 Welcome to the Condo Insider Show, where we discuss all things related to condo living. Today, our discussion will shed light on the arbitration and mediation process to help facilitate various dispute resolutions. As our guest today, we have Jane Sugimora, our condo insider and expert to share with us how to navigate these options designed to serve the industry to avoid lawsuits. Welcome back, Jane. Thank you very much, Cheryl. Always a pleasure. Always a pleasure. I know that many condo associations and homeowner associations, you're going to find this as a shocker, but they rarely get into disputes. We know right off that. We know that. That's not true. There are always disputes, and what we usually tell boards when that issue comes up is the way to avoid disputes is to talk to people. Even if they're angry, because if you don't talk to them, they get worse. They get angrier. Yeah. That's a good way. And they start writing letters first to the board, and then to the other owners, and then you get petitions, and then you get a lawsuit, so it just escalates. And so my advice is to the board, you don't ignore the people who are complaining. Exactly. They need to be acknowledged to know that somebody's listening to them and doing something. And if you can't do anything, you have to tell them, well, we really don't have an answer to you, but we're going to look into this and then get back to them. And then actually get back to them. Yeah. And if you do that, and you establish that pattern, then you know. They stay ahead of these things. Right. But the way to end up in a dispute is to ignore them, because it just gets worse. And for owners and for condo boards, if you ignore the disputes, it just results in a whole lot of disruption in the community. It costs the association money. It costs the unit owner's money, because if there is a lawsuit or some kind of dispute resolution where attorneys have to get involved, the homeowners end up paying for it through their maintenance fees. Yeah. Yeah. It's all connected. It's all connected. It's like a little ripple. Like, you know, you throw a stone and the water ripples, right? And so, you know, you just want to make sure that, you know, these things don't blow up. Yeah. Yeah. And they do blow up. Yeah. They do. They do. And so, and I think that in instances where they do blow up and they do grow there, there are resources out there for condo associations to help them kind of mitigate some of these problems and issues that come up. And some of them, or two of them that we're going to talk about today is the mediation and arbitration process that many boards may or may not be aware of that we want to kind of expound on and kind of let them know that these resources are out there. But let's start with mediation. Why don't we define exactly what that is and how that can serve? Okay. A condo association. A mediation is where you engage, where the parties who are in the dispute and there is a provision in the condo statute in 514B. And that's 514B, I think it's 161, which is the mediation statute. It is. And what it does is it tells who can participate. And it used to be just the owners and the board members. But now it's the owners and the board members. And if you have board members who disagree with each other, they are also, they can also be included in the mediation, as well as the resident manager, the managing agents. So board members can also participate in mediation within the board? Yes. Because to give you an example, there are some, there's, there is a, there is a provision that talks about rules of good conduct. I don't know what it is. Yeah. Yeah, I think I read that. And some boards have been adopting it. I myself think that that's kind of like overdoing it because, you know, the boards have a fiduciary duty and you have a board president who's tasked under Robert's rules to control the meeting. So people get out of hand and start yelling and screaming. It's chair's job to control the meeting. And to say, hey you, you know, stop it. Cut it out. Cut it out. If you can't be civil and respectful, I'm going to ask you to leave the meeting. You know, so, so, but instead of that, there are these rules of conduct. And I, I know of a situation where a board member who didn't agree with their rules of conduct wouldn't sign the form, or wouldn't vote for it, or wouldn't vote for it, and was censured. And he ended up suing, not suing, but challenging the board. I recall an instance like that as well. And so, so you have instances where you have board members who disagree with other board members. And so they were not included in the mediation statute. And two years ago, when we did revise it, we included it so that if you have board members who have a dispute, you know, with other board members, they can be included in the mediation process. But what a mediation process is, is that the people who have the dispute, they can contact certain