Arbitration in co-ownership disputes
Disputes in a divided co-ownership can become particularly difficult when they involve the interpretation of a declaration of co-ownership, the use of common portions, building expenses, decisions of the syndicate, renovations, noise, access to units, insurance, maintenance obligations or relations between co-owners. Although litigation before the courts remains available in many situations, arbitration may provide an alternative method of resolving certain co-ownership disputes in Quebec.
Arbitration allows a dispute to be submitted to a neutral arbitrator rather than to a court. The arbitrator hears the parties, considers their evidence and arguments, and renders a decision known as an arbitration award. Depending on the circumstances, the obligation or right to proceed by arbitration may arise from an arbitration clause contained in the declaration of co-ownership or from an agreement entered into by the parties after a conflict has arisen.
Arbitration and the declaration of co-ownership
The declaration of co-ownership is one of the first documents that should be examined when a dispute develops in a condominium building.
A declaration of co-ownership establishes much of the legal framework governing the building. Among other matters, it may regulate the use of private and common portions, the powers and responsibilities of the syndicate, the administration of the building and the respective rights and obligations of the co-owners.
Some declarations also contain dispute resolution provisions. These provisions may require or permit negotiation, mediation or arbitration when certain types of disputes arise.
The wording of an arbitration clause is therefore important. A clause may apply broadly to disputes relating to the declaration of co-ownership or may be restricted to particular categories of conflicts. Before beginning arbitration, it is necessary to determine whether the dispute actually falls within the scope of the clause.
Can a co-owner be required to arbitrate?
Whether arbitration is mandatory depends largely on the legal basis for the arbitration.
When the parties voluntarily agree to submit an existing dispute to arbitration, their consent will normally determine the scope of the arbitrator’s mandate.
The situation may be different when an arbitration clause already exists in a declaration of co-ownership. A party faced with such a clause should not assume either that arbitration is automatically mandatory in every dispute or that the clause can simply be ignored.
The nature of the dispute, the wording and validity of the clause, the identity of the parties and the remedy being sought may all be relevant.
Certain matters cannot validly be removed from the jurisdiction of the courts through private arbitration. Questions involving public order or matters that cannot legally be settled by agreement require particular attention.
Who can be involved in a co-ownership arbitration?
A co-ownership dispute may involve different participants.
A conflict may arise between two co-owners, between a co-owner and the syndicate of co-ownership, or in connection with the actions of the board of directors. In more complex cases, managers, contractors, insurers, developers or other parties may also be involved.
The existence of several participants does not necessarily mean that every person connected to the dispute is bound by the same arbitration clause. It is therefore important to determine who is legally bound by the arbitration agreement and whether the arbitrator has authority to decide the claims involving each participant.
What disputes can arise in co-ownership?
Arbitration may potentially be considered for a wide range of private co-ownership disputes, depending on the declaration of co-ownership and the nature of the conflict.
Common examples include disputes concerning:
- the interpretation or application of the declaration of co-ownership;
- the respective obligations of the syndicate and individual co-owners;
- maintenance and repairs;
- responsibility for damage to private or common portions;
- water infiltration and other building problems;
- renovation work carried out by a co-owner;
- access to a private portion when work or inspections are required;
- the use of common or restricted common portions;
- parking and storage areas;
- noise, nuisance and other disturbances;
- allocation or recovery of certain expenses;
- compliance with building rules;
- insurance-related responsibilities; and
- certain contractual disputes connected with the administration of the building.
Whether a particular dispute can actually be decided through arbitration must nevertheless be assessed in light of the arbitration agreement and the applicable legal rules.
Challenging a decision of the syndicate or the co-owners
Some of the most sensitive co-ownership disputes concern decisions made by the syndicate, the board of directors or the meeting of co-owners.
A co-owner may believe that a decision was adopted improperly, exceeds the powers of the body that made it, violates the declaration of co-ownership or unfairly affects the co-owner’s rights.
The existence of an arbitration clause may become important in determining how such a contestation should proceed. However, not every challenge is necessarily subject to arbitration. The exact nature of the decision, the remedy requested and the applicable rules must be considered.
Deadlines may also apply to certain types of challenges. A party should therefore avoid assuming that discussions, negotiations or an arbitration process automatically suspend every applicable time limit.
Choosing the arbitrator
The selection of an arbitrator can significantly affect the efficiency of the process.
Co-ownership disputes often combine contractual, property, construction and governance issues. For that reason, the parties may prefer an arbitrator who has experience with divided co-ownership and understands declarations of co-ownership, syndicate governance and building-related disputes.
The arbitration agreement may specify how the arbitrator is selected. Otherwise, the parties may attempt to agree on a neutral person.
An arbitrator must remain independent and impartial. Potential conflicts of interest should therefore be identified before the appointment is confirmed.
How does arbitration work?
The procedure depends on the arbitration agreement, the nature of the dispute and the procedural rules established for the arbitration.
Generally, the parties identify the issues in dispute, exchange relevant documents and present their respective positions. Depending on the complexity of the case, evidence may include correspondence, minutes of co-owner meetings, resolutions, financial records, photographs, expert reports, construction documents, plans, invoices and witness testimony.
A hearing may then take place before the arbitrator. Some matters can be decided primarily on written evidence, while more complex disputes may require witnesses and experts.
The arbitrator ultimately renders a written arbitration award resolving the matters submitted for decision.
Is an arbitrator’s decision final?
One of the most significant differences between arbitration and ordinary litigation is the limited ability to challenge an arbitration award.
