I Love Lucy is one of the most beloved sitcoms in all of television history. In one episode, after Little Ricky is born, the baby is screaming and screaming, keeping awake the next door tenant, Mrs. Trumbull. Mrs. Trumbull complains to landlord Fred Mertz, demanding that he do something about it. According to Mrs. Trumbull, the building rules state that babies aren't allowed. Okay, it's a rental building...and it's a sitcom, so of course everything turns out all right by the end of the 30 minutes. Mrs. Trumbull even ends up loving Little Ricky and becoming his babysitter.
Wouldn't it be great if all problems in a building were handled so smoothly and succinctly? If at the settling of a disagreement, everyone became friends and lived happily ever after? Sure it would – but it would also involve some wishful thinking. The reality is that in co-op and condo living, problems are bound to arise between residents – as well as between the residents and the board - and unless these issues are handled deftly, they can easily balloon into something even more divisive and unpleasant.
Well, That Escalated Quickly...
"A problem between the board and the residents can be a disgruntled shareholder who ultimately is upset with building management, the board or another shareholder," says Bruce F. Bronster, of Windels Marx Lane & Mittendorf, LLP in Manhattan. "The problems could be a noise issue, smells, or pet problems. Usually the first line of the problem is to talk to the super, or someone who is in charge of the building. It depends on how the shareholder wants to handle it."
If Mrs. Trumbull had been a real-life resident of a NYC condo and had complained to her real-life board president that the Ricardos were breaking the rules, she could reasonably expect that something would be done. If Board President Mertz failed to enforce the rules, Mrs. Trumbull would probably threaten litigation.
It's no secret that lawsuits are expensive, acrimonious undertakings that can severely erode both the finances and morale of building communities. When a disagreement between a resident and the board escalates into a serious dispute and the threat of litigation is brought into the mix, it can make a bad situation worse. And perhaps the most irksome thing about these types of issues is that to a large degree, they're preventable. Time and again, attorneys and managers cite board inaction or opacity as the reason why resident grievances ignite into litigation.
"What happens when the board tends to ignore a complaint is that the resident sues," says Stuart Berg, a partner with the real estate department of Manhattan-based Kurzman Eisenberg Corbin & Lever LLP, and adds that these type of situations are becoming more frequent. "Boards becomes susceptible when they don't take action." He recalls one situation when a resident kept a gaggle of seven cats in her unit. Another neighbor complained that the board wasn't enforcing the co-op's own rules on the number of animals allowed per unit. "The second neighbor had to force the co-op to act on the cat lady," says Berg.
In addition to these types of events that may lead to litigation, Simeon H. Baum, an attorney and president of Resolve Mediation Services, Inc. In Manhattan says that a board's financial decisions can also lead to potential problems between the board and the residents. "These decisions can lead to increased maintenance fees, or assessments," says Baum. "Even issues of board composition and succession can generate disagreement - particularly in buildings where there is a fracture in the community over one of these typical issues, and there is a fracture within the board or split between the existing board and a group that would challenge this board. These can result in contested elections."
Baum says that the most typical lawsuits involving co-ops or condos are property damage cases. "The upstairs neighbor's pipe bursts, flooding neighbors below," says Baum.
"Boards can also be hauled into court for discrimination claims. A well-known example was with an Upper East Side building, where a board member wrote a note on a board package stating the racial identity of a prospective purchaser who was appearing for a board interview. Similarly, boards can be sued for claims of discrimination against, or failure to accommodate, persons with disabilities."
Regardless of the problem, there are other alternatives for resolving any of these conflicts without resorting to the courts. These range from an informal sit-down between disputing parties to more formal (and legally binding) arrangements reached with the help of a professional mediator. Collectively, these measures are referred to as alternative dispute resolution, or ADR.
"ADR is a great way to resolve disputes in an expeditious fashion," Craig Penn, an attorney with Penn & Associates LLP, which has offices in Manhattan and White Plains. "Discovery is very limited and the process is much more simple than traditional court actions. When it works, ADR enables people to resolve a dispute with developing intense hatred."
ADR can help cut through the red tape and legalese that are part and parcel of a full-blown lawsuit to solve the problems between two or more parties. Once a tenant complains but nothing is done, they may move to the next level. "The disgruntled shareholder is basically complaining to anyone trying to get to the ultimate goal or to go to court," says Bronster. While the goal of ADR is to avoid the courtroom, Bronster says that sometimes mediation happens as a result of a judge's mandate. "We've had a couple of cases where the court says that before they hear the case they think hearing a mediator will be a effective," he says.
While some states (New Jersey, for example) require disputing parties to attempt ADR prior to allowing a dispute to be litigated, mediation and arbitration is not legally required in New York. According to Penn, unless the parties in question agree in writing to resolve their dispute by ADR, there is no legal right to compel them to do so. Every building comes with rules—a list of dos and don'ts if you will—call the bylaws or the proprietary lease, depending on whether it's a co-op or condo. If the documents say that the parties should go to arbitration or mediation, they go. "Traditionally, co-ops and condos have not included arbitration provisions in their organizing documents," he says.
