Alternate Dispute Resolution Comes to Association Communities (Whether they want it or not)

April 27, 2018
Aaron S. Marines

* House Bill 595 was signed by Governor Tom Wolf on Monday, May 7, 2018.  The Bill becomes effective on Wednesday, July 6.

The Pennsylvania General Assembly passed House Bill 595, which is expected to be signed by Governor Wolf.  This Bill gives a process for deciding disputes in Condominium and Homeowners’ Associations.  There are a few things that every Association should know about this new requirement.  They are:

  • Most Associations need to adopt bylaws or rules and regulations that establish Alternate Dispute Resolution (ADR) procedures. This includes procedures for disputes between two or more unit owners and/or between a unit owner and the Association.
  • A “unit owner in good standing” can file a Complaint with the Attorney General’s Bureau of Consumer Protection for a violation of the Act relating to meetings, quorums, voting, proxies, and Association records. Previously, this option was available only to disputes over Association financial records.
  • A “unit owner in good standing” is someone who has no past due assessments. So a unit owner that is behind on their assessments cannot file a Complaint with the Bureau of Consumer Protection.  Except that if the unpaid assessments are related to a Complaint filed with the Bureau of Consumer Protection, then the unit owner is in good standing regardless of unpaid assessments.
  • A unit owner cannot file a Complaint with the Bureau of Consumer Protection until he or she has exhausted the ADR procedure or at least 100 days after the unit owner started the Alternative Dispute Resolution procedure. If there is no ADR procedure, the unit owner can go straight to the Bureau.
  • Finally, if a unit owner has a dispute with the Association and wins, he or she may be entitled to an award of costs and reasonable attorney’s fees.

These additions to the Uniform Condominium Act and the Uniform Planned Communities Act are intended to help owners and Associations settle their differences without going to court.  In order to do this, Associations will need to take some steps to prepare themselves:

  1. Associations should make sure they are as transparent as possible with annual meetings, quorums, voting and proxies, and Association records. I always advise Boards to be as open as possible with elections, voting, proxies, etc.  This gives the greatest number of people the ability to participate.  Now, it could also head off Complaints to the Attorney General.
  2. Most Associations should develop some sort of Alternate Dispute Resolution. This could be different in different Associations.  In big communities, an Association may establish a separate ADR committee.  The ADR committee may have the final say in disputes.  In the alternative, the Board may take an approach that is more like mediation.  That is, one person is assigned to go between the unit owner and the Board in order to reach a resolution of the issue.  This could be a Board member, unit owner, property manager, attorney, or someone outside the community.
  3. Be prepared to respond to questions from the Bureau of Consumer Protection. Generally, the Bureau asks the Association for its side of the story before it moves forward.  The Association needs to answer these requests completely and openly.  Usually the Bureau will not investigate issues where the Board was clearly within their rights to take an action.  The Association needs to make sure that it shows the Bureau its right to take the action, or that it complied with the unit owner’s reasonable requests.

These new changes to the Condominium and Planned Communities Acts can help to solve disputes in communities.  In order to do this, however, the Association needs to embrace the spirit and the process of the Alternate Dispute Resolution that is required.

Aaron Marines is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University and practices in a variety of areas including Commercial Real EstateLand Use, Land Planning and Zoning matters.