An arbitration award is generally final and binding. Arbitration is not designed to create an additional level of trial followed by an ordinary appeal simply because one party disagrees with the result.
There are limited circumstances in which judicial intervention may be possible, particularly where fundamental procedural requirements, jurisdictional limits or rules of public order are involved.
Consequently, parties considering arbitration should understand from the beginning that the arbitrator’s decision may effectively determine the dispute.
Enforcing an arbitration award
An arbitration award binds the parties, but further steps may sometimes be required if one party refuses to comply voluntarily.
A party may seek recognition of the award by the competent court. Once recognized through the appropriate process, the award can generally be enforced in a manner comparable to a court judgment.
This distinction is important where an award requires payment of money, performance of work, compliance with an obligation or another measure that a party refuses to carry out.
Arbitration versus mediation in a co-ownership conflict
Arbitration and mediation serve different purposes.
A mediator does not normally decide which party is right. The mediator assists the participants in attempting to negotiate an agreement.
An arbitrator, by contrast, is asked to decide the dispute. The result does not depend on the parties reaching a compromise.
Mediation may therefore be particularly useful when co-owners must continue living in the same building and want to preserve a workable relationship. Arbitration may be more appropriate when the parties need a binding determination and negotiations have failed.
The two processes can also be used sequentially. Parties may attempt mediation first and proceed to arbitration if no agreement is reached.
Advantages of arbitration in co-ownership disputes
Arbitration may offer several practical advantages.
Proceedings are generally private, unlike ordinary court proceedings. The parties may also have greater flexibility in organizing the process and selecting a decision-maker with relevant expertise.
In appropriate cases, arbitration can provide a more focused procedure and avoid some of the delays associated with conventional litigation.
These advantages can be particularly valuable in co-ownership disputes because unresolved conflicts may interfere with the daily administration of the building and the relationship between neighbours.
Potential disadvantages and costs
Arbitration is not necessarily simpler or less expensive in every case.
Unlike a judge, a private arbitrator normally charges professional fees. The parties may also incur expenses for experts, legal representation, hearing facilities and administration.
Complex arbitration can therefore become costly, particularly when numerous witnesses, expert reports or extensive documentary evidence are required.
The limited possibility of appealing an arbitration award is another important consideration. Finality can be an advantage when the objective is to resolve a conflict quickly, but it can also represent a significant risk when the financial or property consequences of the dispute are substantial.
Drafting an arbitration clause in a declaration of co-ownership
A poorly drafted arbitration clause can itself become the subject of litigation.
An effective clause should make clear which disputes are covered, who is bound by the process, how an arbitrator will be selected, how the costs will be allocated and what procedure will apply.
It may also be useful to determine whether mediation or another settlement process must be attempted before arbitration begins.
Very broad clauses can create uncertainty about disputes that should remain before the courts, while clauses that are too narrow may fail to cover the conflicts the parties originally intended to resolve through arbitration.
Existing declarations of co-ownership should therefore be read carefully rather than assuming that the presence of the word “arbitration” resolves every procedural question.
Can parties agree to arbitration after a dispute begins?
Yes. The absence of an arbitration clause in the declaration of co-ownership does not necessarily prevent the parties from choosing arbitration after a conflict develops.
The parties can enter into an arbitration agreement defining the dispute they want the arbitrator to decide.
Such an agreement should clearly identify the issues being submitted, the parties participating in the arbitration and the scope of the arbitrator’s authority. Procedural matters, selection of the arbitrator and allocation of costs can also be addressed.
An agreement made after the dispute has arisen can sometimes be easier to define because the parties already know the specific issues requiring resolution.
When arbitration may not resolve the entire dispute
Co-ownership litigation can involve several overlapping relationships.
For example, a dispute between a co-owner and the syndicate may also involve an insurer, contractor or another co-owner. If some participants are bound by an arbitration agreement and others are not, it may be difficult to have the entire controversy determined in a single arbitration.
There may also be remedies that require intervention by a court.
Before commencing arbitration, it is therefore important to identify all necessary parties, the remedies sought and any related proceedings.
Evidence and preparation
Arbitration should not be treated as an informal conversation simply because it takes place outside the courthouse.
The outcome can depend heavily on the quality of the evidence.
In a co-ownership dispute, relevant evidence may include the declaration of co-ownership and its amendments, building regulations, meeting minutes, board resolutions, notices, emails, photographs, invoices, accounting records, inspection reports, engineering assessments and correspondence between the parties.
A clear chronology can also be particularly useful in disputes involving recurring problems such as water infiltration, noise, construction work or repeated violations of building rules.
Arbitration as part of co-ownership dispute resolution
Arbitration can be an effective mechanism for resolving certain disputes in Quebec divided co-ownerships, but its usefulness depends on the circumstances.
Before proceeding, the parties should determine whether a valid arbitration agreement exists, whether the particular dispute is covered, who is bound by the agreement, what remedies are being sought and whether any urgent measures or legal deadlines must be addressed.
A well-designed arbitration process can provide a private, structured and binding resolution to a conflict. A poorly defined process, however, may create additional disputes about jurisdiction, procedure or enforcement.
For that reason, understanding the declaration of co-ownership, the arbitration clause and the precise nature of the dispute is often the starting point for determining whether arbitration is an appropriate alternative to conventional co-ownership litigation.
This text is provided for legal information purposes only. If you have a specific question regarding your personal situation, please contact a lawyer.
Allen Madelin Avocats offer consultations both in person and via videoconference. The first consultation is offered for $125.For more information, please contact us by telephone: 1 514 904 4017 or by e-mail: [email protected].
