ddressing violations and dispute resolution in homeowner associations is getting a more and more complicated all the time by the addition of new laws. However, the good news is that boards of directors are getting more and more statutory guidance to go by in imposing discipline and in resolving association disputes. The trend of the legislators passing the laws is to work toward processes that will result in more resolution within the Association, so disputes don't get to court. The real sympathy though lies with homeowners who have complaints about their board or association, who complain of no "due process", and who have no recourse that is affordable when battling with their HOA board.

When considering whether enforcement, IDR, ADR, either, any, or both are appropriate procedures for any disputes or governing document violations, boards today are in the unenviable position of having to determine whether a violation of or disagreement over responsibilities under the governing documents should first go into the "enforcement category" or "dispute resolution" category. If it fits into both, the Board must decide which process to try first. If it fits into the "dispute resolution" category, it has to decide whether to try IDR before ADR. The intent of this article is to try and help boards make some sense of all of this.

For purposes of clarification, these definitions should help.

Enforcement - The board of directors is charged with "enforcement" of the CC&Rs and other governing documents. ("Governing documents" include the Articles of Incorporation, the Bylaws, CC&Rs aka the Declaration, and any rules and regulations, policies, etc., that regulate and govern the association.) Thus, if the CC&Rs or rules contain a prohibition on parking commercial or recreational vehicles in the development, and someone is doing violating the rule, the board of directors could seek compliance ("enforce"). One way is to threaten fines or other disciplinary action. This would require a meeting/hearing (discussed in more detail below).

ADR stands for alternative dispute resolution. That is resolution of disputes "alternative" to litigation. ADR has been around longer and is a more generally understood process than IDR. There are courses widely available teaching ADR methods which generally include conciliation, mediation, or arbitration.

IDR, a newer concept (and coined within the California HOA industry because of recent legislation) stands for "internal dispute resolution". Either ADR or IDR or both may be required, depending on the circumstances and where a board wants to go with a grievance against an owner or resident that involves a possible violation of the governing documents of the Association or California law regulating HOAs, or where an owner wants to go with a grievance against the Association. If the Association is considering litigation against an owner, both processes must be invoked unless an exception applies dictating urgency as defined by the statutes. If an Owner is considering litigation against the Association, he or she is required to follow the ADR statutes but the IDR process is voluntary.

California law contains statutes dictating requirements for all three processes. The key to planning for a board is to formulate from these statutes and the governing documents of the Association an overall policy for handling matters that involve a lack of compliance with the governing instruments of the Association or pertinent laws. The key to success and the quandary for boards is putting together a policy that satisfies the minimum requirements of the law, satisfies the enforcement requirements of the governing documents, and provides a process that can reasonably be applied.

Any board of directors that does not have a "roadmap" (written policy) to go by to apply these concepts will surely face considerable confusion as to how to handle each particular matter, and in what order.

Below are some suggestions that might help a board formulate a policy to deal with enforcement, IDR and ADR processes. It's kind of a "menu" process with steps that can be changed around or combined, depending on what action needs to be addressed, the type and severity of it, and depending on whether the inability to resolve it could lead to litigation, by necessity or choice. Each association is unique in varying character of the board members, the makeup and level of sophistication, the acumen, and people skills. Fiduciary duty (responsibility) to enforce the governing documents enters into the picture as to how to best choose the right path, and when to invoke dispute resolution processes. The finances available to the association might also be a factor in defining a workable, legally acceptable plan of action (the policy) that would make sense for a particular association. The board of directors must keep in mind that any time it adopts a policy that is to be used to govern members of the association, discipline, conduct, etc., it must circulate that policy to the members before the board formally adopts it. (Civil Code Section 1357.100 et seq.) This is to allow the owners to comment on the proposed rules or policies before they are adopted. No rule, rule change, or policy needs to be circulated to the owners before adoption by the board if it simply reiterates a statute or existing governing document provision because in that case the board would not be formulating provisions; it would be using existing authority for the policy. Owners are also entitled to notice of the board's intent to adopt the enforcement policy (unless it's taken from an existing document or law) and to attend the board meeting when the board will discuss the proposed policy and consider adopting it. They are entitled to written notification after the policy is formally adopted by the board.

In many situations, there is good chance that disputes would be resolvable if the board would give the owner some personal attention and discuss the issue with the owner(s). On the other hand, there are often situations where actions (such as a threat of discipline, fines, reimbursement assessments, or "self-help" by the board) are more convincing and effective than friendly pleas for compliance. The question is: which comes first, enforcement or dispute resolution, especially since the order of processes is not provided in the pertinent statutes.

