Pre-Litigation Mediation for Community Association Disputes

New NC Law Encourages Association Boards and Owners to Work Out Their Differences Ahead of Filing a Lawsuit.

   Continuing a trend toward diverting disputes away from the court system and toward formal mediated conferences, North Carolina recently passed a law intending to encourage homeowner and condo associations to resolve pending disputes with property owners before filing a lawsuit

   Effective July 1, 2013, condominium and homeowner associations organized under Chapters 47C and 47F, respectively, of the General Statutes, must notify their members annually of the availability of the pre-litigation program by posting the notice on the association’s website (if it has one) or including it with the requisite mailing following an election of directors and officers.

   In the event a dispute between the association and a member arises, either party may contact the North Carolina Dispute Resolution Commission to request the Commission to contact the opposing party for the purpose of inviting that party to mediate the dispute. Note, however, that the program does not cover disputes related solely to a member's failure to pay an assessment or assessment-related fines or fees.

   Participating in the mediation is voluntary but the new law provides two incentives to encouragie the parties to avail themselves of the opportunity to mediate.

   The first incentive is that if the parties agree to, and in fact do, mediate, all applicable “limitations periods” are suspended pending the outcome of the mediation. ("Limitation periods" generally impose a time limit by which a given civil action must be filed after the event giving rise to the claim occurs.)

   The second incentive is that, if the mediation fails to resolve the dispute and one of the parties files suit, the law excuses the parties from the mandatory mediation required for most civil cases in the court system. In other words, since the parties already expended the time and money on mediation before the suit was filed, they need not incur the duplicate expense of mediating after the suit has been filed.

Recognizing how successful the mandatory mediation program has been for civil lawsuits, the new law goes one step further by presenting an early opportunity to “settle” a dispute before the litigation process kicks off while not imposing an additional cost on the prospective litigants if the mediation is unsuccessful.

   Given the potential expense of litigation, this opportunity is a win-win proposition to be sure.