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Community Association Statutory Pre-suit Alternative Dispute Resolution Requirements

The question has been presented time after time, are we really required to participate in either a nonbinding arbitration or mediation prior to filing a lawsuit? The answer is not as simple as it seems.

Section 720.311, Florida Statutes requires that homeowners and homeowner associations participate in mandatory presuit mediation for certain types of disputes prior to filing a lawsuit. Section 718.1255, Florida Statutes requires that unit owners and condominium associations participate in nonbinding arbitration or mediation for certain types of disputes prior to filing a lawsuit.  This past year, section 718.1255, Fla. Stat. required unit owners and condominiums to participate in only nonbinding arbitration prior to filing a lawsuit for certain disputes. The statute was changed to add the option of participating in mediation prior to filing a lawsuit for certain disputes.

The Third District Court of appeals recently addressed the issue of whether the association was required to arbitrate its dispute before filing a counterclaim in CWELT-2008 Series 1045 LLC v. Park Gardens Association, Inc., 305 So. 3d 618 (Fla. 3d DCA).  CWELT owns a unit in Park Gardens Condominium which is subject to the Declaration of Condominium including amendments for Park Gardens Association.  CWELT purchased the unit with the intention of renovating the unit, leasing the unit, and ultimately selling the unit. Park Gardens amended the Declaration of Condominium prohibiting unit owners from leasing a unit for the first two years of ownership without prior written approval from the Board of Directors. As a result, CWELT filed a complaint in circuit court asking the court to void the amendment and sought damages for the loss of rental income. CWELT did not participate in nonbinding arbitration prior to filing the lawsuit.

After the lawsuit was filed, the association moved to dismiss the lawsuit alleging that CWELT’s claims were barred by the statute of limitations, and that an earlier amendment accomplished the same result as the amendment being challenged by CWELT. The parties litigated the case for a little over two years prior to the court ruling on the association’s motion to dismiss. The trial court denied the association’s motion to dismiss and required the association to file an answer to the complaint. The association filed an answer and a counterclaim alleging two breach of contract counts (nuisances and unauthorized tenants) and one count seeking declaratory relief. The association also failed to participate in nonbinding arbitration prior to filing its counterclaim. CWELT filed a motion to dismiss the association’s counterclaim on the grounds that the association was required to proceed to nonbinding arbitration under section 718.1255(4)(a), Fla. Stat. prior to filing its counterclaim.

The court denied CWELT’s motion to dismiss.  In reaching this decision, the court analyzed the facts of the case. The court took into consideration the fact that CWELT filed its motion to dismiss almost immediately after the association filed its counterclaim, but the court could not ignore the fact that CWELT had been litigating its claim for nearly three years prior to the issue being raised. The main factor that the court relied upon is the fact that the parties were relying upon the same amendment in their respective suits. Another words, the dispute as defined by section 718.1255, Fla. Stat. related to the very same subject matter in both complaints and both were subject to the mandatory presuit arbitration procedure set forth in section 718.1255, Fla. Stat. The court held that CWELT waived its right to assert that the association could not file its counterclaim without first complying with the same statute. In other words, CWELT could not fail to comply with the statute and then force the association to comply with the statute, what is fair is fair.

The court concluded that there are circumstances where mandatory pre-suit arbitration will not be enforced.  In making this decision, the courts must look at the facts of each case to determine whether mandatory pre-suit mediation and/or nonbinding arbitration will be enforced. There are several factors that the court will examine when determining whether mandatory pre-suit mediation or nonbinding arbitration is required including the factors discussed herein.

Community associations should always be cautious when filing a lawsuit which involves the disputes discussed in sections 718.1255 or 720.311, Fla. Stat.  Associations should have a policy in place to address how to process disputes contemplated by section 718.1255 and 720.311. Ensuring the proper procedures are in place for disputes considered under this section of the statute can assist the association with avoiding costly unnecessary litigation.

Posted in Arbitration, Community Association, Condominium Association, Homeowners Association, Mediation
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