providers like the dispute prevention resolution DPR, or the mediation center of the Pacific, or there are certain mediators in town, professional mediators, and they are known to the, the real estate commission, and who can refer, you know, people to the mediators. And then, so the mediator is a, is a neutral, and there's two types of mediation. One is facilitative, and the other one is called evaluative. Evaluative mediation means that the neutral is, you know, talks to both sides and tries to get both sides to come together. The neutral being the mediator. Yeah. Yeah. You know, to come to a solution that is, works out acceptable to both. And evaluative mediation, whereas where you've got the parties who come together, and the mediator is somebody with specific knowledge, and in this case, it would be a knowledge of the condo statute. Okay, so those, so in evaluative mediation, you have somebody who's, who has, who has expertise in the statute, and then he listens to both sides, and he renders, he or she renders an opinion, saying, oh, well, you know, your case is strong on these points, weak on these points, and you know, and so it tries, and what it does is it tries to tell them whether they've got a good case or a bad case. And usually these trained mediators are attorneys who practice in condo law or retired judges who know, who should know what they're doing. Yeah, they know their stuff. And so if, if you were one of the, the disputants or the people who are disputing and you're, you're coming and, and you have a professional, you know, looking at both sides and basically telling you, your, your case really sucks. You know, maybe you bend, you should probably rethink. You rethink this and maybe, your position. Yeah. And, and, and so, so that's what evaluative mediation is. And, but the whole task, the whole point of mediation is to have somebody, a third party, come in, listen to both sides, and to try to get them to agree to a solution that's going to be acceptable to both so that the dispute gets resolved. Yeah. That's the whole point of it, is to let's, and you might not get everything you want. But you know, most times you don't when, when, when you try to resolve something, you have to give a little bit and the other side has to give a little bit and fine, if it's something that, you know, might not be something that was, you know, number 10 on your list, but if it was number six, Yeah. you could live with that. Yeah. And, and, and, and that's, that's okay. And to me, the reason why this is, why this type of remedy is so necessary for condominium. In a condominium, I mean, in a lawsuit, if you have a lawsuit, you probably don't know that person really well and that person doesn't live in your building. Right. That's not your neighbor. Right. It's not your neighbor. You don't see him in the elevator. You know, so it makes it kind of awkward if you're fighting, the person you're fighting with is in your building or in where you live. And you know, so it's best, and because there's nothing you can do because you're not going to move, the other person's not going to move. Right. You need to get it resolved because. It's awkward. Yeah. It's awkward. And the dispute affects other people. I mean, the other neighbors, the people who don't want to take sides. Right. Right. Who want to just stay away from both of you because they know you're fighting with each other. Yeah. You know, so it doesn't make for a very harmonious community. And so that's why it's in everybody's best interest to get these things resolved quickly and cheaply. And with mediation, in recent years, under the evalutative mediation, the state of Hawaii will subsidize it, which means that if you apply for, if you apply to any of these contractors, and they have contracts with the state of Hawaii, and you say, I want to do evalutative mediation, then they will contact the DCCA and make sure that your condominium is registered, when most of them are. Most are, yeah. You pay the first $375, and the state will subsidize the balance. That's huge. They're saying that they really want to help assist in these matters. And the thing of it is, condo people, they shouldn't feel bad that it's being subsidized because it's not taxpayer money. It's not money from the general fund. The money that sits, that is used to subsidize the evalutative mediation, and we'll talk about arbitration later, but who subsidizes the dispute resolution. It comes from condo ed fund, a condominium education fund that was established about 30 years ago. And it was because there was this huge dispute with the Marco Polo, and there was a lawsuit. And what happened in that case was the court found that the board president, you had a very wealthy person who was living in the Marco Polo, and the board president, they just happened to be neighbors in the penthouse. And it started with a roof leak. And because the owner didn't feel that the association was