When dozens and sometimes hundreds of personalities live together in one space, conflict inevitably will ensue. When passionate individuals serve on boards and are responsible for the overall well-being of the co-op or condo which they serve and the people whom they represent, again disagreements and arguments can arise. And finally, when management works with vendors and contractors and where significant responsibilities and large sums of money often change hands, problems are an everyday part of life.

The trick to surviving all these potential conflicts is to know how to handle them and perhaps most importantly, know how to resolve them before they reach litigation. In the movies, these types of arguments always end with someone shaking their fist and yelling, "I'll see you in court!" That kind of problem solving leads to potential misery for all involved: costly court fees, unsatisfactory judgments and solutions that fail to solve the issues at hand.

Thankfully, there is alternative dispute resolution (ADR), a system that encompasses mediation and arbitration. These two means of negotiation are being used throughout the co-op and condo industry as well as other industries to reach agreement and solve conflicts before they reach the courtroom. They can be an effective means of finding solutions that fit the problem rather than getting judgments that inevitably are defined by the law and not always by the needs of the parties involved.

"There are many, many things that can be resolved with intelligent people talking, as long as they want to work things out," says Mona Shyman, a consultant and vice president of the Federation of New York Housing Cooperatives and Condominiums (FNYHC).

Why Do I Need It and What is It?

Alternative dispute resolution has become an invaluable tool in settling the problems that arise for co-op and condo owners, shareholders, board members, managers and others involved in the business. "Noise issues can be a problem," says Simeon Baum, president of Resolve Mediation Services, Inc. in New York City. "These are neighbor versus neighbor issues that can become very awkward. [Things like mediation] can help keep it in a neighborly mode."

Shyman agrees. "Sometimes you might have a problem with dogs," she says. "And it's often an issue that is addressed in the bylaws. In that instance, it might take a letter from the building's lawyer to shock the dog's owner into complying with the rules. But when you have situations like crying babies or other problems like that, those should be resolved with talking and reasoning."

Property damage within a building can create problems as well. There could be a roof leak in one of the apartments. If there's damage, the owner's first inclination might be to sue, but ADR might be another solution. "Mediation is done all the time in property damage issues," Baum says.

Financial issues are also common sources of strife, as are construction disputes between the building and contractors—perhaps a job did not get finished? Was the quality of work not what was agreed upon? Does the contractor feel he or she did not get their full fee? There are issues of governance and questions that arise about how decisions that affect the entire building are made. And there are election disputes. In fact, organizations such as the American Arbitration Association often administer elections in order to head disputes off at the pass.

So now that we know what problems can rear their ugly heads, what exactly does mediation and arbitration do? First, think of a sliding scale—on one end, you have litigation: judges, attorneys, discovery, final judgments, etc. On the opposite end of the scale, you have simple negotiation: two people sitting in a room hashing out their problems with each other. Sitting in the middle of that spectrum is mediation, which is closer in spirit to negotiation, and arbitration, which is closer to litigation.

There are a number of defining characteristics that separate mediation from arbitration. "They are different processes, but effective processes," says Eric Tuchmann, general counsel for the American Arbitration Association. Mediation takes place between two disputing parties and can take place any time before or after litigation. It involves a third party coming in to facilitate resolution. The mediator has no authority to bind a party to an outcome. If a solution is reached, a binding agreement is often drawn up, but the mediator has no official power to create that agreement. It must come through the disputing parties. "He or she is there to help them come to their own solution," Tuchmann says. Ultimately, mediation, unlike litigation and arbitration, is completely voluntary—it's up to the parties involved to decide if they are going to create that binding agreement that they both agree to follow. If not, one party can walk away from the table—no harm, no foul. Mediation comes in a variety of forms and styles with mediators trained to take on problems a number of different ways, approaching things in a way that is designed to make all parties comfortable and create a feeling of trust between all involved.

The voluntary aspect of mediation is one of the things that separates it from arbitration. Arbitration is "an adversarial procedure," says Tuchmann. Two opposing sides come together to hear the judgments of an arbitration panel. "It's usually a one or three person panel that will render an award at the end and that decision is final and binding," Tuchman says.

The panel is often comprised of experts in the field in which the dispute is based, and the parties involved are allowed to choose those arbitrators based on their expertise. "You get to choose someone who really knows the field," Baum says. This gives it a leg up over litigation, where the judge may be fully versed in the law but not necessarily in the nuances of the field.

Arbitration also has very limited appeal rights, which makes it "an attractive feature for some people," Tuchmann says, "because that means they're not going to have to go through 20 years of appeal (like in litigation)."

That finality and "the sense that it would be fast and cheap," made arbitration popular "20 to 30 years ago," Baum says. These days, though, it seems that "arbitration has bloomed into another form of litigation."

Engaging in Arbitration or Mediation

If people decide to take part in arbitration or mediation, how does it all happen? In some cases, it might not necessarily be a choice. Many contracts have arbitration or mediation written into the fine print, ensuring that people will try to resolve their differences out of court if conflict arises out of the contract. Or a court may order parties to mediate.

Although all processes are different, if two parties were to go through the American Arbitration Association, arbitration would look like this: "When we receive a demand for arbitration, we talk to the parties about what kind of arbitrator they want," says Tuchmann. "One might say they need an attorney with 20 years of co-op experience, but if it's a construction issue, the contractor might say they need an architect who knows buildings. We try to find someone who meets all those needs." At that point, all parties involved need to come up with a suitable schedule to begin hashing out the issues. Attorneys will be present, representing their clients. Everyone will lay out their cases and the arbitration panel will render its decision.

In mediation, a mediator will be selected. They will contact both parties, usually via conference call, to get information. They also will submit mediation statements describing what their dispute is, what their positions are and what they'll settle for. Mediation starts with all parties in a room together. Each party is given time to discuss their case and why they're having problems. There is an exchange of ideas. A caucus will then take place in which the mediator splits people into separate rooms and then goes and talks to them individually. At this point, the mediator might share with them his or her thoughts on the strength of their case and what kind of resolution they might expect if they took it to court. "It is a well-known fact that parties over-estimate the strength of their own case. A mediator can help give an objective view with respect to the likely outcome of their case," says Tuchmann.

As these conversations take place, the mediator will take these positions and try to come up with a resolution. It could be a monetary solution or something different that satisfies both parties. At the end of mediation, the mediator will either say an agreement has been reached and will help the parties create a binding agreement or the parties will agree that a solution was not reached, and they will move on to other options. Whatever the outcome, "mediation usually brings parties together and they begin to understand each other," Tuchmann says.

Choosing the Best Solution

Arbitration and mediation both have their fans. Some people like the finality of arbitration. Others like the non-confrontational nature of mediation. Experts such as Tuchmann and Baum agree that mediation often has the highest degree of satisfaction. "A mediator can come up with a creative resolution while a judge or arbitrator has to say one party is right or wrong," says Tuchmann.

Baum agrees. "People say and studies show that there is a higher satisfaction rate with mediation because they had control over the outcome and the remedy. Every mediation is a deal."

Mediation also helps "cultivate and repair relationships," Baum says. "Mediation focuses on quality of communication. When you feel you've been heard and you understand someone, you're going to get along better." This is especially important in co-ops and condos where the parties involved in the conflict still have to live or work together. Mediation offers perhaps a better opportunity for those relationships to be repaired and restored in the future.

Ultimately, it's all about talking. As Shyman says, "Sometimes you need to get creative with your problem solving." Alternative dispute resolution offers that opportunity.

Liz Lent is a teacher and freelance writer living in Bloomfield Hills, Michigan.