Dispute Resolution

What It Means

Dispute resolution is the predefined process within a Co-ownership Agreement for resolving disagreements between co-owners. Effective dispute resolution provisions establish a tiered escalation framework — typically progressing from direct negotiation to mediation, and in some agreements to binding arbitration — designed to resolve conflicts before they reach litigation.

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Dispute resolution is governance infrastructure, not a contingency plan. It is negotiated and agreed upon at the same time as the Co-ownership Agreement's financial, exit, and operational terms.

How Tiered Dispute Resolution Works

Most Co-ownership Agreements structure dispute resolution in tiers. The first tier is direct negotiation between the co-owners, often with a defined timeframe (e.g., 30 days). If negotiation fails, the second tier requires mediation — a facilitated process with a neutral third party who helps the co-owners reach a voluntary agreement. Some agreements include a third tier of binding arbitration — a process in which a neutral arbitrator renders a decision that both parties are legally obligated to follow. Others designate litigation as the final fallback.

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This tiered structure ensures that disputes are resolved at the lowest possible cost and conflict level before escalating. Each tier has defined timeframes and procedural requirements, preventing either party from stalling or bypassing the process.

Why It Matters for Co-owners

Disagreements in co-ownership are normal. Disputes about Shared Expenses, property maintenance, occupancy use, or Exit Strategy timing can arise in even the most carefully structured arrangements. The question is not whether disagreements will occur, but whether the group has a structured path to resolve them.

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Without a defined dispute resolution process, the only available option may be a Partition Action — a court proceeding that costs $20,000–$100,000+ in legal fees and typically destroys both the financial investment and the personal relationship. A tiered dispute resolution framework significantly reduces the likelihood of a Partition Action by providing faster, cheaper, and less adversarial alternatives at every stage.

Key Points

• The structured process defined in the Co-ownership Agreement for resolving disagreements
• Typically follows a tiered framework: negotiation, then mediation, and sometimes binding arbitration
• Each tier includes defined timeframes and procedural requirements
• Designed to resolve conflicts at the lowest possible cost and conflict level
• Significantly reduces the likelihood of a Partition Action by providing alternatives at every stage
• Must be agreed upon before closing as part of the Co-ownership Agreement