Mediating a Solution

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If you don’t want to spend a day (or more) in court, try mediation. It can save you time, money, and (possibly) some bitterness.

What often happens when there is no mediation is predictable: charges, countercharges, lawsuits – and big legal bills. Indeed, litigating co-op and condo disputes is costly, time-consuming, and usually undesirable. Besides creating bad feelings among the owners, litigation disrupts the building’s budget and can quickly become a financial black hole. And don’t forget: once a case is filed in court, it becomes a matter of public record, and this can adversely affect the value of the building’s apartments. Any publicity may scare away prospective purchasers and lenders.

Mediation to the Rescue

Mediation, on the other hand, is a private, voluntary dispute resolution process in which a neutral third party is invited to assist the disagreeing parties in identifying issues, developing options for resolving them, and finding solutions acceptable to all parties.

Unfortunately, mediation has been underutilized by co-ops and condos for two reasons: (1) unlike in other states, New York law does not require it, and (2) there are widespread misconceptions about it. While advocating over the past 20 years for alternative dispute resolution, one of this article’s authors has repeatedly received objections from shareholders and unit-owners, who believe they are giving up a valuable right to litigate.

Let’s dispel those myths right now: mediation can be an extremely useful, cost-effective tool and is particularly appropriate for co-op and condo disputes because residents in a co-op or condo are likely to have continuing relationships with one another in the elevator, gym, laundry room, or any other of the building’s common areas. By providing an opportunity for parties to speak in a controlled environment such as in the managing agent’s office, mediation can lessen the hostility when parties inevitably interact in the future.

Boards and managing agents should educate residents about mediation and can do so at board meetings and through a website or newsletter. Mediation is an informal, voluntary approach to settling disputes. Disagreeing parties should turn to mediation as soon as they realize they have an intractable problem. They should seek out a trained mediator who will work with the participants to reach a mutually acceptable resolution to their dispute.

Mediation is confidential and non-binding; any of the involved parties may stop the process at any time. If the participants reach resolution, a settlement agreement may be written and signed at the table that would be binding on the participants. The key players are the parties to the dispute and a selected mediator. A party may, but need not, have an attorney present; the parties themselves are the owners and drivers of the process. Occasionally, a witness or expert may be called. The whole procedure allows the participants to decide for themselves how to resolve the dispute rather than leaving the decision to a judge or arbitrator. The process is private and confidential – what is said in mediation cannot be used in any subsequent proceeding.

A side benefit is that experts believe that parties are more likely to be satisfied with both the process and result when they participate in creating their own agreement. And where litigation is often unable to adequately resolve quality-of-life disputes, mediation enables the parties to craft creative solutions that a court would be unable to achieve.

Multi-Purpose

Mediation could be helpful for both conflicts between owners as well as conflicts between an owner and the board. Arguably, disputes between neighbors stand to benefit the most from mediation, because the owners may not have standing to sue one another for violating a house rule and the kinds of issues that frequently arise between neighbors are not worth enough to spend money on legal fees.

Costs are hard to calculate, but they are certainly lower than the cost of litigation. The New York City Bar Association’s Co-op and Condo Mediation Project supplies trained mediators for a $100 non-refundable administrative fee per party. There is an hourly fee for the mediator, ranging from $150 to $400. Participants are always given a choice of mediators. Additionally, the Community Dispute Resolution Centers Program (CDRCP) funds independent nonprofit agencies in every county in New York State in order to provide access for all New Yorkers to affordable or free alternative dispute resolution services, including mediation.

Boards would be wise to facilitate mediation among the residents. In a co-op setting, the board (as a landlord) is bound by the warranty of habitability and must ensure the premises are in accord with the uses reasonably intended by the parties. Nancy Kramer, an experienced New York City mediator who has mediated about 25 co-op disputes, has noticed a recent trend of boards paying the entire cost of mediation in order to get quarreling neighbors to participate in mediation.

Some mediation advocates even encourage boards to amend their proprietary leases and bylaws to stipulate that any disagreement with the board or another resident must first go through mediation. Amending the proprietary lease and bylaws may be the only way to do this. Such amendments require owner approval, however, and that may be difficult to get.

Some scholars, in advocating for mediation, have proposed that boards need only amend their house rules to include a mediation clause. Amending the house rules would be much simpler than amending the proprietary lease or bylaws because boards would not need shareholder or unit-owner approval. However, whether such an amendment would withstand a court challenge is uncertain. (See the box on p. 20 for a sample amendment.)

Whether a mediation clause is inserted into the proprietary lease, house rules, or any other contract, it should address similar issues. Generally, the clause will provide that parties mediate first, before resorting to binding arbitration or litigation. An effective clause could remove boards from the unwanted position of arbiter of disputes, formally empower the landlord or community association’s board as the arbiter or mediator, or formally empower a third-party mediator. If outside mediators need to be hired, the clause should spell out how the services will be paid for and how the mediator will be chosen. Since mediation is not intended to result in a win for any party, the parties should typically split the costs. ==HABITAT SIDEBAR==

Where to Go

Even though mediation has not yet been heavily utilized by the co-op and condo community, there are many choices for effective mediators. Specifically for co-ops and condos, any party can request a mediator through the New York City Bar Association’s Co-op and Condo Mediation Project. To find out more about this, contact Elizabeth Dorfman at (212) 382-6772 or edorfman@nycbar.org.

Furthermore, mediation may always be initiated under the auspices of agencies such as the American Arbitration Association, JAMS, or National Arbitration & Mediation; there are also nonprofit and private companies, law school clinics, and solo practitioners who offer mediation services. Mediate.com provides information on local mediators as well as information on mediation in general. Finally, for a nonprofit organization funded by the Community Dispute Resolution Centers Program, the New York State Uniformed Court System website makes available a directory of CDRCP providers. http://1.usa.gov/u6Caz4