*Note: this is an analysis of H.B. 56 as proposed on January 2, 2012, and the bill may have been amended since that time.
Alternative dispute resolution methods — especially mediation and arbitration — seem to be becoming more and more popular with our representatives up at the state legislature, whether as tools for modest tort reform, ways to open up the dispute resolution process to those who might be priced out of invoking the full judicial machinery, or as methods for conserving judicial resources.
This session, Representative David Litvack is proposing legislation that would extend the arbitration services of the legislatively-created Office of the Property Rights Ombudsman to dispute between condominium owners and their associations.
Currently, the Office of the Property Rights Ombudsman is tasked with advising property owners regarding takings (eminent domain) and land use issues. It is authorized to:
(a) develop and maintain expertise in and understanding of takings, eminent domain, and land use law;
(b) assist state agencies and local governments in developing the guidelines required by Title 63L, Chapter 4, Constitutional Taking Issues;
(c) at the request of a state agency or local government, assist the state agency or local government, in analyzing actions with potential takings implications or other land use issues;
(d) advise real property owners who:
(i) have a legitimate potential or actual takings claim against a state or local government entity or have questions about takings, eminent domain, and land use law; or
(ii) own a parcel of property that is landlocked, as to the owner’s rights and options with respect to obtaining access to a public street;
(e) identify state or local government actions that have potential takings implications and, if appropriate, advise those state or local government entities about those implications; and
(f) provide information to private citizens, civic groups, government entities, and other interested parties about takings, eminent domain, and land use law and their rights and responsibilities under the takings, eminent domain, or land use laws through seminars and publications, and by other appropriate means.
Representative Litvack’s bill would add to the following to the Office of the Property Rights Ombudsman’s list of responsibilities:
(g) advise a condominium owner who has a legitimate potential or actual dispute with the owner’s condominium association involving the owner’s condominium unit.
A “legitimate actual or potential dispute” is defined as a dispute “concerning a matter of greater than trivial significance” that arises “from allegations that, if true, would show that the condominium association has taken or is taking action that is contrary to state law or to the declaration, bylaws, or other documents governing the association.” ”[T]rivial significance” is not defined in the statute, but it’s probably safe to assume that we’re talking about a dollar amount threshold that will be defined in practice by the Office of the Property Rights Ombudsman itself (I didn’t see any provision authorizing the adoption of implementing regulations in the proposed bill).
In addition to providing advice about legitimate disputes between a condominium owner and a condominium association, H.B. 56 would empower the Office of the Property Rights Ombudsman to initiate binding arbitration between a condominium owner and a condominium association if: (1) the condominium owner requests it, (2) the dispute between the condominium owner and the condominium association is “legitimate,” and (3) the Office of the Property Rights Ombudsman determines that mediation or arbitration of the dispute is “otherwise appropriate.”
As you can see, there’s lots of wiggle room built into the mediation/arbitration provisions of Representative Litvack’s bill. The “otherwise appropriate” language seeming allows the Office of the Property Rights Ombudsman full discretion in picking and choosing which cases it will arbitrate and which ones it won’t (though it is required, if it denies arbitration, to send a letter to the condominium owner explaining the reasons for the denial). Even so, a statutory arbitration option can be quite a powerful tool for property owners — that majority of whom would almost certainly be financially prohibited from pursuing any significant claim through the judicial system. This is especially true where the requesting party is not obligated to pay for the statutorily mandated arbitration.
Representative Litvack’s bill proposes to fund the mediation and arbitration services provided by the Office of the Property Rights Ombudsman by creating a Condominium Fund that is funded by a mandatory annual registration fees imposed on condominium associations of $2 per unit. All condominium associations are required to pay the fee, regardless of whether they have nonprofit status or not. Failure to timely pay the fees as required prevents the condominium association from imposing or enforcing any lien on a condominium unit until the fees are paid (lawyers — are you paying attention to this potential defense?).
I don’t really have much commentary on H.B. 56, as I don’t have the experience or background with the Office of the Property Rights Ombudsman or condominium law to intelligently comment on its merits. So, even more than usual, I’d love some input on this one.
Good idea? Bad idea? Have at it!