For a clear, unequivocal violation that is obvious based on evidence or investigation supported by pictures, eyewitness accounts, or observation, it would make sense to move right to enforcement and try to get compliance. This prevents delays which can sometimes lead to more violations by others who see something going on in spite of restrictions stated in the governing documents. Other times, a meeting with the Owners might resolve the issues.

Thus, the suggested steps below could be used as is or modified by identifying specific types of violations that would switch the course of action (in other words, categorize types of disputes and identify the order of the steps for each category). For example, a board may decide for architectural disputes it will use the dispute resolution processes first, rather than moving to fines or disciplinary hearings, but for rule violations such as leaving out trashcans too long or creating a nuisance, fines would be considered before a dispute resolution process is invoked. If the dispute or action of the owner could lead to litigation, the board needs to keep in mind that it is required, prior to filing any kind of litigation, to utilize the IDR and ADR processes (see Civil Code Sections 1363.810(b) and 1369.520). There is an exception if the situation is one which for some justifiable reason involves seeking a an immediate court order (injunction) so timing may be a critical component in the decision as to which step to take.

And there are those situations where the board may want to implement the enforcement processes and the dispute resolution processes at the same time. A good reason might be that the board wants to conserve resources and energy, or wants to shorten delays in the passage of time, or a board may prefer a more creative process. There is nothing in any of the laws that dictates the order in which the processes should be used, or prevents using a combination of processes concurrently.

Here are some reasonable steps to consider for a policy designed to handle noncompliance issues or a dispute over rights or responsibilities in the governing documents or the law:

Step 1: Verify and Document Problem. Verify, in writing, the problem, either by obtaining a written complaint from the complaining party, or by documenting what has been observed, providing dates, times, and a description of the observation. (The Association "record" is critical to success as the enforcement or dispute resolution processes progress.)

Step 2: Courtesy Letter. Communicate with the owner of the property regarding the violation or violations that are believed to be occurring, or have been identified as occurring. A phone call works for some associations. However, if it doesn't, for whatever reason, or there is good reason to be fearful about approaching an owner, a letter is better. [The Step 1 information can be memorialized in a "courtesy" letter to the owner who is responsible for the noncompliance or non-complying party's actions.] Quite often an owner is simply unaware that they or their tenant have violated a restriction or provision exists in the governing documents, or failed to maintain something that is their responsibility, so a courtesy letter may take care of many common problems.

Step 3: Warning Letter/Demand/Possible Notice of Process. If compliance is not forthcoming, a more pointed letter again identifying the problem and demanding compliance immediately or within a stated time should be sent. This letter would include a laundry list of the Association's remedies that will be considered (suspension of rights, fines, reimbursement assessments, right of entry, self-help, etc.). This letter could precede any invitation to IDR or hearing notice, or it could include a notice of an IDR meeting or notice of a hearing. Perhaps a board might decide to have a combined meeting (example: IDR first, then hold a hearing if agreement is not reached). The question often arises as to whether a "hearing" satisfies the IDR requirements or vice versa. I don't believe either process satisfies the requirements of the other process, except when a specific effort is made to make sure that all of the notice and other requirements of both statutory processes are satisfied. Each process has its own set of parameters according to the controlling statutes, and there may be good reason to treat the two as separate processes. However, it is also conceivable that a board could opt for a combined meeting that would involve at first a discussion about the issues and an attempt to reach an agreement (as in IDR), with a subsequent hearing to discuss possible disciplinary action in the event an accord was not reached in the IDR process. This dual track could be called a "cross-over step" that encompasses both steps at the same time. There is more discussion on this below.

The point of the preliminary communications in Steps 2 and 3 is that two written reminders might be all it takes to resolve a violation of the documents or a lack of required maintenance. For more serious violations, situations involving stubborn parties, or where strong disagreements arise as to responsibilities, matters will probably progress to the next steps.

Step 4 or 5: IDR or Enforcement Action. The Board can choose IDR at this point if desired (addressed in Civil Code Sections 1363.810 et. seq.). It is required to adopt a "fair, reasonable, and expeditious process" for dispute resolution. This process can be accomplished by sending a written request to the owner to attend the next board meeting to discuss the pending problem with the full board, or to a meeting with one or two or more the board members at a stated time and place. At the meeting, the board members and the owner would be able to express their side of things and discuss resolution and possible agreement. An owner is not obligated to attend. (But note that if the owner demands the IDR meeting, the board is required to attend.) The board members (if less than the full board) should be authorized to execute a written agreement if an accord is reached, and the agreement would be binding on the Association. It is not the same as a hearing where the board or board members assigned to meet sit in judgment and mete out discipline like fines. (See more on the hearing process in the next Step.)

