When ADR is Required; Prerequisite to “Enforcement Action”
Neither an association nor any of its members may file an “enforcement action” (i.e., a lawsuit) in superior court unless the parties to the dispute have “endeavored” to submit their dispute to “alternative dispute resolution” (ADR) in accordance with Civil Code Section 5930. (Civ. Code § 5930(a).)

ADR Defined
“Alternative dispute resolution” (ADR) is defined as “mediation, arbitration, conciliation, or other nonjudicial procedure that involves a neutral third party in the decision making process.” (Civ. Code § 5925(a).)

“Enforcement Action” Defined
An “enforcement action” means a civil action or proceeding, other than a cross-complaint, for any of the following purposes:

• Enforcement of the Davis-Stirling Act; (Civ. Code § 5925(b)(1).)
• Enforcement of the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code); (Civ. Code § 5925(b)(2).)
• Enforcement of the association’s governing documents. (Civ. Code § 5925(b)(3).)

Exceptions to ADR Requirement
Offering ADR is not required in connection with the following enforcement actions:

• If the party is filing a claim in small claims court for money damages; (Civ. Code § 5930(c).)
• Where preliminary or temporary injunctive relief is necessary; or (Civ. Code § 5950(a)(3).)
• A dispute involving delinquent assessments unless the member requests ADR with the association in connection with the assessment dispute. (Civ. Code §§ 5930(d), 5658(a).)

Participation in ADR
When “internal dispute resolution” (IDR) is invoked by a member, the association is obligated to participate in IDR. (Civ. Code § 5910(c); See also “Internal Dispute Resolution (IDR).”) However, there is no such requirement in the Civil Code when a member offers his/her association ADR, though such a requirement may be contained in the provisions of an association’s governing documents (i.e., in its CC&Rs).

Refusal to Participate & Attorney’s Fees – “In an enforcement action in which attorney’s fees and costs may be awarded, the court, in determining the amount of the award, may consider whether a party’s refusal to participate in [ADR] before the commencement of the action was reasonable.” (Civ. Code § 5960.)

Certificate of Compliance
At the time an enforcement action is commenced (i.e., a lawsuit is filed), the party commencing the enforcement action is required to file with the initial pleading a certificate stating that one (1) or more of the following conditions are satisfied:

• ADR has been completed; (Civ. Code § 5950(a)(1).)
• One of the parties to the dispute did not accept the terms offered for ADR; (Civ. Code § 5950(a)(2).)
• Preliminary or temporary injunctive relief is necessary. (Civ. Code § 5950(a)(3).)

If the party fails to file the required certificate, it provides grounds for a demurrer or a motion to strike “unless the court finds that dismissal of the action for failure to comply with the [Civil Code’s ADR requirements] would result in substantial prejudice to one of the other parties.” (Civ. Code § 5950(b).)

Initiating ADR: “Request for Resolution”
To initiate ADR, a party is required to serve on the other parties to the dispute a “Request for Resolution” pursuant to Civil Code Section 5935. In sum, the Request for Resolution includes a description of the dispute, a formal request for ADR, a notice of the required response timeline, and a copy of the Civil Code’s ADR provisions (if the party on whom the request is served is a member of the association). (Civ. Code § 5935(a); See also “Initiating ADR: Request for Resolution.”)

ADR Timelines

30 Days to Accept Request for Resolution – A party on whom a Request for Resolution is served has thirty (30) days following service to accept or reject the request. (Civ. Code § 5935(c).) If the party does not accept the request within that period (or simply fails to respond), the request is deemed rejected by that party. (Civ. Code § 5935(c).)

90 Days to Complete ADR – If the party on whom a Request for Resolution is served accepts the request, the parties are required to complete ADR within ninety (90) days after the date the acceptance was received, unless the period is extended by written stipulation signed by both parties. (Civ. Code § 5940(a).)

Effect on Statute of Limitations
If a Request for Resolution is served before the applicable statute of limitations has run for commencing an enforcement action, the statute of limitations is tolled:

• During the the thirty (30) day period for a response a Request for Resolution, (Civ. Code § 5945(a).) and
• If the Request for Resolution is accepted, during the the ninety (90) day period to complete ADR, including any extension of time for completing the ADR that is stipulated to by the parties. (Civ. Code § 5945(b).)

ADR Costs Borne by the Parties
The costs of ADR (i.e., the fees to use a neutral third party mediator or arbitrator) must be borne by the parties to ADR. (Civ. Code § 5940(c).) This requirement for a member to incur costs associated with the ADR proceeding is one of the major distinctions between ADR and internal dispute resolution (IDR); in an IDR proceeding, the member may not be charged a fee to participate in IDR. (Civ. Code § 5910(g); See also “Internal Dispute Resolution (IDR).”)

Recovery of Attorney’s Fees
The parties to ADR must generally bear their own attorney’s fees. However, there may be circumstances where attorney’s fees may be recoverable by a party that prevails in a subsequent lawsuit:

ADR Attorney’s Fees are Recoverable in Subsequent Litigation
Reasonable attorney’s fees that are incurred by a party in ADR are recoverable by that party if it prevails in any subsequent litigation. (Grossman v. Park Fort Washington Association (2012) 212 Cal. App. 4th 1128.)

Attorney’s Fees to Enforce a Settlement Agreement Reached in ADR are Recoverable
If a settlement agreement is reached in ADR, and a subsequent lawsuit becomes necessary to enforce compliance with that settlement agreement, the prevailing party in the lawsuit is entitled to recover its reasonable attorney’s fees and costs.  (Rancho Mirage Country Club HOA v. Hazelbaker (2016) 2 Cal. App. 5th 252.)

Summary of ADR Procedures in Annual Policy Statement
An association must include a summary of the Civil Code’s provisions pertaining to ADR within the association’s annual policy statement. (Civ. Code § 5965.) The summary must include the following language in accordance with Civil Code Section 5965(a):

“Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 5930 of the Civil Code may result in the loss of the member’s right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law.”

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