That may be changing, however. As legal costs spiral upward and lawsuits drag out longer and longer, many buildings are having ADR requirements built right into their governing documents to head litigation off at the pass. Berg says that he has been studying bylaws for more than two decades, and tries to help boards modernize their documents by including such clauses. "One of my recommendations is mandatory arbitration of disputes," he says. "Most of the disputes that come up between shareholders and unit owners and the board have to do with quality of life—too much noise, smoke, somebody that somebody’s dog is pooping in the hall—and none have proof that something happened. Very few people are going to go to court if the person upstairs is making too much noise. They want the board to make the decision. When there's no lawyer to go to [because of a mediation requirement in the documents], the boards are happy."
Baum explains that mediation and arbitration are two of the three major alternatives to litigation. "The most significant alternative, which is often overlooked—and the granddaddy of dispute resolution processes—is negotiation," he says. "We negotiate all the time. The real question is how effective can we be, and how effective are our representatives in negotiation. When negotiations hit a snag, there might be a number of things negotiators, or the principals responsible for the negotiation, might do to get past the impasse. But, assuming negotiations have ground to a halt, the use of a neutral third party to help resolve the dispute might be in order.
Baum says that in mediation, the parties themselves are the decision-makers. "The mediator is a neutral party who helps the parties engage in constructive communication, reflection, bargaining, and joint decision making," explains Baum. "The mediator helps the parties identify their own interests, learn about the interests of the other parties, and brainstorm together to generate options that might aim to maximize satisfaction of all parties' interests."
The major difference between mediation and arbitration, Baum continues, is the identity of the decision maker. "Arbitration is similar to litigation, in that a neutral third party makes an evaluation and determination that is binding on the parties," says Baum. "In litigation, a judge and jury make the binding decision. In arbitration, the arbitrator is judge and jury rolled up into one. While there might be appeals from the decision of the trial court, there is no general right of appeal from arbitration. Arbitral awards may be modified or vacated only on very narrow ground, like fraud on the tribunal, or bias of the arbitrators. Mistake of law or fact is not a ground for vacating an arbitrator's award. The courts give great reference to arbitral awards as creatures or contract - processes agreed to by the parties in a written contract in advance of the dispute or agreed on an ad-hoc basis after the dispute has arisen."
The mediation process starts as both parties or their counsel ask around and interview mediators to learn about their orientation, experience and style. "Once selected, it is good practice for mediators to hold a conference call with the parties - or more typically, with their counsel - to learn about the matter going into mediation," says Baum. "We confirm that all parties will appear at the mediation with full authority to make a deal. I suggest that counsel or the parties prepare me with a pre-mediation statement bringing me up to speed on the facts of the dispute; the law, to the extent it will influence or be a part of the discussion; what might be important to the parties; their thoughts on resolution; insights into inter party dynamics; thoughts for the process itself; and any other information that might be useful. It is also a good time to learn whether the parties need information from each other in advance of their mediation session, and to lay out a process for developing and sharing that information."
The mediation session itself is a confidential meeting. This enables parties to speak freely without concern that statements made in an effort to resolve their dispute will be used against them as admissions against interest in court, in the unlikely event that the mediation does not produce a resolution.
Baum explains that the opening session begins with the mediator's introduction to the process, followed by opening statements by parties or their representatives generally expressing their views of the issues that have brought them to the table and what they would like to see come out of the day. "It is fairly common, however, for the parties to break for separate, confidential meetings with the mediator, known as caucuses," he says. "These offer an opportunity for the parties to reflect on what is important to them, to share confidential information with the mediator, to receive candid feedback, and the like."
When a decision is made in mediation, it is not binding. "They will make a report, but both parties must agree that it's binding," says Bronster. "It's a funny situation, because the mediator will meet with group A first and be their best friend. Then meet group B and be their best friend. Then they'll try to figure out why the other guy is wrong and become group A's worst enemy and then group B's worst enemy. It comes down to how well you can convince the mediator you have a case."
The American Arbitration Association (AAA) estimates that ADR is able to settle disputes in about 80 percent of cases—saving not only time, but legal fees. While ADR isn't free (counseling attorneys may still charge fees, and mediators typically are paid as well) both parties shoulder the cost of the process, which can be tens of thousands of dollars less than full-blown litigation and court costs.
In the case of the cat lady mentioned above, the problem was actually resolved even before it went to mediation. "There were about a dozen conversations with the lady's attorney, and ultimately she moved out and sold her apartment," says Berg.
Perhaps we can learn something from Lucy after all.
Lisa Iannucci is a freelance writer and frequent contributor to The Cooperator.