Mediation and Arbitration Should Be Baked Into Your Governing Documents

Michael P. Graff, Founder, Graff Dispute Resolution

When you can’t resolve a dispute with a shareholder or unit-owner, the worst-case scenario is ending up in litigation. Before this happens, consider:

Mediation. Both parties go before a neutral person who is trained and knowledgeable about real estate law and present their case, and there’s a resolution that’s satisfactory to both sides. 

Arbitration. If mediation fails, a neutral person hears both sides and makes a decision that is binding on both parties. 

Incorporate these in governing documents. The two processes should be in your house rules or bylaws. Many co-op and condo documents are from 20 or 30 years ago, when arbitration and mediation were not in the forefront; today, the courts can even compel them. You should also specify a timetable where the disputing parties will proceed to mediation within 30 days of the board’s request and then submit to binding arbitration within 45 days after that. You can put these clauses in your house rules, since that’s easier than amending your bylaws.