Compliance with California’s Dispute Resolution Requirements
The Davis-Stirling Act (also known as Title 6 of the California Civil Code, which covers sections 1350–1378) sets out the laws of governance for common-interest developments) in California. Sections 1363.810 – 850 and 1369.510 – 590 address the requirements for resolving disputes that arise in CIDs.
According to the Davis-Stirling Act, “a homeowners association or an owner … may not file a civil action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution.” [§1369.520] “Alternative dispute resolution means mediation, arbitration, conciliation, or other nonjudicial procedure … The form of alternative dispute resolution … may be binding or non-binding, with the voluntary consent of the parties.” [§1369.510]
Davis-Stirling was enacted to encourage mediation as an alternative to litigation for all CID disputes, thereby accelerating the time and minimizing the cost to resolve disputes. However, alternative dispute resolution is not mandatory for
(i) disputes that claim monetary damages in excess of $5000, (ii) disputes over assessments, and (iii) disputes filed in Small Claims court.
Step 1: Request for Resolution
The dispute resolution process begins when a party serves all other parties a Request for Resolution. This request must include a brief description of the dispute, a request for alternative dispute resolution, and a notice that a response is required within 30 days or the request is deemed rejected. [§1369.530]
“Service of the Request for Resolution shall be by personal delivery, first-class mail, express mail, fax, or other means reasonably calculated to provide the party on whom the request is served actual notice of the request.” [§1369.530]
Step 2: Response to Request for Resolution
“If the party on whom a Request for Resolution is served accepts the request, the parties shall complete the alternative dispute resolution within 90 days after the party initiating the request receives the acceptance, unless this period is extended by written stipulation signed by both parties.” [§1369.540]
The other party doesn't have to accept the Request for Resolution. However, “the court, in determining the amount of the award, may consider whether a party's refusal to participate in alternative dispute resolution before commencement of the action was reasonable.” [§1369.580]
Step 3: Parties Meet to Resolve the Dispute in Mediation
In approximately 80% of mediations, parties reach an agreement, but you’re under no obligation to settle. Presuming you reach a settlement, the mediator will draft the agreement in language acceptable to all parties. You can choose to make the agreement either binding (i.e. enforceable in court) or non-binding. You may also have your attorney review it before you sign it.
Experience has taught us that only those parties who experience their conflict as a moral crusade are unlikely to reach a mediated settlement. We encourage parties to review our Preparing for Mediation guide to help ensure that mediation yields a successful outcome for all parties.
Step 4: If Parties Don’t Reach Agreement in Mediation
Having fulfilled the requirements of section 1369.520 (i.e. “to submit their dispute to alternative dispute resolution,” obligated parties are now free to pursue their dispute in superior court. In order to demonstrate fulfillment of the requirements, the party who wishes to bring the suit must file with the complaint a certificate that states: (i) alternative dispute resolution has been completed, and (ii) one of the other parties to the dispute did not accept the terms offered. Failure to file this certificate can be grounds for dismissal of the case. [§1369.560]
Step 5: Mediation After Commencing a Civil Action
Section 1369.570 encourages parties, even after one has filed a lawsuit, to submit their case to mediation: “After an enforcement action is commenced, on written stipulation of the parties, the matter may be referred to alternative dispute resolution. The referred action is stayed.” [§1369.570] Again, if mediation is unsuccessful, the parties can resume with a court proceeding.
Advisory Obligations of HOAs and Association Members
Section 1369.590 requires an HOA to provide its members an annual summary of the dispute resolution provisions specified in Civil Code §1369.510 – 590. This summary should include the following language:
“Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 1369.520 of the Civil Code may result in the loss of your right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law.”
