WHAT IS ‘ADR’
Alternative Dispute Resolution (‘ADR’) is any one of a number of methods designed to resolve a dispute without the necessity of a lawsuit or trial.
- It is required. New Jersey requires that parties to a dispute participate in some form of ADR prior to an Association imposing a fine and/or prior to proceeding to trial.
- Cost savings. ADR often saves all parties costs in terms of attorney fees, court costs and time commitment.
- Risk Reduction. The parties maintain control of the dispute outcome. Rather than risk having a judge or jury, who may not be as familiar with or interested in the dispute, make a binding decision, the parties can reach a compromise where each may get less than everything but neither will risk losing everything.
- Post-Dispute Relations. Parties to Association disputes will typically continue to live as neighbors or community members after the dispute. This is unlike many commercial litigation cases where the parties are unrelated except for the subject of their dispute. An agreed upon settlement may more quickly return relations to normal after the dispute is resolved.
Today the most common forms of alternative dispute resolution are mediation and arbitration.
Mediation is typically a loosely structured process involving a neutral mediator who assists the parties in identifying the key disputed issues, suggests solutions and aids in reaching a compromised resolution.
Mediation is probably the most common form of alternative dispute resolution in community associations. The reason for this is procedural simplicity and flexibility combined with the fact that the parties retain control over their dispute.
The Mediation process typically involves the following:
- Notice. The Association sends the violation notice describing the alleged violation, notifying the accused of the date and time for the mediation and notifying the accused that non-attendance will be taken as a waiver of the right to alternate dispute resolution.
- Mediator. Appointment of a mediation committee composed of non-Board members who do not know the parties to the dispute and who are not involved with the disputed issues. An independent mediator (or arbitrator) may also be hired. The advantage of this is that the independent mediator (or arbitrator) will likely be even more independent and may compel the parties to more seriously discuss the matter. The drawback is that professional mediators charge significant fees.
- Process Overview & Confidentiality. The mediator must outline the mediation process and discuss confidentiality with the parties (determine which information he or she may disclose to the other side during the mediation process). Prior to the mediation the mediator should also discuss payment of any mediation costs, the attorney fees and who will bear such costs.
- Initial Statements. Allow each party to explain their version of the facts without interruption.
- Individual Caucuses. Often mediators will then separate the parties and discuss the nuances of each party’s position. The mediator will also point out the strengths and weaknesses of each party’s position and highlight the benefits of settling versus pursuing the case through the courts. During individual caucuses the mediator may learn of sources of friction that are not the original source of the complaint. If possible, these additional issues should be addressed too.
- Framing Key Disputes & Possible Settlements. The mediator will then bring the parties back together, frame the key disputes and suggest settlement scenarios.
- Reducing Settlement to Signed Writing & Providing for Default Penalty. If the parties reach an amicable settlement, the mediator should assist in reducing the settlement to a written instrument that is signed by both parties and that provides for penalties if the parties fail to abide by the settlement agreement. If the parties cannot reach an agreement, the mediator should issue an opinion as to how the mediator feels the matter should be settled. This would be an advisory opinion or a non-binding arbitration.
In contrast to mediation,arbitration is more formalized and involves one or more neutral or non-neutral arbitrators who, much like judges, listen to the parties’ arguments, review their evidence and render a decision. The determination may be binding or non-binding. In a non-binding arbitration the parties have the right to have the dispute reevaluated by a court. In a binding arbitration, the arbitration decision is binding and enforceable against both parties.
In Association disputes, arbitration decisions are typically non-binding unless otherwise agreed to in writing. This allows the parties to take the non-binding decision as advisory and either adopt it or reject it. Further, settlements are limited by the Association’s governing documents and a binding arbitration decision regarding governing document interpretation may be unwise and/or unenforceable.
In sum ‘ADR’ need not be complicated, confusing or expensive but rather a simple method of attempting to work out a problem without the necessity of going to Court.