When Required. Parties to a dispute in common interest developments are required to offer alternative dispute resolution ("ADR"), i.e., methods of resolving disputes outside of court, before litigating a dispute. The most common forms of ADR are arbitration and mediation. This requirement applies to associations and their members whenever the dispute is solely for declaratory or injunctive relief, or for such relief in conjunction with a claim for damages not in excess of five thousand dollars ($5,000).

Procedural Requirement. Effective January 1, 2005, Every association is required to provide a “fair, reasonable and expeditious” procedure for resolving disputes between the association and its members to enforce the Davis-Stirling Act, the Corporations Code provisions relating to associations, or the association’s governing documents. If an association does not establish its own procedures, then the following process automatically applies:

1.  Either the association or the member may request that the other side meet and confer in an effort to resolve the dispute. The association may not refuse such a request, and the member may not be charged a fee to participate in the process.

2.  The association must designate a board member to attend the meet and confer session.

3.  The meeting must occur “promptly” at a mutually convenient time and place. At the meeting, the parties must explain their positions to each other and must confer “in good faith” in an effort to resolve the dispute.

4.  If the parties agree on a resolution of the dispute, the agreement must be put in writing and signed by the parties. The agreement is binding and can be enforced by the courts if: a) it is not in conflict with the law or the governing documents, and b) the association’s representative had the authority to enter into the settlement or the settlement is ratified by the board.

"Endeavor" Requirement. The Davis-Stirling act also requires that before an association or a member files a lawsuit in superior court to enforce the Davis-Stirling Act, the Corporations Code provisions relating to associations, or the association’s governing documents, the parties must “endeavor to submit” their dispute to a form of alternative dispute resolution (ADR) before a neutral third party—i.e. mediation, arbitration or conciliation. Disputes which are not subject to this requirement are those which involve monetary damages in excess of $5,000, small claims cases, and certain assessment disputes.

Refusal to Participate. If a party unreasonably refuses to participate in the process and the case proceeds to court, the court may order the refusing party to pay the other side’s attorneys fees.

Notice. The association must provide notification to its members concerning both of the above dispute resolution procedures.

Mediation. In light of the tremendous costs in time and money of litigation, the Davis-Stirling Act encourages associations and their members to resolve their disputes before lawsuits are filed. Mediation is considered to be the most effective and cost-efficient method of alternative dispute resolution because the mediator serves to facilitate negotiations between the parties, thereby helping them find their own mutually acceptable resolutions. Mediation is especially successful in homeowner association cases, since the parties have a continuing relationship and must continue interacting with each other after the dispute is concluded.