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HOAs and Mediation: Not always a viable alternative to Litigation

We have written extensively on the virtues of alternative dispute resolution, specifically mediation, to resolve disputes. Litigation is a time-consuming and expensive undertaking, and in the end, both sides are generally unhappy with the result because of the costs and time incurred.

But although we encourage mediation generally, mediation in HOA litigation is a much more complex and difficult undertaking. In this blog post, we will discuss difficulties with mediating HOA disputes.

It is most accurate to think of “mediation” as “assisted negotiation.” In mediation, parties continue to negotiate, but they benefit from the assistance of a third-party mediator. This mediator cannot make any decisions, nor can the mediator bind either party. A good mediator can help the parties get “over the hump” and negotiate a resolution that seemed hopelessly beyond reach.

However, there are certain matters for which an HOA cannot negotiate, and therefore mediation will not be effective. Restrictive covenants comprise a contract relied upon, and enforceable by all of the owners in a community association. Deleting or modifying restrictive covenants requires an amendment that must be approved by a specific percentage of the owners in a community. Consequently, the Board of Directors may lack the authority to modify or waive restrictions through mediation.

The following table highlights some of the issues faced by the Board of Directors for a homeowners association, decreasing the likelihood that an association can reach a mediated resolution.

  • Disputes over payment of assessments – Associations have limited ability to compromise the payment of assessments. These assessments are determined by the association’s governing documents. The governing documents probably do not permit the Board of Directors to waive assessments. However, mediation can be a benefit only as it pertains to structuring payment plans.
  • Disputes over covenant violations – Again, many violations of the recorded covenants cannot be overlooked or compromised. A Board of Directors does not have the authority to waive restrictive covenants. For example, if the governing documents prohibit livestock and poultry, the Board may not be able to “mediate” away the restriction and permit a homeowner to house a goat.
  • Disputes over architectural requirements – Prohibitions on signs, solar panels and clotheslines cannot be mediated by the Board of Directors. If the Board attempted to waive these restrictions, the HOA could find itself involved in additional litigation by another homeowner claiming that the Board lacked the authority to modify or waive the restriction.
  • Boundary Line disputes – Sometimes, a homeowner may build a structure that extends into the Common Area owned by an HOA. These boundary line disputes probably cannot be negotiated or mediated, because the Board of Directors has the duty to protect the association’s property rights.

Parties are always well-advised to seek resolution through reasonable discussion and negotiations with your attorney. When that fails, mediation is a viable alternative. However, because of the nature of homeowners associations, Boards of Directors have limited authority to negotiate rights owned in common by all the homeowners.

Have you had success in mediating disputes with HOAs? If so, let us know the circumstances.

John Tarley

John Tarley


Susan Tarley

 

Tarley Robinson, PLC,  Williamsburg, VA



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John Tarley

John is the firm's managing partner and chairs the firm's small business, zoning, and litigation practice areas.

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Filed under: Common Interest Community, HOA, HOA litigation, John Tarley, Real Estate Litigation, State & Federal Litigation, Susan B. Tarley, Unit Owners Association by John Tarley

3 Responses to “HOAs and Mediation: Not always a viable alternative to Litigation”

  1. As a mediator who has mediated numerous HOA disputes, I see the issues from a different vantage point. In my experience, almost all of community association issues can be mediated, although the Board must carefully prepare for mediation.
    Mediation with an HOA (or a condominium) is similar to a mediation with other corporate entities, which are frequently involved in mediations. The Association Board must understand mediation, be open-minded, know what it can and cannot do pursuant to the association’s documents, have counsel present to walk them through the options, and understand and explain the parameters of their authority (and limitations on their authority) to the other parties.
    Corporations, like individuals, face significant risks in any litigation. Association boards, like other corporate boards, are entitled to exercise their “reasonable business judgment” in exercising their authority to deal with these risks. A court will seldom overrule a Board’s reasonable business judgment.
    A compromise that is reached as a result of mediation (or otherwise) in order to avoid litigation may be a better alternative to a judicially (jury or judge made) determination of association disputes.
    Focusing on these realities, associations seeking mediation should hire a professionally trained mediator who can draw out the underlying problems of both sides.
    Disputes respecting the payments of assessments involve limited opportunities for compromise, although there are options for payment arrangements, and the state/federal financial settlement respecting lending institutions that was announced today (in which lenders will be compromising mortgage balances and providing other relief to homeowners) may create new opportunities for creative counsel and mediators.
    Likewise covenant violations, disputes over architectural restrictions and boundary line disputes are amenable to mediation, or at least to attempting resolution. I have mediated boundary disputes and architectural restrictions in several multi-party disputes. The attorneys and clients often believed, prior to mediation, that the case could not be resolved. In these instances, the underlying problems between the parties were unknown, despite years of litigation, until the mediation process began. By sharing information, the parties were able to find compromise solutions without the need for modifying, ignoring, or modifying the governing documents.

  2. All of these are great points, Karin, thanks for the input! As you correctly point out, mediation is a much better (and less expensive) alternative than litigation. For HOA mediation, there are so many moving parts: the board and its members; HOA counsel; the opposing owner; opposing counsel; and probably most important, the mediator. Everybody has to be working diligently towards the same goal.

    This blog piece came after an unsuccessful HOA mediation, so I guess I brought that experience with me when I wrote this article. Thanks, again!

    John Tarley
    jtarley@tarleyrobinson.com

  3. Check out Karin’s helpful and informative mediation blog: http://mediationbytes.wordpress.com/ and her website http://www.hobbsmediation.com/index.html

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