SB 800: Mandatory Arbitration No Longer Protects Developers from HOA Claims

Recently it was reported in the case of Villa Vicenza HOA v. Nobel Court Development, LLC that mandatory arbitration provisions in the CC&R’s, between the developer and the HOA, were no longer valid.  The court ruled that while CC&R’s may be enforceable among homeowners and between the homeowners and the developers, such provisions are unenforceable by a developer against the HOA.  Why?  The court held that the HOA did not exist before the CC&R’s and, therefore, the HOA never contractually agreed to mandatory arbitration.

Subsequently, the same panel of the Court of Appeal granted a petition for a rehearing in the case.  The effect of the order is to withdraw the opinion above.  So, the opinion is no longer binding between the parties or as precedent.  The panel plans to take the case under submission again later this summer.  In a possibly related matter a different panel of the same court has under submission another similar case:  Pinnacle Museum Tower Assn. V. Pinnacle Market Development LLC.

Bottom line:  For the time being arbitration provisions in CC&R’s are enforceable between the developer and an HOA.  However, that may change by August 2, 2010 when the Pinnacle decision is reached.  Stay tuned!

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