Though the benefits of condominium and cooperative living are numerous, it’s human nature that where there are people, there will be conflict. Running to a lawyer every time a problem arises is hardly sensible. The legal process is slow, costly, and rarely brings a peaceable resolution between two parties. This is where alternative dispute resolution, or ADR comes in.

A broad term, ADR refers to various methods of attempting to achieve agreement including mediation, arbitration, negotiation, and hybrids of all of the above. It's essentially any kind of organized summit outside the formal court system that seeks to resolve a conflict, and there are different ways to execute the resolution process within each of these models.

Conflict resolution outside of the court system has existed for thousands of years, but the more formal ADR methods we recognize today have gained in popularity over the past 30 years and have been shown to be highly effective in settling all manner of business and personal conflicts. For residents, board members and managers of condo buildings and HOAs, the process can be particularly effective, since creative solutions can be reached quickly and relationships kept intact—something that is important for people living under one big roof.

Mediation vs. Arbitration:

What’s the Difference?

Though they all have the same goals, the modes of ADR vary.

“Mediation is a confidential, consensual process where the parties can agree at any time to mediate their dispute. It is non-binding in that the mediator tries to resolve the dispute by focusing on the issues and trying to find grounds where the parties can agree and eventually resolve their dispute,” says Stanley Sklar, executive director of Arbitration Studies at the DePaul University College of Law’s Center for Dispute Resolution. Sklar adds that while the written settlement that arises from a mediation session isn’t legally binding, it may be enforceable in court. “Mediation can be part of a contract,” he says, “in construction contracts, for example, in which the parties agree to mediate their dispute before taking it to the next level.” The next level could be arbitration, or litigation.

Arbitration—often called binding arbitration—is just as confidential and consensual as mediation and still isn’t court, but it differs in that its result is, as the name suggests, legally binding. The arbitration process is contractual, and parties agree to accept the ruling or award of the arbitrator after the conclusion of the hearings and witnesses.

“[Arbitration] is similar to a court proceeding in that there are hearings, witnesses testify under oath, exhibits are introduced and the arbitrator issues an award based upon the hearings,” Sklar says. “The award is binding on the parties and can be enforced by a court.”

Negotiation meetings with a neutral third party also live under the ADR umbrella, as well as mediation-arbitration hybrids that take some elements from both systems. Methods like mini-trials, early-neutral evaluations, and summary jury trials are also emerging forms of non-court conflict resolution, and continue to gain popularity due to the lower costs, speed of outcome, flexibility, and tendency to be less complex than any given lawsuit.

In many states, there’s nothing “alternative” about mediation and arbitration—one or the other may be actually required before parties step into a courtroom. Court-annexed arbitration has evolved in states like Minnesota, where the Hennepin County District Court adopted a program in the mid-1990s that made any civil case involving less than $50,000 subject to mandatory nonbinding arbitration. The arbitration program proved so efficient, it was later instituted statewide. A small percentage of cases between individuals or HOA members actually reach court these days, since methods of ADR are so effective and cost so much less. In states like New Jersey, for example, the law also requires HOA’s to provide unit owners with “alternatives” to litigation to resolve disputes.

“There are other processes which can be tailored to meet the needs of the parties, but none work as effectively for co-op/condo buildings,” Sklar says. “To be effective for these buildings, the mediation/arbitration process should be part of the association’s bylaws, so that any disputes can be resolved more efficiently. If there is no bylaw requirement, the parties can opt for litigation, which will be more expensive, less efficient and the unit owners can read about their dispute in the local papers or on the Internet. No one really likes to see their dirty laundry on the local news.”

What’s it Like?

Marc Becker, president of Chicago-based ADR Systems of America, says that if communication and civility break down between HOA members and/or boards or management, a mediator should be brought in as early as possible. “This helps preserve relationships before any major legal expenses are incurred,” he says. And he adds that almost any type of conflict is a potential candidate for mediation. “We see everything from issues regarding special assessments to issues over garbage cans to damage caused by one unit owner to another,” Becker says.

Once two parties decide to bring in a neutral third party (the fundamental ingredient in any kind of formal ADR) the process begins. “Parties start in one room and will usually give the mediator an opening statement or their position in their case,” says Becker. “Then the mediator will ask one of the parties to go into another room. He or she will then go between the rooms and hold private caucuses with each party, pointing out to each side the strengths and possible weaknesses of their case. He or she will go back and forth to each party until a final settlement is reached.”

Those are the basics; every mediation is different, and the neutral party, be it a legal representative, an ADR professional, or even a chaplain, has his or her own way of running things.

“Once the parties have selected me as a mediator, I prepare a pre-mediation submission outline which I ask the parties to share with each other,” says Sklar. “The purpose of the submission is to make sure that all parties are informed of the issues subject to the mediation. It avoids surprises.”

Like any good neutral party, Sklar insists that the parties discuss the conflict in a respectful manner. “Vitriolic comments usually signal that a settlement may be unattainable.”

Sklar also makes sure his role in the process is clear from beginning to end, whether or not a settlement is reached. “If settlement is reached, I or the counsel for the parties will prepare a term sheet outlining the terms agreed to; the counsel will then use this as the model for a formal settlement agreement.”

However the process shakes out, Sklar says that timing is everything. “Timing of mediation is critical. Too soon, and the parties may not understand the nature of the dispute; too late and the well can be poisoned for future mediations.

A Win-Win Situation

Agreements aren’t guaranteed in the mediation process, and there are no promises made about how happy everyone will be with the outcome. There’s no formal measure of how effective non-litigious conflict resolution meetings are, but according to some, ADR can be useful no matter what the result.

“You don’t always come to a settlement, but sometimes that’s not the goal,” says Jill Tanz of Chicago Mediation LLC, a member of the American Arbitration Association Panel of Mediators and a certified mediator for the Circuit Court of Cook County. “The postal service, for example, uses transformative mediation for employee problems, where settlement isn’t the primary goal, but it provides recognition and empowerment for the parties. That’s the goal—and you can use those principles in a co-op or condo setting.”

Tanz says that really any kind of peaceable, formal meeting to discuss a conflict in hopes of reaching agreement should be a useful meeting, provided the people involved are committed to finding a solution. “Virtually every mediation will accomplish something. The process of sitting down together and speaking across the table has benefits—it can improve the relationship even if the immediate dispute is not resolved. Mediation gives parties a safe place where they can come and talk to or at each other, and that’s useful. You always have someone there who is in control of the process, who will maintain a safe atmosphere.”

If a settlement isn’t reached but clearly still needs to be, the parties can use binding arbitration or court litigation.

The failure of mediation will mean significant additional costs such as legal fees, expert witness fees, discovery costs, jury consultants if a jury is demanded, and the enormous time commitment of the parties in assisting legal counsel prepare for and try the case,” Sklar says, pointing out that it’s in everyone’s best interest to make mediation work. “I have often said mediation is the cheapest dollars a party will spend to resolve a dispute.” He adds that there’s always time to stop the legal process and opt for an ADR situation. “It’s never too late to engage in mediation,” Sklar says, “even on the court house steps.”

Mary K. Fons is a freelance writer living in Chicago.