Many bylaws include an arbitration provision. Something like, any dispute between the Unit Owners and the Condominium shall be submitted to binding arbitration in accordance with the rules of the American Arbitration Association and that the decision in any arbitration shall be binding upon all of the parties thereto and may be entered in any court of appropriate jurisdiction. Complaining unit owners often overlook it and boards may stay away from it. Some argue that an arbitration agreement in the condos governing documents only applies to breaches under the governing documents and not disputes outside the four corners of the documents; however, the usual “any dispute” and “shall be submitted” language in an arbitration provision, is awfully broad and arguably goes beyond the four corners.
That said, there are drawbacks of arbitration. For example, discovery is not a right of the parties (that is, unless the arbitration provision covers discovery. Instead, an arbitrator or even a arbitration panel of several decision makers, decides whether the parties need discovery. Another issue is getting discovery from third parties. Although an arbitrator or panel can subpoena third parties to testify at an arbitration hearing, there is no right to subpoena third parties for pre-arbitration discovery. The third party can simply ignore a subpoena and unlike a court, an arbitrator is essentially powerless to compel compliance.
Some people believe that arbitration is a less expensive approach that a litigation, but that is not always the case. Some arbitrations can be as contentious as litigations and sometimes take longer than a court lawsuit.
Unit owners and boards should consider what their governing documents say about arbitration and if appropriate in a given case, consider arbitration instead of litigation. Consulting with counsel who is experienced in both litigation and arbitration like Colbert Law, is always recommended.
