynamic out of “who is right?” and focuses on “how can we resolve this?”. This emotionless approach allows both sides to cool off, save face, and come together on a solution that is in compliance with the association’s covenants.
Mediation vs Arbitration
There are many different types of alternative dispute resolution ADR. However, the two most common methods used by HOAs are mediation and arbitration. Board members and community volunteers should familiarize themselves with both so they can pick the right tool for each job.
Mediation | Finding Compromise
Mediation is a voluntary process that involves the parties working with a neutral third-party mediator. The mediator doesn’t decide anything. Instead, they help facilitate conversation between the parties so they can reach a compromise on their own.
The beauty of mediation is that the parties can come to an agreement that suits their particular situation. If the parties can’t reach an agreement, they can always try arbitration (more on that below) or litigation. Since everything discussed in mediation is confidential, you also avoid the whole neighborhood finding out about the dispute.
Arbitration | Avoiding Court
Arbitration is similar to mediation, except the “neutral third party” acts as a private judge. The arbitrator will listen to both sides’ arguments, review evidence, and then issue a final decision.
Arbitration can either be binding or non-binding. The purpose of non-binding arbitration is really just to educate the parties on the merits of their position if it were to go to trial. If at least one party is unhappy with the outcome of a non-binding arbitration, they can still file a lawsuit. Boards usually prefer arbitration when they want an answer to a complicated legal issue without having to pay for a full-blown trial.
Understand Your Options
Litigation
✓ Tremendously formal
✓ Filed in public
✓ Costs can reach tens of thousands of dollars
✓ Decision rendered by judge or jury
Mediation
✓ Collaborative process
✓ Confidential
✓ Non-binding
✓ Parties have complete control of outcome
Arbitration
✓ Adversarial process
✓ Private
✓ Can be binding or non-binding
✓ Decision made by third party
The HOA Dispute Resolution Process
It isn’t enough to just know these methods exist. If a board throws around the words “mediation” and “arbitration” without any type of cohesive plan, they will likely find themselves accused of the same tactics they’re accusing the homeowner of using. When an impasse is reached, follow these steps.
Step 1: Internal HOA Complaint Process
First, the board should ensure they have followed their internal complaints process. This includes providing the homeowner with written notice of the violation(s) and an opportunity to speak at a board meeting. For the attorney geeks out there, this gives the HOA the ability to claim that those aggressive homeowners were afforded due process.
Next, it can’t hurt to have someone from your HOA management company review the entire file to ensure that all processes were handled correctly. Community association lawyers have seen just about everything under the sun. If your HOA manager notices that something was missed along the way – like your board failed to follow a certain provision of your CC&Rs when issuing a fine – they will know exactly what to do.
Step 2: Select Neutral Third Party
Similar to the prior step, using an attorney or a mediator who is experienced in community association law will help the board feel confident that the process is being handled fairly. Colorado actually has a statewide ombudsman program designed to help association members locate neutrals.
Step 3: The Actual Resolution Meeting
Remember: this is NOT the time to rehash every sin that this homeowner has ever committed against the HOA. Stay calm, cool, and collected so the other party knows you’re not emotionally invested in “winning” – you just want what’s best for the community. Host the mediation or arbitration session and let the professionals do their job.
Preparing for Alternative Dispute Resolution
Before walking into a mediation or arbitration session, take a few minutes to plan for success.
- Have all letters, pictures, and excerpts from the CC&Rs organized and ready to show the mediator/arbitrator.
- Meet with your attorney to ensure the board is on solid ground legally. You don’t want to show up to a mediation session just to be told “We can’t do that.”
- Know who has the authority to sign a settlement agreement on behalf of the HOA during the session.
- Know how much the mediator will cost as well as how much legal fees will be so you aren’t surprised later.
Call On Goodwin & Company — We’ve Got You Covered!
Alternative Dispute Resolution offers boards an opportunity to handle important disagreements in a dignified manner. It allows associations to protect their reserves while also keeping petty lawsuits out of the public record. Ultimately, using ADR shows members that you care about fiscal responsibility and the long-term productivity of the community.
Running a successful community is no easy task, especially when conflicts with residents arise. Since 1978, Goodwin & Company has served associations across Texas and Colorado by providing councils with the tools they need to lead. Instead of billing you by the hour and making you pay for surprises, we only require a monthly fee because we earn that every day with exceptional performance and total transparency.
From accurate budgeting to vigilant covenant enforcement, our professional services take care of the technical side of property management and lifestyle services while your board stays neutral. Contact the team at Goodwin & Company today to see how we can help your community thrive.
