California Appellate Court Rules that a Developer Cannot Force HOA to Arbitrate Defect Claims Based on a Provision in the CC&Rs

By Alyssa Klausner, SwedelsonGottlieb Senior Associate
In the case of Villa Vicenza Homeowners Association V. Nobel Court Development (follow this link to see the entire decision), the developer of a condominium project recorded a Declaration of Covenants, Conditions and Restrictions (CC&Rs) which required a homeowners association to arbitrate any construction defect claim the association might have against the developer. The Court ruled that the CC&Rs are not an effective means of obtaining an agreement to arbitrate a homeowners association’s construction defect claims against a developer.

The basis of the Court’s decision was that the recorded CC&Rs, standing alone, are not a contract between the developer and the homeowners association, which only came into existence after the CC&Rs were recorded, and therefore there has been no showing the association entered into a binding arbitration agreement.

We have represented several associations that have had to deal with this issue, and we are pleased to have an appellate court decision confirming that such provisions in CC&Rs are not enforceable. If you have any questions regarding how this case impacts your association or about defect cases in general, please contact Alyssa Klausner, Esq. at (310) 207-2207, Ext. 205.