doing enough to fix the roof, he was complaining, and he had lawyers, and then the board president, who lived next door to him, used her authority. And so there were dirty tricks both sides. And that was the case where the carry even walked away in the middle of the lawsuit. The carrier, the insurance carrier, walked away and said, we're out of here. And they had to end up... That's unusual, isn't it? No, it's not, but they ended up suing the carrier because this is a D&O carrier. Yeah, aren't you obligated? They are obligated to defend, but in the end, because of the shenanigans, I guess, that were going on, and it was in the newspapers. It was very bad. And in the end, the court found that the board president had breached her fiduciary duty, and she was fined $75,000, and the vice president was... This is over 30 years ago. And the vice president was fined $65,000 for not stopping the board president, which I happen to personally know the board president, and she sat on my Hawaii Council board. And let me tell you, there's nobody who can tell her what to do. But anyway, because of that, the legislature kind of gathered us together because we had wholesale resignations, because board members found out that they could get sued and be personally liable because the court would not allow the insurance to pay the fines. They had to pay it out of their own pocket. And so, you had all this wholesale resignation, and the legislature... So, it unlocks the legislators. It says, you know, this cannot happen again. And so, we are going to establish a fund to educate board members and owners and to promote dispute resolution so that lawsuits don't end up in court. Yeah. That's how these things happen, folks. Well, this is a good place for a break, so we're going to take a quick break and we'll be right back. Please come back and join in the conversation on arbitrations when we come back. We'll educate you on that. So, thank you. Thank you. I'm Dave Stevens, host of the Cyber Underground here in ThinkTech Hawaii and ThinkTech Hawaii needs you. Please help us on our fall fund drive. Every dollar sustains us go to thinktechhoaide.com and click on the donation button or send your check to ThinkTech Hawaii 904th Street Mall, 888-107-96813. Your donation is tax deductible and we appreciate it. Mahalo. Hi. I am Rusty Kamori, host of Beyond the Lines. I was the head coach for the Punahou Boys varsity tennis team for 22 years, and we were fortunate to win 22 consecutive state championships. This show is based on my book, which is also titled Beyond the Lines, and it's about leadership, creating a superior culture of excellence, achieving and sustaining success, and finding greatness. If you're a student, parent, sports or business person, and want to improve your life and the lives of people around you, tune in and join me on Mondays at 11 a.m. as we go beyond the lines on Think Kauai. Aloha. Welcome back. We're going to continue our discussion with Jane. I think we left off discussing the mediation process and the funding of that or the subsidy that's allowed. Right. And what I was trying to emphasize is that the people who use the subsidy should not feel bad because they're paying for it. And like I said, 30 years ago there was this lawsuit, and the legislature decided that we're going to be educating boards so that we could avoid dispute resolution, and that ends up in lawsuits in the courts that cost so much money and cost, it wrecked havoc at the market pull. At one time, nobody could sell the units because there were liens on the property. Oh, wow. It was just the most... It was bad. It was very bad. That's a good history lesson. And so when it first started, it was a dollar and a quarter per unit for every condominium unit in the state of Hawaii. That's biannual. Biannual, which is every other year. Yeah. And at that time, I mean, we kind of balked at that and said, you know, that's unfair. They were going to set up a special fund to be regulated by the DCCA. And we said, yeah, it's going to be a dollar and a quarter now, but 20 years from now, it's going to be a lot larger. And as of last year, it was $10 per unit every other year. Like everything else, yeah. And in fact, I have good news. I got a call from a legislator about a month ago, and Takashi Ono is head of oversight with the government. And they were looking at these four special funds. One of them was a condo education fund. Really? And they found, and I could have told them this, they found that there was a lot of money in the condo education fund, over $2.5 million. Really? That's amazing. No wonder they can afford to subsidize. Well, of course, they want to help, but the money is there. And because when he did his investigation of these special funds, what he found was the four funds that in question, that they weren't spending it down. And so they were collecting the money from condo owners, but they weren't spending it down fast