Mandatory Arbitration for Disputes Between Unit Owners and Condominium Associations

What happens when condominium unit owners disagree with their condominium association? According to Fla. Stat. § 718.1255(4)(a), disputes between unit owners and associations must first be submitted to non-binding arbitration before a lawsuit may be filed. That does not mean that all issues between unit owners and associations must first go through arbitration. Only “disputes” require arbitration before a lawsuit may be filed.

According to Fla. Stat. § 718.1255(1), a “dispute” in this context is a disagreement involving the condominium association’s authority to (1) require or prevent a unit owner from doing something with his or her unit, or (2) modify a common area. A “dispute” also arises with allegations that the board has failed to: (3) properly conduct elections, (4) give notice of meetings or actions, (5) conduct meetings, or (6) allow inspection of books and records.

According to the same statute, a “dispute” is NOT a disagreement involving: (1) title to units and common areas; (2) warranties; (3) fees or assessments; (4) collection of assessments; (5) eviction of tenants; (6) fiduciary duties; or (7) claims for damages to a unit from the association’s failure to maintain common areas. These claims are not required to go through non-binding arbitration before a lawsuit may be filed.

In practical terms, when does Fla. Stat. § 718.1255(4) apply to require arbitration first? In Carlandia Corp. v. Obernauer, 695 So. 2d 408, 410 (Fla. 4th DCA 1997), the court stated:

“The nonbinding arbitration required by section 718.1255(4) is well suited to deal with everyday condominium disputes such as keys, pets, proxies, renters, election violations and offensive exterior decoration or maintenance of a unit. These types of cases are factually simple. They can be presented to an arbitrator without extensive discovery, expert testimony or sophisticated legal assistance.”

The Florida Fourth District Court of Appeal recently affirmed this interpretation of Fla. Stat. § 718.1255 in Gomez v. Lakes of Carriage Hills Condo. Assoc., Inc., No. 4D09-1338, 35 Fla. L. Weekly D1822a (Fla. 4th DCA Aug. 11, 2010). In Gomez, nineteen condominium unit owners sued the condominium association board over a disagreement in how insurance proceeds from Hurricane Wilma damage were spent.

The unit owners alleged several complaints against the board, but, for the most part, they centered on allegations that the board members breached their fiduciary duties to unit owners. A fiduciary duty requires that one act in the best interest of another, and Fla. Stat. § 718.111(1)(a) imposes a fiduciary duty that requires association directors and officers act in the best interest of unit owners. The unit owners alleged that the condominium association board members did not appropriately use insurance benefits to make necessary repairs to property damage from Hurricane Wilma.

The Fourth District Court of Appeal held that these allegations were not “arbitrable disputes” as contemplated by the Florida Legislature, and allowed the lawsuit to proceed without arbitration. The Court clearly thought that issues surrounding fiduciary duties could not easily be “presented to an arbitrator without extensive discovery, expert testimony or sophisticated legal assistance.”

There were also other counts against the condominium association that were dismissed by the trial court in summary judgment. Those counts involved different issues that will be discussed in an upcoming post.

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