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| How does the group enforce the bylaws and rules? How and where are disputes between the group and particular co-owners resolved? |
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If the manager, Board, or any co-owner, feel that a co-owner has violated the Bylaws or any rule, he/she/it may send a “Notice of Actionable Violation” (“NAV”) which describes the alleged violation along with the steps required to cure it. A co-owner who receives such a notice must take action. The action could be (i) doing the things described in the NAV as required to cure the violation (including payment of any applicable penalties or costs), or (ii) initiating the alternative dispute resolution (“ADR”) process. If the recipient co-owner does nothing, his/her interest is subject to forced sale (more on that below).
The ADR process begins with an attempt at mediation, and follows with binding arbitration (if the mediation does not resolve the dispute). The entire ADR process occurs in the United States under U.S. law, and the procedures are described in detail in the Bylaws. If an arbitration occurs, and the arbitrator determines that a violation has occurred, the short period for curing the violation will resume; if the co-owner fails to cure before the cure period ends, his/her interest in subject to forced sale. Decisions of an arbitrator are not appealable and the dispute cannot be taken to court.
The forced sale process begins with a valuation of the defaulting co-owner’s interest through a neutral appraisal process described in the Bylaws. The interest then goes on the market for its appraised value. The price of the interest is automatically reduced 10% every 30 days until it sells. The entire process takes place in the United States, and can be administered by an arbitrator or a Court officer if necessary. When the interest sells, the sale proceeds are used to pay any costs of the sale and of the dispute resolution process, and any arrear-ages or damages to the group. To the extent there is money left over, it goes to the defaulting co-owner. Since all costs come out of the defaulting co-owner’s share, there is a strong disincentive for the co-owner to interfere with the forced sale process.
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