enough. So for the next biennial session, which is, I think, this coming year, 2020, then they cannot, they have to waive it. They have to waive, no, up to, they can't collect more than $5 per unit. So it's almost cut in half. I don't know if that's going to affect the fund, I mean, and, you know, but they have a lot of money. It's so funded now, so. So people should not feel bad about using the subsidy because it's money that condo owners have, it gets collected from condo owners, it gets put into a fund, and there's over $2.5 million there. Wow. Wow. Well, what are they doing to get the word out? If you go on their website, the DCCA RAC website, and you go to, if you search for mediation, they have a page. They have maybe two or three pages about mediation and arbitration, and it talks about evaluative mediation. It also talks about the subsidy. Oh, I see. And if you call the DCCA and say, I want to do evaluative mediation, who is doing it? DPR, Mediation Center of the Pacific, and there's Louis Chang, and there's other, I think Philip Nerny does it, but they will give you the name and the contact information. They also have it on the neighbor islands as well. So it's statewide because they're collecting money, and being a board president, I can remember getting the bill from the DCCA and having to sign the check for the $10 for however many units in our building. Yeah. And so... I remember sending those out. Right. Yeah. That's what it's all about. And so people should take advantage of it. That's what it's there for, and the whole purpose is to avoid them going to court. That's where we don't want the disputes to go to, and I will tell you, as an attorney, I have personal knowledge, the judges hate condo cases, and I had one district court judge tell me, you know, she does temporary training, she says, why can't you people get along? Yeah. She says, I have all these... I spend hours hearing these cases, and I can't believe the bad conduct or the mean things that people do to each other. Yeah. And it's awful. It's unfortunate. Like you said, you live, this is your home, these are your neighbors, you want to promote, you know, a healthy environment, and you want to... Right. And that's why, like you stated earlier, it's imperative that boards listen. Right. Just listen to homeowners, and the issue is not going to go away, even if you give them an answer that they're not necessarily 100% happy with, at least you're listening. And responding. And I think people appreciate that. Yeah. And what they don't appreciate is being ignored, especially if they're paying maintenance fees, right? Yeah. They're a part of the association, they pay their maintenance fees, and it's like, well, geez, I asked a question, I think it's a reasonable question, I deserve an answer. Or I'd like to see the board minutes, how come I can't see the board minutes? Yeah. It's like... Simple things. It's simple things like that. Yeah. And then it costs the association money, the statute says you can charge. Right. You know, if they won't give you an email address, you know, where you can send this stuff, then you have to copy it, you incur a cost, you're entitled to charge. And so that's fair. And so, you know, so the issue is, so the answer is do not say no when somebody wants a document. Yeah. You know, just give it to them. Yeah. And that'll, you know, prevent a lot of issues later on, potentially. Because that's what... I don't know why, but over the years that I've been involved, there have been more disputes regarding documents. Documents. Yes. Well, I can't... Why won't my association give me the contract? Yeah. The managing agent's contract. And it's like, well, why do you want it? I mean, they can ask you why you want it, but you know, they have to eventually give it. It's like, and it's probably because the homeowner is probably mad at the resident manager, wants to know what, you know... What are we paying him? And what you're paying him... But that's in the budget. Yeah. And, you know, but, you know, what I've done is, when people want things like that, I just tell the R managing agent, just give it to them. If there's privacy information, that has to be redacted. Yeah. You don't want to give cell phone numbers or home addresses, because you don't... Social security and all these things. Social security. Yeah. Because you don't want the unit owners to be harassing. Right. I mean, because, I mean, it's okay to give them the contract, but, you know, some of them just kind of go overboard. Yeah. And you can't control that. So the whole way to do that is not to give them contact information. And it's... And, you know, we tell people, if you're mad at the resident manager, complain to the board, complain to the managing agent, that's what your recourse is. And we're supposed to handle it. And if we don't handle it to your satisfaction, then they're... And the unit owners' recourse is to replace the