Alternative Dispute Resolution ("ADR")
When is ADR Required?
Civil Code Section 5925 et seq. requires that the association and owners endeavor to submit certain types of disputes to ADR prior to initiating a lawsuit. This notice provides only a summary of the statute. If there is a dispute which may require ADR pursuant to Civil Code Section 5925 et seq., please review all of the provisions of the statute or seek your own independent legal counsel.
Parties Bound by The Statute. The parties required to comply with the statute are the association (though the board of directors) and any owners of record.
Disputes Subject to The Statute (Qualifying Disputes). Civil Code Section 5939 provides that the association or owners may not file an enforcement action in the Superior Court unless the parties have endeavored to submit their dispute to ADR. An "Enforcement action" is defined as a civil action or other proceeding for any of the following purposes: (1) enforcement of the Davis-Stirling Common Interest Development Act (Civil Code Section 4000 et seq.); (2) enforcement of the California Nonprofit Mutual Benefit Corporation law, commencing with Corporation Code Section 7110 or (3) enforcement of the association's governing documents. Where, an owner has a private dispute with another owner or a tenant, or the board has a dispute with a third party such as a contractor, such a dispute is not within the confines of the statute.
Disputes Specifically Excluded from The Statute. The ADR statute applies only to an enforcement action that is solely for declaratory, injunctive or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits of Small Claims Court. The following types of disputes are specifically excluded from being required to resort to ADR: (1) a Small Claims action; (2) assessment collections, except as otherwise provided by law; (3) claims by the association for money damages in excess of the jurisdictional limits of Small Claims Court in conjunction with a claim for declaratory, injunctive or writ relief; (4) claims by an owner for money damages excess of the jurisdictional limits of Small Claims Court in conjunction with a claim for declaratory, injunctive or writ relief; (5) action for preliminary or temporary injunctive relief; and (6) the filing of a cross-complaint in response to a complaint already filed.
A. Initiating Party. The party pursuing the dispute, prior to filing any lawsuit, must serve on the other party a "Request for Resolution" including the following information and language: (1) a brief description of the dispute; (2) a request that the matter be submitted to ADR; (3) a notice that the party receiving the Request for Resolution (the "Responding Party") is required to respond thereto within 30 days of receipt or it will be deemed rejected; (4) if the party on whom the Request is served is an owner, a copy of Civil Code Section 5925 et seq.
B. Service. A Request for Resolution may be served by personal delivery, first-class mail, express mail, facsimile transmission or other means reasonably calculated to provide the Responding Party actual notice of the Request.
C. Responding Party's Obligation. Upon receipt of a Request for Resolution the Responding Party, whether the association or an owner has 30 days in which to either accept or reject the request. In the event no such response is received, the request is deemed "rejected".
D. Time For Completion of ADR. Where the Request is accepted, the parties must complete the ADR within 90 days of receipt of the acceptance. However, the parties can stipulate in writing to extend this period.
E. Cost of ADR. The cost of ADR shall be borne by the parties,
F. Tolling of Statute of Limitations. If a request for Resolution is served before the end of the applicable statute of limitations, the time limitation is tolled for certain periods specified in Civil Code Section 5945.
G. Certificate. In the event that a lawsuit is eventually commenced, the party filing must with the initial pleading a certificate stating that one or more of the following conditions is satisfied; (1) Alternative Dispute Resolution has been completed in compliance with Section 5925 et seq.; (2) one of the parties to the dispute did not accept the terms offered for alternative dispute resolution: or (3) preliminary or injunctive relief is necessary.
Consequences For Failure to Comply with the ADR Law. The failure to file the aforementioned certificate with the Superior Court is grounds for a demurrer or motion to strike unless the Court finds that dismissal of the action for failure to comply would result in costs, a court may consider whether a party's refusal to participate in ADR before commencement of the enforcement action was reasonable. As a result, it is important to seek independent counsel in the event that you, as a owner have further questions.
Failure of a member of the association to comply with the alternative dispute resolution requirements of Civil Code Section 5925 et seq, may result in the loss of your right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law.
American HOA Management