What is arbitration?

Arbitration is a proceeding that is essentially a substitute for, and less formal version of, a lawsuit filed in court. It is intended to reduce the amount of time and legal fees required to reach a binding resolution in a dispute, although the decision reached by the arbitrator is binding on the parties to the dispute. The arbitration process begins by filing a request for arbitration. The request is a fairly simple form, which includes information such as the parties to the dispute, the requested arbitrators, the requested dates for arbitration, and where the arbitration will occur. The party initiating arbitration will also file a case summary, which sets forth the facts and issues in dispute, and their requested relief. The opposing party will then have a chance to file an answer and counterclaims, in which they will respond to the allegations in the case summary and have the option to make their own claims. Unlike a lawsuit, there is no formal discovery process in arbitration. Instead, prior to the hearing the parties will exchange all documents and disclose the witnesses they intend to use in the arbitration hearing. The hearing itself is conducted by an arbitrator, which is a neutral third party who essentially acts as the judge. The arbitrator will hear the testimony, review the evidence, and make a determination that is binding on both parties and enforceable in court.

Whether a party can seek to have a particular dispute arbitrated depends on the nature of the dispute and the wording of the arbitration provision in the condominium documents.

The Real Estate Bar Association Dispute Resolution Department is one outfit that offers arbitration services. They employ a number of arbitrators with extensive experience in real estate related matters, including condominium disputes. More information can be found on their website.

Is it a good idea to have an arbitration provision in your condominium documents?

As mentioned above, litigation can be very costly and time consuming. In some cases, it can take well over a year to resolve a dispute in court, and parties can spend upwards of tens of thousands of dollars, or more, litigating a dispute in court. As such, some condominium declarants – particularly those of smaller condominiums – include an arbitration provision in their condominium documents. The arbitration provision can either be mandatory or discretionary. With a mandatory arbitration provision, the parties in dispute are required to submit the matter to binding arbitration, and if one party files a lawsuit in court, the opposing party can seek to dismiss the case and compel arbitration pursuant to the mandatory arbitration provision (although if both parties agree to waive the arbitration provision and proceed in court, they can do so). Discretionary arbitration provisions do not require the parties to submit the matter to arbitration, but include it as a potential option for parties in dispute. Whether a party can seek to have a particular dispute arbitrated depends on the nature of the dispute and the wording of the arbitration provision in the condominium documents. In all circumstances, if the parties agree to arbitrate, they can do so even if the condominium documents do not contain an arbitration provision or even if the arbitration provision does not apply to their specific dispute.

What should you do when a condominium dispute arises?

It is important to consult with an attorney any time a dispute arises within a condominium. Regarding arbitration, the attorney will be able to review the relevant provisions in the condominium documents and first determine whether there is an arbitration provision. If there is such a provision, the attorney will advise whether it is mandatory or discretionary, and if it is discretionary, whether it applies to the particular dispute. The attorney can also discuss the pros and cons of proceeding with arbitration as opposed to filing a complaint in court.

Law firms specializing in condominium work, including our office, generally have extensive experience drafting and revising arbitration provisions within condominium documents. Additionally, the Real Estate Bar Association has model condominium documents for two-unit condominiums that contain an arbitration provision for smaller condominiums. If your condominium association is interested in exploring adding or revising an arbitration provision, we encourage you to contact your legal counsel for more information.