Going to court over a nuisance issue is time-consuming and expensive, but boards do have the alternatives of mediation and arbitration. You recently dealt with a Manhattan co-op that handled a noise dispute this way.
This was a co-op on the Lower East Side where there were two neighboring tenants who couldn’t reconcile their differences. One complained about the other making noise, everything from talking on the phone too loud to playing the piano to their dog barking. As a result of this issue, the complaining party would bang on the wall, slam the compactor chute loudly, and even post cartoons of the neighbor in a public place in the building. She claimed there was a breach of her warranty of habitability and stopped paying maintenance.
So this was a situation from hell. The managing agent contacted the bar association, which has a program for co-op and condo dispute resolution, and assigned the case to me. I met with the parties, and we spent a full day arguing it out and trying to find a common ground.
And was there a resolution?
There was an agreement signed by both parties and enforceable in court that called for a number of steps to be taken. It was quick, private and confidential. The dog had to get barking training, and a trainer was recommended. Both parties had to put up soundproofing on the wall. And they agreed they would talk to each other; there would be no more banging on the wall. The co-op contributed a significant part to the expense of bringing peace by paying for the soundproofing of the wall, which was key to the agreement. Had the parties ended up suing, they would have had to file in Supreme Court, because this was a case involving an injunction, and the lower courts can’t issue them. The long and short of it is that it would be five or six years before that case would finally get to trial.
Since this was a dispute between shareholders, would the co-op be involved as well?
Yes, because the complaining tenant was holding back maintenance payments. In addition to generating legal expenses, a lawsuit would be a public issue, meaning there would be no confidentiality and no privacy. Often there’s an incident report filed, which goes to your insurance company, and your rates could go up. Even though nobody was suing for money, the insurance company would have to pay for the co-op’s legal defense, and in the Supreme Court that might cost $60,000 or more. They have to get that money back somehow. So yes, rates go up, and if it happens frequently, those rates can double or triple. When you go to an insurance broker to get a new policy from somebody else, they’re going to want to know exactly what your litigation history was.
You mentioned that the mediation was private, which means it would not be on the record and reported to an insurance company, correct?
I don’t think it would have been. First of all, it was a mediation, not yet an arbitration. An arbitration is a next step, which sometimes can result when the parties aren’t able to agree between themselves what the resolution should be, or if the parties fail to comply with the agreement.
Then they can go to court, but at that point, the whole thing is much simpler. The court doesn’t have to figure out what the facts are; it just has to enforce the terms of the agreement. The court is going to make the parties settle anyway, because 95% or more of the cases that go to court ultimately get settled. The court either refers the case to presumptive arbitration, which is a new process to compel mediation, or to a court office where someone might sit down with the parties and say: “Come on — let’s work something out.” But that happens years later. Meanwhile, these issues continue and may escalate.
How does a co-op or a condo board ensure that these kinds of disputes go to mediation instead of straight to court?
In this particular case, there was nothing in the co-op documents that compelled the parties to mediate or arbitrate. But in many cases, parties and lawyers who are drafting these agreements are seeing the value of making it a part of the bylaws or at least the house rules. And so if it’s in the bylaws and the dispute is a violation of the bylaws — which covers odors and noise and other quality-of-life disputes — then it can be effectively resolved by putting in a mediation clause or an arbitration clause or a combination of the two. But that of course requires a bit of effort, since you need a supermajority of shareholders to approve the change.
Can you take care of these kinds of nuisance disputes in your house rules?
Sure. If it’s in the house rules, the board usually gets the power to impose fines for violations, which can also get parties to mediate. And it saves a tremendous amount of money. In the case of the Lower East Side co-op, the fee for my services was $1,000. Normal legal fees would be $350 or $400 an hour, so it was a fraction of what it would have cost if the dispute had gone to court. But more importantly, if it had gone to court, these issues would have continued for another three to five years.
Mediation certainly sounds like the reasonable way to go. Why doesn’t everybody do this?
When people have disputes, they talk to the board, to the building management and sometimes to the attorney who handles their litigation. And mediation is not yet fully accepted by these stakeholders. Mediation is basically an emerging process. Now, for the first time, it’s being compelled by the courts, so things are changing.