Pre-Suit Mediation Demystified Alternative Dispute Resolution In Action
Living in a managed community can provide many benefits to owners, such as shared amenities and protection of property values. In a perfect world, everyone obeys their restrictions, and neighbors live in peace. We do not live in a perfect world, however, and disputes in managed communities arise frequently. Rather than requiring every dispute to be settled through expensive and time-consuming court battles, Chapters 718 (condominiums) and 720 (homeowners associations) both provide methods of "Alternative Dispute Resolution," such as arbitration (in some limited cases) and, more commonly, pre-suit mediation.
For both HOAs and Condos, the Florida Statutes require the parties to a dispute to at least attempt pre-suit mediation. Usually, the story is that an owner has violated the governing documents, and the association has taken steps to stop the violation. In that scenario, the association must first notify the owner that a violation has occurred and give the owner a chance to fix the problem within a reasonable time. If the owner fails to fix the problem in a timely fashion, the statutory pre-suit mediation requirement kicks in.
Imagine, for example, a dispute between an association and an owner over pet restrictions in a condominium. The owner has kept a nuisance-creating pet in their unit and has failed to remove it after a notice of violation. The association's next step would be sending a pre-suit mediation demand. Section 720.311(2) of the Florida Statutes contains a form letter to be used by the complaining party (and Section 718.1255(5), dealing with condominium mediations of this type, basically says, "Go look at 720.311(2) for mediation stuff"). The pre-suit mediation demand has one party provide a list of mediators for the other to choose from, and the responding party generally picks one from that list. Once the mediator is selected, mediation must occur within 90 days of the demand letter being sent.
Be aware that pre-suit mediation does not just apply to complaints by an association against owners. Owners can also take legal action to enforce the governing documents against the association or other owners. As the law pertains to prevailing party fees and costs, whoever is attempting to enforce the governing documents (the "Complainant") is responsible for sending the pre-suit mediation demand to the responding party (the "Respondent").
Legal benefits of pre-suit mediation.
Before getting into mediation itself, it is essential to discuss why mediation is a valuable tool in dispute resolution. Historically, it turns out that putting two parties together in a room to work out their problems between themselves works more often than most people may think. Having discovered this, the legislature decided to enact Sections 720.311(2) and 718.1255 as a method of conserving judicial resources. The law ties participation in pre-suit mediation to the ability of a party to recover their attorney's fees and court costs if a lawsuit eventually becomes necessary. Governing documents typically, and Chapters 720 and 718 always, provide that a party prevailing in a lawsuit regarding enforcement of the restrictions can collect their fees and costs from the losing party; however, failure to participate in pre-suit mediation can change that. The penalty for failure to send the demand letter is that the Complainant may lose their right to recover fees and costs, even if they ultimately win the lawsuit. Alternatively, the Respondent (if they were to prevail in the lawsuit) would be able to recover their fees and costs if they were to prevail because they had no duty to seek mediation under the statutes. However, if the Complainant does send the demand letter, and the Respondent simply ignores it or refuses to attend a scheduled mediation, then the Respondent loses their right to prevailing party attorney fees, but the Complainant would not. Since litigation expenses can be significant, ensuring compliance with the pre-suit mediation process is vital before resorting to legal action.
Other benefits of mediation.
Aside from the fees and costs issue, mediation generally provides a faster and lower-cost option than litigation and some other non-tangible benefits. The average civil lawsuit in Florida takes 18 months from start to finish and is likely to cost thousands of dollars at a minimum, with certain association disputes going well into the six figures as fees and costs mount (especially if appeals are involved). Alternatively, mediation is usually wrapped up within 90 days of the initial demand letter and typically only involves about a day's worth of attorney time and half of the mediator's hourly fee.
Additionally, mediation allows the parties to be more creative in how they resolve their dispute than the courts can allow. A judge can only award an injunction (a court order compelling the parties to take or refrain from specific actions) or a money judgment. At mediation, the parties can agree to other types of settlements that a court simply would not have the authority to issue, such as agreements requiring cooperative action by both parties, fee splitting agreements, or waiver of certain claims.
Mediation also attempts to foster a positive environment and allows the parties to be heard and understood by each other. Mediated settlement agreements typically result in deals where both parties contribute and provide direct input, making it more personal. This sense of individual responsibility in the outcome is psychologically compelling. Litigation, on the other hand, is by its very nature adversarial, with one party coming out a winner, and the other a loser, potentially resulting in a lot of leftover hostility between the parties in the aftermath. Essentially, mediation is going to be more cathartic than adversarial lawsuits.
