A quick reference guide to Body Corporate Building Mediations
What is a Mediation?
It is a voluntary arrangement entered into by two willing parties and is viewed as an alternative form of dispute resolution.
A body corporate i.e. a group of owners typically becomes involved in the Mediation process in NZ usually because of building remediation issues.
Who conducts a Mediation?
An independent third party mediator conducts the mediation. Mediators in NZ are likely to have had international training plus they will be experienced solicitors.
Any mediation will start with the mediators explaining their role and they are always, for obvious reasons, scrupulously independent.
What is the benefit of a Mediation?
A mediation, which can often be conducted in one day, is considerably less expensive than a High Court case. A mediation can lead to parties adopting a less combative approach.
How long does a Building Mediation take?
In many building mediations, the mediation may be conducted in a day.
What is the end result of a mediation?
The end result of a successful mediation is the transfer of a sum of money from one party to the other.
Where does the Mediation take place? What is the format of a Body Corporate Building Mediation?
A mediation usually takes place in a neutral venue such as a hotel.
There will be one large conference type room.
The day begins usually with all parties sitting around a large table and explaining their positions.
During the day there will be a lot of ‘waiting around’ in break out rooms.
The mediator will walk around and communicate with all parties. Each mediator has a different style but all mediators generally keep in touch with groups to facilitate a settlement.
It is always important to explain to owners at a mediation that there may be considerable “waiting around”.
Who is present at a Mediation?
- The owners in a body corporate form a settlement committee. Any owner can be on a settlement committee.
- The lawyers for the plaintiffs i.e. the body corporate
- All the experts acting for the plaintiffs
This can include:
Building surveyors, quantity surveyors, façade engineers, fire engineers, ‘Council experts’ acting for the plaintiffs
- The defendants e.g. Council, the developer, the building company.
- The insurance company lawyers acting for the defendants
- The mediator – whose skill is crucial for everyone’s success.
How can I be part of the Mediation?
Usually in the latter stages, as the mediation date draws near, the lawyers acting for the plaintiffs will ask which owners would like to be on the settlement committee.
In many body corporates, irrespective of the number of the units, there ends up being five to seven owners on the committee but we have been to successful mediations where there have been considerably more owners than that on the settlement committee.
The settlement committee will usually meet several times prior to the mediation.
The members of the settlement committee will attend the mediation.
What is the pattern of a typical mediation?
While there may be variations in the time frames, the mediation typically starts at about 9.00 a.m. in the morning and many go on until the early hours of the next morning!
Once a mediation result has been achieved, the members of the settlement committee will sign a confidential settlement agreement after the lawyers have worked on the ‘finer details’.
Why can owners get frustrated prior to the mediation?
Owners at this stage of the process can often understandably get frustrated. It seems as if the building experts are trying to find problems. What they are trying to do is to find all the possible faults that could be recovered from the defendants.
What is the incentive for the defendants to take place in a mediation?
For the defendants – a decision as to whether to settle at a mediation or to let the case go to Court – strictly a risk assessment without an emotional component.
The plaintiffs, particularly if they are owner occupiers, will understandably have a different perspective.
Why is it so costly for the plaintiffs to get to a mediation?
When a body corporate identifies that there are building issues a long process begins.
A building expert or a range of experts has to identify the issues and establish that they are Building Act 2004 breaches.
A process begins not only of identifying breaches but of ensuring that the sample size selected is large enough. At this stage, there may be same ‘destructive testing’ in parts of the building. Essentially this means small sample panels taken out.
What is in fact happening is that when the body corporate is claiming against the defendants you have essentially one chance to capture faults that are Building Act breaches. If this is not done precisely then at the other end of the process when the remediation work starts and a building consent will be needed if all of the faults such as passive fire system problems are not captured the work will still need to be done but the rectification costs will not have been included in the claim.
How does the Body Corporate know how much to claim?
Once the building experts have identified the faults a scope and design solution to rectify these issues must be prepared.
The end result this is to carry out the remediation solution.
Quantity surveyors will quantify the costs of this work to be done.
A further stage which body corporates may embark on is to ensure that the quantum is crystallised more accurately, by placing the remediation work out to tender. This then assists even further to make the remediation process more robust for the plaintiffs as there is certainty about the final costs claimed.
This is also a costly process but gives a precision to the quantum.
What happens at the end of the mediation process?
The terms of many body corporate mediation settlements means that the funds will usually be paid into the plaintiff’s solicitor’s account.