Avoiding the Courthouse: Using ADR and Common Sense to Resolve Community Association Disputes

By Margey Meyer, CMCA, PCAM

President, CADRExperts, LLC

Community Association Dispute Resolution Experts

www.CADRExperts.com

A homeowner paints her mailbox pink to support breast cancer awareness. Parents construct a playhouse in their backyard to help their disabled child. A veteran installs an American flag in his front yard. An environmentally- and cost-conscious owner installs solar panels on her roof. A renter nails a small religious object on the front door frame of her condominium unit. An owner starts construction on an outbuilding similar to a neighbor’s without first obtaining board approval. The spouse of a soldier serving in Iraq wraps the trees on her property with yellow ribbons.

In each situation detailed above, the board of directors sued the owner for violating the governing documents of the community association in which the home was located. Was that drastic action necessary or were there alternatives the board could have pursued that would have resulted in a more neighborly, less adversarial, more mutually-beneficial solution?

There are three essential steps to resolving issues successfully and amicably before they end up in court (and/or on the evening news or the lead story of news feeds):

  •    Work with developers to create association-friendly governing documents that empower the board to be flexible in addressing homeowners’ unique issues.
  •    Establish a relationship among owners, board members and the manager, if applicable, that engenders mutual trust, respect and open communications.
  •    Recognize potential disputes before they become adversarial or confrontational and utilize dispute resolution techniques to work out a solution.

 

Let’s start with step #1, where it all begins. Without flexible, enlightened governing documents, the board is hamstrung, limited to those words on paper that specifically instruct them what to do and when to do it, without considering special circumstances. Examples of 20th century language that hinder the board from responding with compassion, common sense and pragmatism are:

  •    Requiring annual and board meetings to be held at a specific date/day and time
  •    Requiring monthly, evening board meetings
  •    Requiring a high percentage of owners to attend in person or by proxy to achieve a quorum for an annual or special meeting
  •    Describing a confusing and difficult-to-implement election process
  •    Placing a cap on assessments, and requiring a vote by the owners to approve the annual budget,  increase assessments or impose special assessments
  •    Failing to clearly delineate owner and association maintenance responsibilities
  •    Failing to specify developer responsibilities for assessments and subsidies
  •    Establishing a board of more than seven members
  •    Creating multiple sub-associations instead of “villages” or other entities that don’t require separate boards of directors
  •    Not mandating ADR (Alternative Dispute Resolution) prior to filing suit
  •    Not clearly detailing in simple English the developer’s limited warranty to the association and to each owner
  •    Limiting the association’s purposes to enhancing the “health, safety and welfare” of the members without focusing on the three main functions of the association: (1) protecting, maintaining and enhancing the physical condition and property values of the community, (2) operating the association as a sound, nonprofit business enterprise and (3) building a community of neighbors

 

Conversely, developers could minimize the potential for disputes, reduce risk and ensure the success of the community association by following these 21st century best practices:

  •    Build it right (duh)
  •    Customize the documents—tailor them to the specific facts of each project
  •    Prepare realistic operating and reserve budgets that result in realistic assessments
  •    Segregate and transfer all operating and reserve funds
  •    Hire an independent, professional management company during the planning stage to review draft construction plans and governing documents, and work with the company throughout the transition process
  •    Establish a Homeowner Advisory Committee as early as possible in the development process
  •    Treat the association as a separate and independent business entity
  •    Ensure that marketing material reflects actual construction plans and doesn’t overpromise or increase expectations beyond reality
  •    Transition control of the association in accordance with governing documents and state law
  •    Continue to serve on and support the Board after transition of control

 

Now let’s turn to step #2, establishing a trusting, respectful relationship among the board, owners and manager. While some board members see their time on the board as the opportunity to impose their authority on the owners and to run the association as their own little fiefdom, enlightened board members understand their role as leader, conciliator, and policy-maker. Most important, association leaders should be customer service gurus who recognize their obligation to provide responsive, empathetic, reasonable, courteous, compassionate service to their fellow owners and neighbors.

