By Elysa Bergenfeld and Nicole Miller
For homeowners and condominium associations (“Community Associations”), disputes among owners or between owners and boards are as inevitable – and undesirable – as special assessments. They can lead to tension and hostility and, if not handled properly and diplomatically, can metastasize into costly and disruptive litigation that leaves a sour taste in everyone’s mouth.
New Jersey law recognizes that such conflicts are bound to happen and that litigation is rarely, if ever, the most productive way to resolve such issues. That is why both the New Jersey Condominium Act, N.J.S.A. 46:8B-1 et seq., and the Planned Real Estate Development Full Disclosure Act (“PREDFDA”), N.J.S.A. 45:22A-21 et seq., require that Community Associations provide a “fair and efficient” alternative dispute resolution (ADR) mechanism for unit owners to resolve “housing-related” disputes between each other or with the board.
Specifically, as stated in Section 14 of the Condominium Act (and in parallel language in PREDFDA):
An association shall provide a fair and efficient procedure for the resolution of housing-related disputes between individual unit owners and the association, and between unit owners, which shall be readily available as an alternative to litigation. A person other than an officer of the association, a member of the governing board or a unit owner involved in the dispute shall be made available to resolve the dispute. A unit owner may notify the Commissioner of Community Affairs if an association does not comply with this subsection. The commissioner shall have the power to order the association to provide a fair and efficient procedure for the resolution of disputes.
Importantly, a board must participate if an owner requests ADR based on a housing-related dispute. However, while a board must make ADR available to quarreling owners, a unit owner cannot compel another unit owner to participate in ADR.
What Is a “Housing-Related” Dispute?
Community Association boards are not expected to be clearing houses for every possible gripe and grievance a unit owner has. Instead, as noted, the mandatory ADR procedures that boards must establish are only applicable and available to resolve “housing-related” disputes. Citing New Jersey public policy that favors arbitration over litigation whenever possible, courts have interpreted that term broadly, though not limitlessly.
In Bell Tower Condo. Ass’n v. Haffert, the court stated that “the term ‘housing-related disputes’ signifies that only disputes that arise from the parties’ condominium relationship are subject to the arbitration provisions” of the law. It noted several examples of matters that fall outside that definition, including:
- An auto accident in the condominium parking lot;
- A commercial dispute arising from a failed business venture between two unit owners;
- A palimony claim asserted by one unit owner against another;
- A legal or medical malpractice claim against another unit owner;
- A crime or disorderly persons offense committed by one owner against another; or
- Any other dispute that does not arise directly from the parties’ condominium relationship.
What Does Providing a “Fair and Efficient Procedure” Mean?
To satisfy the ADR requirement, boards can offer either mediation or arbitration. Both processes are overseen and conducted by an unbiased neutral third party who has no personal stake in the outcome. As such, neither the board nor any of its agents or employees can act as the neutral third party.
In a mediation, the neutral cannot impose a resolution on the disputing parties but can only work with them collectively and individually to bridge their differences and hopefully reach an agreed-upon solution. In an arbitration, the parties grant the neutral the authority to decide how the matter should be resolved.
The neutral third-party arbitrator reviews evidence, hears arguments from the parties, and hears testimony from witnesses. Though the rules of evidence and procedure are typically less stringent than at a trial, they are often similar to those of a case tried in a court of law. Arbitration can be binding or non-binding.
What ADR Can’t Do
ADR is not a means to secure an order to stop a board from taking action or to force a board to act. That kind of relief can only be obtained through appropriate court proceedings. Similarly, ADR is not the means to obtain monetary damages against an association.
Additionally, matters within a board’s legitimate discretion are not subject to ADR because a court will not substitute its judgment for that of a board. Only alleged violations of governing documents or other legal obligations can be the subject of an ADR demand against a board.
If your Community Association board needs assistance or guidance regarding its ADR policies, programs, and procedures, please contact Nicole Miller or Elysa Bergenfeld at Ansell.Law.
