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Developer Cannot Enforce Arbitration Provision in California CC&Rs

A condominium developer in Southern California got sued by the Association for construction defects. The developer filed a motion to compel arbitration under the provisions of the CC&Rs. The court said no!

Recorded CC&Rs are made binding in disputes between owners, or owners and the association, because of their shared interest in the common interest development. CC&Rs are equitable servitudes which bind the owners and association. CC&Rs are not a contract between the developer and the owners association. There was no opportunity for “actual notice and meaningful reflection.” The association springs into existence on the sale of the first lot of the project. Maybe there is an argument that there is a meeting of the minds between the developer & the first buyer; but the rest of the buyer have no choice but to accept the CC&Rs.

So rarely do we see courts refuse to enforce unbargained for arbitration provisions (such as here) that it is an event worth celebrating.

Villa Vincenza HOA v. Nobel Court Develop. LLC (2010) 5th Distr. # D054550.

Sacramento Real Estate Attorney James J. Falcone