|Section 102: The Right to Resolve Disputes without Litigation|
1. Required Notice of Violation. Before an association may seek foreclosure, file suit, charge any fee (including attorney fees), limit common area use, or take other action against a homeowner for violation of governing documents, except for an emergency action as provided in ¶ 9, the association must, in addition to compliance with other law and governing documents, do the following:
a. Provide notice to the homeowner twice, at least 21 days apart, that
i. describes the basis for the claim, including how the homeowner allegedly
violated quoted terms of the governing documents;
ii. states any amount the association claims is due, describes how the
homeowner can remedy the violation, confirms the right to comply
without waiving the right to dispute the violation, and (where applicable)
gives notice of the right to request an installment plan for assessments;
iii. describes the ombudsperson, including that the ombudsperson has a list of
no- and low-cost mediators and other information; and
iv. states the homeowner has a reasonable period to cure--of at least 21 days
after the second notice, unless the homeowner had an opportunity to cure a
similar violation within the past six months, and that during the cure
period the homeowner can obtain a hearing as provided in ¶ 2 or
mediation as provided in ¶ 3, and can contact the ombudsperson as
provided in ¶ 4, without incurring any attorney fees charged by the
b. If the certified mail notice is not delivered, reasonably try to confirm the homeowner’s current address and either resend the notice as in ¶ 1a or, if no other address can be found, reasonably try to hand-deliver the notice, the period to cure starting anew from this notice.
2. Right to a Hearing. After notice of ¶ 1a, homeowners have the right at no cost to a hearing to verify facts and seek resolution with the directors or a committee designated by the directors. If the directors use a committee, any agreement must be enforceable, to be ratified by the directors unless it conflicts with law or the governing documents, and the homeowner must be allowed to appeal to the directors. In addition:
a. the association shall hold the hearing within 30 days after the association receives the homeowner’s request and shall provide notice of the date, time, and place at least 10 days before the hearing; the homeowner may request postponement, which shall be granted if for not longer than ten days; additional postponements may be granted by written agreement of the parties; the homeowner may record the meeting; and the committee (and, on any appeal, the directors) shall issue a written decision including the notice required by ¶ 5; and
b. the association shall extend the period to cure under ¶ 1a(iv) until 15 days after notice of the written decision by the committee or directors, whichever is later.
3. Right to Confidential Mediation. After notice of ¶ 1a, except with respect to disputes involving only an assessment or small monetary charge (less than $___), homeowners shall have the right to one-half day of neutral mediation, with the proceedings to be kept confidential and not admissible in court except as provided by state law.  The requesting homeowner(s) shall pay 50 percent of the mediator’s charge and the association shall pay the balance. If after 30 days, the parties cannot agree on a mediator, the homeowner shall have the right to contact the ombudsperson as provided in ¶ 4. If the parties agree on a mediator, the association shall extend the period to cure under ¶ 1a(iv) until 15 days after the mediation.
4. Right to Petition the Ombudsperson. After notice of ¶ 1a, except with respect to disputes involving only an assessment or small monetary charge (less than $___), homeowners shall have the right to petition the ombudsperson upon payment of a filing fee not to exceed $___.  The association shall cooperate in any investigation pursued by the ombudsperson. The association shall extend the period to cure for 30 days, and for a longer period if requested by the ombudsperson.
5. Right to Options. After receiving notice of a decision under ¶ 2, homeowners shall have the right, within 15 days, to invoke either the procedure of ¶ 3 or ¶ 4. The notice of decision under ¶ 2b shall specify this right.
6. Right to Extend Time to Cure. During the period to cure as provided in ¶ 1, as extended in
¶¶ 2 to 4, the association shall not incur attorney fees chargeable to the homeowner, and shall not take any enforcement action except for emergency action allowed by ¶ 9.
7. No Lawsuit Without Directors Voting. No association may sue a homeowner without an
authorizing vote by a majority of all directors, in compliance with applicable law and governing documents that may set super-majority vote or other requirements.
8. Notice before Litigation. Except for emergency action allowed by ¶ 9, the association must provide distinct notice at least 15 days before filing suit against a homeowner, that
a. describes the basis for the suit, including how the homeowner allegedly violated
specified terms of the governing documents; and
b. states any amount the association claims due, describes how the homeowner can
cure the violation, and (where applicable) gives notice of the right to request an
installment plan for assessments.
9. Exception for Emergencies. Nothing precludes an association from seeking a temporary injunction, or taking temporary enforcement action (such as suspension of rights to use a common property), in a good faith response to an emergency. An emergency is a situation that could not have been reasonably foreseen, poses a significant and immediate threat to the common-interest community, and makes compliance with the preceding paragraphs impractical. Any temporary enforcement action entitles the homeowner to immediate notice and the related rights above, provided enforcement action may remain in place pending (a) the final determination of homeowner rights or (b) the end of the conditions resulting in the immediate and significant threat, whichever comes sooner.
10. Additional Right to Petition the Ombudsperson. In addition to the rights of ¶ 4 and other
rights in this model statute to petition the ombudsperson, except with respect to disputes involving only small monetary charges (less than $___), and upon paying the ombudsperson a filing fee not to exceed $____, homeowners shall have the right to petition the ombudsperson to challenge violations of homeowner statutory rights. Before making a petition under this ¶ 10, homeowners first shall give the directors notice of the dispute, and allow two weeks for a response, to be extended by an additional two weeks if needed to complete any procedures for alternative dispute resolution required by the governing documents; provided this shall not require more than one-half day of confidential mediation or require the homeowner to pay a fee. The association shall cooperate in any investigation pursued by the ombudsperson.
