Pennsylvania Enacts Law Requiring Alternative Dispute Resolution
On May 7, 2018, Governor Tom Wolf signed in to law House Bill 595 (now known as Act 17 of 2018) which will take effect in sixty (60) days.
Act 17 amends the Pennsylvania Uniform Condominium Act, Real Estate Cooperative Act, and Uniform Planned Community Act, mandating that bylaws for all condominiums, cooperatives and planned communities (established after the effective date) contain “alternative dispute resolution procedures”. Such procedures are intended to address and resolve disputes between and among owners and associations. Act 17 specifically defines “alternative dispute resolution” as “[a] procedure for settling a dispute by means other than litigation, such as arbitration or mediation”.
In addition to imposing a requirement on all new communities to offer alternative means of solving association disputes, Act 17 imparts jurisdiction on the Bureau of Consumer Protection (a branch of the Attorney General’s Office) to receive, investigate and respond to complaints of owners in “good standing”. Specifically, matters including those relating to voting, proxies, meetings, quorums, and association records may now be investigated by the Attorney General’s Office. Complaints (with the Attorney General’s Office) may be filed immediately if an association does not offer internal dispute resolution procedures, and/or an association refuses to follow its existing procedures. Accordingly, complaints filed with the Bureau of Consumer Protection are not permissible if an alternative dispute resolution procedure IS available to the owner by its declaration, bylaws or rules and regulations. A direct complaint cannot be filed until (1) the owner exhausts the available internal procedure without resolution, or (2) 100 days have passed since the owner commenced the procedure and a resolution has not been reached. Act 17 thus expresses a clear public policy of encouraging internal, non-litigation means of resolution before seeking governmental investigation and enforcement. Punitive damages may be awarded in the event of willful violations; and if appropriate, the prevailing party may be entitled to an award of costs and attorneys fees.
Although associations generally engage in litigation as a last resort, few have formally adopted alternative dispute resolution procedures. Based on the mandates and public policy set forth in Act 17, we highly recommend that associations adopt bylaws amendments or rules and regulations establishing internal means of resolving disputes. Such procedures will not only provide opportunities for investigating and resolving disputes in a non-adversarial, efficient and cost-efficient manner, they may also prevent such disputes from reaching the Office of the Attorney General.
For more information concerning Act 17, please contact Stefan Richter, Esquire at 215.348.1776.