board. Yeah. Yeah. There's a whole process for that. Right. Yeah. So that's good stuff, Jane. The mediation process can... It's typically not binding, right? It's not binding, but, you know, if it's successful, then you get... Then it goes away. Yeah. Yeah. And so... To me, that's more important than, you know... What you want is... You want the dispute to be resolved. So if it means talking to a third-party neutral to help people work out, sometimes a third-party can see things... That you can't see. ...that you can't see because you're so mad. I didn't think about because you're clouded by anger in any cases. Right. Yeah. Yeah. So then, if it's not resolved, it can lend itself to our next topic of arbitration. Right. So arbitration is something like mediation, except with arbitration, a third-party, which is the arbitrator, if you decide to do arbitration in the statute, the statute is 514b162. And the way the statute is set up, you can demand mediation, and if they don't do mediation, you can then demand arbitration. You know, that's the step you're supposed to do. You don't have to do mediation? Are you saying... The way it was set up, and when you decide on a so-called dispute resolution scheme, the way it was originally set up was, let's make them do mediation first. And if they stonewall, don't do mediation, then do arbitration. And with arbitration, the statute says shell, although the mediation statute says also shell. But you know, if you do mediation first, because mediation is somebody trying to bring the parties together. If you can't come together, arbitration is like a trial. Got it. You go before a third-party who is an arbitrator, and it's usually a retired judge or an attorney. And you basically do your argument. You do a brief. You set off the facts, and you set off the law, and you present it to him, and you can do argument. And if you bring witnesses, you can make the witnesses do testimony in front of the arbitrator. Sounds like a trial. Yeah, you would need a lawyer to navigate that. And in the end, the arbitrator makes a decision. And under the current statute, it's non-binding. Arbitration? Arbitration is non-binding, which means that if you don't like the arbitrator's decision, you can file an appeal. And then it's a trial de novo, which means you file an appeal to the circuit court, and you start all over again. It's as if the arbitration never happened. De novo means you start over again. OK. And that's why a lot of people don't do arbitration. Because if the losing party is so upset, and he wants to do an appeal, you start all over again. It's like the arbitration never happened. That's what de novo means. But last year, we got a bill passed that will allow parties to agree to binding arbitration. OK, that's what I'm familiar with. I didn't know that there was. But that you have to agree to it. The statute says you need to agree. Both parties have to agree to binding arbitration. And then you get an arbitrator who listens to both sides and hears all the testimony and renders an opinion. Now, if you go through that process, the condo ed fund will subsidize it. Oh, at that level as well. Yeah. Oh, OK. But it's got to be binding. But if it's non-binding, it won't. It won't. But if it's binding, it won't. If you agree to binding arbitration, and you pay for the first hour of the neutrals, which is, I think it's $3.75 or $400. But you only pay for the first hour. The condo ed fund will kick in after that. And pay for the rest. OK. And see, that's to encourage people to do binding arbitration. Because if you agree to the binding. So that it's pow. It's pow. It's pow for good, bad, or ugly. When you're done, it's pow. Yeah. And for that, the condo ed fund will subsidize the cost of the mediator, I mean, the arbitrator. And that's something that was brand new in the last session. Oh, I didn't know that. I didn't know that. So either process, if you will, is 100% the preference over just going straight to. Circuit court. Circuit court, lawsuits, and all this. These are the steps that you should take. But I think the bottom line is to avoid either scenario is to just talk to your neighbors and play nice in the sandbox. Yeah. And try to live harmoniously. Right. Because that avoids a whole lot of stress. I mean, because even though this is not in a courtroom or in a legal judicial proceeding type of thing, it's still stressful. Yeah. It's still very stressful. It still means it's. Especially arbitration. Right. Arbitration is like a trial. Yeah. And so you will go, but it's much faster than a court. I mean, you would go in and talk to the arbitrator. And depending on the complexity of the issue and how many witnesses you have, I mean, you could probably get a hearing date within weeks. Oh, well, we're out of time. We could talk about this forever. But thank you for joining us. Come back. We'll have Jane on again. And we'll just continue this discussion. Yes. Thank you. Thank you.