11. No Additional Charges, but Additional Options Allowed. No association may charge
homeowners for exercise of the foregoing rights, but associations may offer additional options for alternative dispute resolution (ADR); provided no association may require binding ADR, otherwise require a homeowner to waive the right to go to court, or bill homeowners for mandatory ADR. In any litigation, if a party moves to compel nonbinding ADR, the court may consider the extent to which the parties already have pursued ADR.
12. Annual Notice of Rights to Alternative Dispute Resolution. Once each year, each association shall alert homeowners of their rights to ADR, including statutory rights and any others available under ¶ 11.
 While differences in cost and availability of mediators may affect the amount of a “small monetary charge,” in no case should this threshold exceed the annual assessment. See also the discussion below.
 The filing fee also depends on labor and other costs that differ among the states.
ADR before litigation, including but not limited to use of the ombudsperson (see Section 110),
offers an important way to promote homeowner rights. It avoids the cost of attorney fees and
encourages a reasonable face-to-face discussion in an informal and non-threatening setting. For associations, too, ADR offers potential advantages to avoid “the financial costs and emotional investments” of lawsuits that can endure and divide communities.  The California Law Revision Commission studied the benefits of “providing more affordable and available means to ensure compliance with the law and resolve disputes among” homeowners and associations.  That study recognized the need to take into account “structural factors that work against effective alternative dispute resolution … includ[ing] the relative inequality of bargaining position between the association and an individual homeowner, and the
cost of invoking a neutral dispute resolution process.” 
The model statute, in ¶¶ 1 and 2, starts by ensuring clear notice, time for homeowners to reflect
and consider their options with a right to cure, and an opportunity to be heard by directors.  This can promote rapid, fair resolution of disputes that reflect misunderstandings, and ensure that directors know if managers (or others) take abusive actions in the association’s name. This is similar to the constitutional requirement of due process when there is a dispute between an
individual and traditional government. 
This process must enable agreements that homeowners can enforce. The directors can use a committee (which can be a committee of one), so long as the directors will ratify any settlement, unless it includes terms forbidden by law or the governing documents. 
homeowners need help to develop their position. Both options should cost homeowners some money, to ensure a point to the process, but neither should cost so much as to discourage their fair use. The options provide assurance that, if a dispute can be resolved amicably, it will be. Both ¶¶ 3 and 4 exclude disputes relating to assessments or small monetary charges. For assessments, the model statute proposes that the homeowner must pay under protest and thereafter bring a challenge. (See Section 103, The Right to Fairness in Litigation.) For example, the homeowner could pay and then petition the ombudsperson to investigate the lawfulness of the assessment under ¶10. For disputes about small charges, the model statute offers no new process other than the hearing of ¶ 2 (but allows challenges in small claims court).
Where multiple homeowners face the same charge and agree jointly to mediate or seek review by the ombudsperson, their charges should be aggregated to determine if they exceed the “small charge” threshold. The small charge threshold to invoke the ombudsperson should be lower than for mediation because the ombudsperson can resolve the matter by reading the letters, and because the ombudsperson gains practical knowledge by staying abreast of issues as they arise.
The model statute ¶10 enables homeowners to petition the ombudsperson to challenge violations of the model statute or other statutory homeowner rights. See also Section 107, The Right to Oversight of Associations and Directors. Only one filing fee need be paid if multiple homeowners join the same petition. Homeowners need this access to the ombudsperson because, as discussed previously, typically litigation provides their only other option, and they lack time, money, skill, and experience, making litigation ineffective to keep associations accountable.
The model statute ¶ 11 allows associations to adopt ADR procedures, but absolutely protects the right to judicial review as provided in Section 103, The Right to Fairness in Litigation. 
Homeowners should be told annually of whatever ADR rights exist. 
 CAI, “Public Policies,” supra n. 58, at 11 (this policy eff. 5/3/02).
 Alternative Dispute Resolution in Common Interest Developments, 33 Cal. L. Rev. Comm’n Reports 689, 696 & n.7 (2003).
 Id. at 700.
 See Tex. Prop. Code 209.006 & 209.007; see also Fla. Stat. Ann. 718.1255; Cal. Civ. Code 1363(h). Similarly, in Jones v. Flowers, 126 S.Ct. 1708 (2006), the Supreme Court explained the importance of making reasonable additional efforts to serve notice in those cases where certified mail is returned undelivered.
 Accord, e.g., CAI “Public Policies,” supra n.58, at 61 (eff. 10/9/93) (homeowners deserve fair process).
 See Alternative Dispute Resolution in Common Interest Developments, supra n.65, at 704 & Cal. Civ. Code 1368.840.
 See Cal. Civ. Code 1369.540(b).
 See also Villa Milano HOA v. Il Davorge, 84 Cal. App. 4th 819, 102 Ca. Rptr.2d 1 (2000) (mandatory arbitration clause can be unconscionable).
 See Cal. Civ. Code 1369.590.
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