11 | 17 | 2011
Legal e-Update
A California Court of Appeal recently concluded that developers who had sold all of the units in a condominium development could not compel arbitration under the project’s declaration of covenants, conditions and restrictions (“CC&Rs”). Promenade at Playa Vista Homeowners Association v. Western Pacific Housing, Inc., No. 225086 (2nd Dist. November 8, 2011). The court in this case reasoned that CC&Rs are equitable servitudes, not a contract, and that the project’s developers were not among those permitted to enforce the CC&Rs once they no longer had an ownership interest.
The California Supreme Court has already granted review in two cases concerning the enforceability of an arbitration provision in CC&Rs against a homeowners association. Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US) (2010) 187 Cal.App.4th 24, review granted November 10, 2010, S186149, is the lead case, followed by Villa Vicenza Homeowners Assn. v. Nobel Court Development, LLC (2011) 191 Cal.App.4th 963, review granted April 20, 2011. (See our e-Update of April 26, 2011.) If the decision in Promenade is appealed and the California Supreme Court grants review, Promenade would probably be placed on hold pending a decision in Pinnacle. Since a date for oral arguments has not yet been set in Pinnacle, any decision is at least several months away.
During this period of uncertainty, those who wish to resolve construction defect claims through alternative dispute resolution procedures should evaluate their existing risk management programs (including SB 800 approach and warranties) and consider whether any changes are needed to implement their goals.
Please contact any of the attorneys at left if you would like to discuss this important issue or means that might be employed to manage challenges to alternative dispute resolution procedures.