 

Providing exceptional customer service to your members requires board members and managers to embrace the following customer service skills:

  •    Be a good listener which entails
  •    Focusing 100% of your attention on the customer, ignoring distractions and interruptions
  •    Not interrupting, allowing the customer to vent and explain his or her issue and position
  •    Asking questions to confirm your and the customer’s understanding of the issue
  •    Not judging the customer
  •    Not letting your ego interfere with really hearing the customer’s complaint – it’s probably not about you but about a perception or action
  •    Paraphrasing the customer’s statements to assure him or her that you are listening and understand
  •    Monitoring your and the customer’s body language to determine a consistent or contradictory message
  •    Treating customers the way YOU would like to be treated
  •    Sincerely, genuinely wanting to help the customer resolve the issue

 

  •    Admitting when we’re wrong. Yes – it’s okay to acknowledge when we mess up. In fact, the best way to establish a credible, trusting relationship with a customer is to apologize for a mishap even before they know the problem occurred, alerting them to what happened and how you are addressing it. The worst thing you can do is ignore the error or misunderstanding and hope no one finds out. In our business, someone always finds out! Be sure to let your supervisor know as soon as you are aware of the problem and together develop a plan to address the issue.
  •    Remembering that, beyond providing exceptional customer service to their members, board members have a fiduciary duty to the owners always to act in the best interests of the association, in good faith and with diligence in pursuing the best course of action.

 

We’ve addressed step 1 (working with developers) and step 2 (establishing a relationship of trust and respect among the owners, board and manager) in the process of resolving disputes amicably before they end up in court. In step 3, we’ll discuss utilizing dispute resolution techniques to work out a solution.

 

One of the most common reasons for community association litigation is covenant enforcement. One of the primary reasons for board members deciding to sue is the misconception that approving a variance would mean “setting a precedent” which supposedly opens Pandora’s Box and prevents the board from rejecting similar requests. Many Board decisions involve discretion—where the Board looks at the specific facts and decides whether the request can be approved under the covenants. While state statutes and governing documents must be reviewed first, if the variance request is reasonable, the board should make every effort to approve it. Really? Yes! Work with your attorney to craft a resolution to allow the variance, using the “whereas” provisions to detail the specific circumstances under which the board is allowing the exception and with which other owners must comply in order to obtain identical approval. Such variances, provided that they are properly documented and supported by the facts, do not vitiate the covenants or require the Board to approve all similar requests.  Only if the covenant has been openly and continually ignored could the association be said to have abandoned the covenant and made it unenforceable.

 

What should the board and manager do when a conflict arises? Depending on the severity of the dispute, the first step may be to involve legal counsel. However, engaging an attorney at the onset will incur cost and may establish an adversarial relationship from which there is no retreat. Instead, consider:

  •    Stop sending emails or letters and pick up the phone. Real people talking with real people can accomplish miracles – or, at least, reduce frustration and misunderstandings.
  •    Offer to meet with the owner at his home or neutral venue to discuss the issue in person.
  •    Invite an impartial third-party to help resolve the dispute. Using the services of a trained, certified mediator, or a less formal “dispute resolver”, can quickly reduce emotions, help identify the real issues, and encourage all sides to work together to craft a mutually-agreeable solution.
  •    Keep your cool. Remain calm and collected. Don’t get defensive.
  •    Ask for help from a colleague or supervisor. Sometimes, just letting the customer talk with someone else resets the conversation and allows for a fresh approach to resolving the issue.
  •    Remember the listening skills detailed in step 2.

 

There you have it – the very-much-condensed version of preventing, reducing and resolving community association-related disputes. To be an even better dispute resolver, search “alternative dispute resolution” on Google or YouTube or in the Research Library at www.caionline.org or check out the books available from Amazon or your local library. There are plenty of resources available to help you prepare for and resolve conflict in community associations without ending up at the courthouse!

 

Margey Meyer, CMCA, PCAM, a certified mediator with the American Arbitration Association and the Houston Better Business Bureau, owned her own management company for 21 years and, after selling her company to Associa, was its VP-Industry Education, Integration and Outreach for the next 11 years. She currently is founder/president of CADRExperts (Community Association Dispute Resolution Experts) providing professional, knowledgeable, impartial and effective developer transition specialists, expert witnesses, mediators and arbitrators serving residential, mixed-use and commercial condominiums, cooperatives and homeowner associations. As a volunteer with the Community Associations Institute (CAI), Margey chaired the Foundation for Community Association Research and Government and Public Affairs Committee, and served as Treasurer and VP of the Executive Committee She was team leader on the rewrite of CAI’s flagship course, The Essentials of Community Association Management, and recently completed the rewrite of the Facilities Management course. She was twice named CAI’s Educator of the Year and, in 2014, was honored with the Outstanding Volunteer Service Award. Margey is a nationally-recognized educator, trainer, speaker, advocate and author in the field of leading, managing and developing community associations.

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