One of the other great benefits of mediation over litigation is confidentiality. Mediation is a private process and is strictly confidential. Nothing said in a mediation can be used outside of the mediation unless authorized by the parties. This allows everyone to speak freely without fear that their comments or statements can be used against them in court, and that free and open type of communication is key in resolving disputes. The exception to this broad grant of privacy, at least in the world of managed communities, is that any agreement to which an association is a party is going to become an official record of the association, meaning any interested owner can request a copy. Confidentiality clauses involving an association trying to keep the agreement a secret are generally unenforceable, as the official records statutes still apply, and mediated agreements are simply contracts that must be maintained and made available for copying and inspection. This exception to the confidentiality rule only applies to the mediated settlement agreement itself, however, and nothing else discussed at mediation needs to be disclosed.
Mediation in practice.
As to mediation itself, there are typically three parties. The complainant, the respondent, and the mediator. The mediator is a neutral party and plays a crucial role. They act as a facilitator (or perhaps more accurately as a translator of sorts), guiding the parties through the process and ensuring that everyone remains focused and productive. Often, a key job of the mediator is simply to try and mitigate the effect that personal grudges or biases may have on the outcome. While a mediator is also a lawyer or retired judge, they are not going to be giving legal advice in mediation – they may point out certain issues that may not otherwise have been considered, but they do not advocate on behalf of either party like a lawyer typically does.
The mediation itself usually begins with the mediator providing a detailed explanation of the mediation process, particularly the confidentiality aspects and potential benefits. Following this, the parties may choose to provide opening statements to present their positions to each other. While these statements are not mandatory, they can be a useful tool in setting the stage for the discussions that will follow. Sometimes, however, both parties are fully informed of each other's position, or perhaps the level of hostility is so great that keeping them in the same room is counterproductive, in which case opening statements may be waived.
After the mediator's introductory comments or opening statements (if presented), the parties usually separate into different rooms. The mediator goes with one party, usually the Complainant, and uses this time to listen to and understand the Complainant's position and legal arguments. Once the mediator has a full understanding of what the Complainant is saying and looking for, they will leave the Complainant and move to the Respondent's room. The same process occurs, with the Respondent explaining their side of the story and their legal arguments. The mediator then goes back and forth between the rooms and attempts to help the parties understand each other better, with the ultimate goal of reaching an agreement that both parties can live with. Both parties to a successful mediation usually need to be prepared to compromise a little, and an old mediation cliché is that a successful mediation leaves both parties feeling as if they lost. While that is perhaps a little over the top, the takeaway should be that successful mediation almost never results in everyone getting everything they want. Finally, thanks to recent innovations in telecommunications technology, mediations may now be held via Zoom or other electronic means (as long as both parties consent and the mediator has the necessary equipment).
The mediated settlement agreement.
If the parties can reach a deal, a contract will be drawn up in the room, and the terms will be negotiated. This document is called a mediated settlement agreement. The agreement must be signed by all affected parties and their lawyers to be enforceable. Once fully executed, it becomes a binding contract. Since this is a voluntary agreement between the parties and not an edict handed down by a judge, everyone tends to come out feeling as if they have been heard and have contributed to the solution, which has the effect of making each party likely to abide by the deal. If a party does breach the agreement, then the non-breaching party has a much easier time in court; instead of having to prove a violation and the entire background of a case, they need only show that the agreement had a specific requirement/obligation and that the other party didn't do what was required of them. This type of lawsuit is much faster and cheaper than a lawsuit to address a violation of the governing documents (which requires the Complainant to prove every element of their case with admissible evidence). In an unsuccessful mediation, where the parties just cannot be made to see eye-to-eye, an impasse is declared, and the parties are free to leave and move on to litigation if necessary.
Impasse.
While the law requires the parties at least attempt the pre-suit mediation process, mediation itself is voluntary. Unlike a lawsuit, where a judge's ruling is final and binding whether the parties like it or not, anyone can walk out of a mediation at any time. A Respondent technically only needs to show up to the mediation, establish their attendance, and then leave to fulfill the statutory requirement to participate and protect their fee entitlement. This is another situation in which a competent mediator can play a crucial role and can hopefully convince a party attempting this type of tactic to at least give mediation a chance to work. Still, if at any point one of the parties feels as if the mediation is deadlocked or that the other party simply will not meet their minimum demands, they can elect to terminate the mediation and walk away. In this case, an "impasse" is declared. This simply means that a voluntary agreement could not be reached but shows that the parties at least tried. Sometimes, an impasse is simply unavoidable, but experience shows that mediation is more successful than one might think. Once a mediated settlement agreement is reached, however, that becomes a binding and legally enforceable contract, so while mediation is voluntary, the agreements reached therein are not.
Conclusion.
Mediation provides a lot of benefits compared to mediation, including lower costs, faster results, better psychological outcomes for the parties, and more creative settlement options. In managed community cases, it just so happens that your right to recover your fees and costs is also linked to at least trying to go through the process. In any dispute involving managed communities, whether involving the association, owners, or any combination thereof, mediation is a key step in resolving the problems and provides a better chance at moving on than its more expensive, time-consuming, and psychologically harsher litigation option.
