Dispute Resolution

In a perfect world, all home owners would pay their assessments on time and abide by the deed restrictions and all association boards would be fair and uniform in their enforcement of those deed restrictions. While most associations operate with little conflict, enforcement of collections and deed restrictions can create significant animosity in the relationship between an association's board of directors and a home owner.

Most disputes between an association and owner involve enforcement of the governing documents (including timely payment of required assessments) and compliance with the deed restrictions. Condominiums add a third issue of dispute with disagreements over the association's duty to repair specific damage to an individual unit.

Depending on an association's governing documents, these disputes usually cost an offending owner financially. For a delinquent assessment, late fees are usually added along with other authorized financial penalties and/or interest. For deed restriction violations, many governing documents provide authority for the board to assess fines. Should those fines go unpaid, late fees and other financial penalties can also attach. Should any dispute go unresolved long enough, many associations will turn the delinquent collection over to an attorney who then adds legal fees to an owner's bill. Financial penalties are successful in gaining the attention of an offending owner, but that attention often only adds to the hostility of a dispute. In some extreme cases, that hostility has turned to violence directed at the board.

The challenge facing boards and owners across this country is to work to avoid these disputes, but when they occur to work harder to manage and resolve disputes reasonably and fairly. One key to resolution is early, constructive communication between the board and the owner before hiring expensive legal counsel. If an owner is belligerent or a board is unresponsive about a disputed fee or fine, adding attorney's fees to the bill will only escalate the problem. While communication sounds easy enough, an informal discussion of the issues and evidence relating to a dispute is sometimes neglected. Often, the difficulty of making contact or finding adequate flexibility in work schedules to discuss a matter can be difficult for the owner and volunteer board members. To address this problem, some states have enacted laws requiring an attempt at formal resolution of a dispute before the board takes an enforcement action or a party files suit in court. Let's look at a few examples:

California--Under the Davis-Stirling Common Interest Development Act, parties involved in a dispute related to the enforcement of the governing documents are encouraged to submit their dispute to a form of alternative dispute resolution such as mediation or arbitration prior to filing suit. The form of alternative dispute resolution chosen may be binding or nonbinding at the option of the parties. The costs of the alternative dispute resolution are paid by the parties. In fact, upon filing suit, the court requires evidence that at least one party attempted this means of resolution. In addition, for an association that imposes a monetary penalty on any member for a violation of the governing documents or rules of the association, the board of directors of the association must meet in executive session if requested by the member being disciplined, and the member shall be entitled to attend the executive session.

Florida--Under Florida law, a fine or suspension may not be imposed on an owner without notice of at least 14 days to the person sought to be fined or suspended and an opportunity for a hearing before a committee of at least three members appointed by the board who are not officers, directors, or employees (or their relatives) of the association. If the committee, by majority vote, does not approve a proposed fine or suspension, it may not be imposed. Florida, like California, also encourages the use of alternative dispute resolution prior to filing suit.

North Carolina--Regarding an association's ability to impose fines or suspend privileges or services, unless a specific procedure is provided for in the declaration, a hearing shall be held before an adjudicatory panel appointed by the executive board to determine if any lot owner should be fined or if privileges or services should be suspended pursuant to the powers granted to the association. If the executive board fails to appoint an adjudicatory panel to hear such matters, hearings shall be held before the executive board. The lot owner charged shall be given notice of the charge, opportunity to be heard and to present evidence, and notice of the decision.

Oregon--An association must give written notice and an opportunity for an owner to have a hearing before the board before it can levy a reasonable fine for violations of the declaration, bylaws, rules and regulations of the association. Before initiating litigation or an administrative proceeding, the party who intends to initiate litigation or an administrative proceeding shall offer to use any dispute resolution program available within the county in which the planned community is located. The written offer must be hand-delivered or mailed by certified mail, return receipt requested, to the address, contained in the records of the association, for the other party. The party receiving this offer then has ten days to accept the dispute resolution offer (and the resolution must be completed within 30 days) or the litigation or administrative proceeding may begin.

Texas--Under Texas laws governing both condominiums and residential subdivisions, before an association can enforce the deed restrictions through suspension or levying a fine, it must provide an owner written notice of the violation and a 30-day opportunity to discuss the matter in a hearing before the board.

Virginia--Before a fine or suspension may be imposed, an owner must be given an opportunity to be heard and to be represented by counsel before the board of directors or other tribunal specified in the documents. Notice of a hearing, including the charges or other sanctions that may be imposed, must be hand delivered or mailed by registered or certified mail, return receipt requested, to the member at the address of record with the association at least fourteen days prior to the hearing. The hearing result also must be hand delivered or mailed by registered or certified mail within three days of the hearing.

Washington--Before an association can levy a fine for a violation of the deed restrictions, it must provide an owner notice of the violation and an opportunity to be heard by the board of directors or by the representative designated by the board of directors and in accordance with the procedures as provided in the bylaws or rules and regulations adopted by the board of directors.

The judicial system in each state is available for civil disputes between an association and owner, but it is clear that many states would like associations and their members to handle disputes internally. If that doesn't work, then use of alternative dispute resolution is offered as a secondary option before full litigation in the courts. Often, the disputes and fines involved are so small that it is impractical to hire an attorney and file suit. Doing so increases costs to both sides that usually dwarf the amount of the original dispute. A gentle reminder to all that the association is established to serve its members, neighbor helping neighbor, may help diffuse situations that lead to hard feelings or worse, the courtroom.

Association Times' Staff Writer