[Comments: One downside is that the statutes do not put IDR in the category of executive session meetings so the best choice is probably to have the owner meet with less than a quorum of board members to safely avoid meeting notice (to owner) requirements. The statute says one board member is enough but in order to avoid "he said-she said" arguments about what was decided, two is generally better. If the IDR process is combined with a hearing, then the statutes would allow the meeting to be held in executive session because consideration of disciplinary action is appropriate for executive sessions. Additional Note: This meeting with a board member or board members is not the only type of IDR that is acceptable. Boards may adopt a policy using outside dispute resolution resources (neutrals such as mediators) and provide for prompt timelines and written notice to an owner requesting attendance. But the "meet and confer" process (which is the default process under the statute if another process is not adopted) described here makes more sense in practical terms because using outside resources to try and resolve matters internally results in costs where meeting with board members does not. If a board uses an outside mediator and the matter does not resolve, the process must essentially be repeated in the ADR processes and then there are more costs. In the IDR process, the Association must bear the expenses if an outside resource is used, while under ADR, the parties share the costs.]

Step 5 or 4: Enforcement Action or IDR. At this point, if the owner has been given one or two written notices about the situation, the board may decide it's time to give the owner a notice of hearing, before or after IDR (hence the designation Step 5 or 4). The requirements under Civil Code Section 1363(h) require that if a board is going to meet and consider discipline of any Owner, the board must (1) send a written notice to the owner listing the violations and remedies to be considered and the date and time of the meeting/hearing; (2) have the meeting/hearing; and (3) send a written notice to the owner of the discipline to be imposed within 15 days of the board's decision. Without following these steps, the disciplinary action would be considered invalid.

[Comment: In order to combine Steps 4 and 5 into one process, the board would have to satisfy the requirements for IDR (below) and satisfy these requirements for notice of a hearing, and if the meeting evolves into a hearing because agreement is not reached, follow through will include deciding on the discipline and providing the notice of decision.]

Step 6: Alternative Dispute Resolution. ADR options are always available on a voluntary basis. If the board is considering litigation, it needs to follow the minimum requirements for ADR, which per Civil Code Section 1369.510 et seq. contain a number of steps and requirements. These steps involve making a request that the other party participate in an ADR process such as mediation, conciliation or arbitration. The responding party has 30 days to respond or the request is deemed rejected. This process is not new, and a request can be made even if there is no intent to file litigation.

[Note: The differences between IDR and ADR include the fact that the Association absorbs any costs of IDR and the owner cannot be charged a fee. But all parties involved share the cost of ADR. And if IDR is requested by the Association, the owner is not required to attend, but if the Owner requests IDR with the Association, the Association is required to attend. If either party requests that the other participate in ADR, the other does not have to agree or participate. If the other side agrees, the parties have 90 days to complete the process ­ but they can agree to a longer period of time. The Association must provide an IDR policy to the owners. The Association must circulate an ADR summary each year explaining the law on ADR. A party must file a certificate stating that an attempt was made to engage the other side in ADR before litigation may be filed asking for injunctive or declarative relief coupled with a damages request of $5000 or more. If one party requests ADR, and the other declines to respond in 30 days or says no, the requesting party can proceed to litigation. If a party refuses to participate in an ADR process and the matter is litigated, the judge can take this into consideration in deciding whether to award attorneys fees to the prevailing party. The implication is that a judge could withhold attorneys fees to the prevailing party if it refused to participate in an ADR process that might have resolved matters and saved the court and parties money and time)]

Step 7. Further Legal Action (Litigation). If the differences are unresolveable through any of the above steps, then the association may consider litigation. Certification will have to be made as to the attempts to resolve matters through ADR in many cases.

The policy of the association for handling noncompliance or violations of the governing documents or California law regulating HOAs should include the procedures that the association would use in any of the above settings. Because of the complicated nature of these processes, it would be advisable to enlist the help of a professional sufficiently knowledgeable so as to make sure that any policy adopted is useful, understandable, and accurate with regard to all of the requirements. It should provide a manageable "road map" for a board now in place and future boards in the association. A policy can always be tweaked as needed, but original policies and material "tweaks" will undoubtedly need to be circulated to the membership before adopted as described in Civil Code Section 1357.100 et. seq.

Attempting to reconcile the three processes (enforcement, IDR, and ADR) may seem complicated but when broken down into steps and choices that are embodied in a policy, processes become manageable. It is to the benefit of all associations to try and make these processes work and to treat owners fairly. Experience tells us that if "due process" for owners is ignored (by violating the notice and hearing requirements), or if boards ignore the statutory requirements for HOAs, or if IDR and ADR are not taken seriously or given an opportunity to work, the legislature will continue to mandate more processes geared to punish boards for the inadequacies and failures, and to keep HOA disputes off of their doorsteps and out of court.

Article by Beth A. Grimm, CID Attorney and member of CAI. CAI-CLAC, and the ECHO East Bay Resource Panel and Legal Panel.