Homeowners Association’s Lawsuit Against Developer for Construction Defects Subject to Binding Arbitration Per Governing Documents

August 16, 2012.

The State Supreme Court in California reversed a trial court and an appellate court’s rulings in favor of a homeowners association that sued the developers of the project for damages caused by construction defects. The developer had sought to compel the homeowners association to participate in arbitration.

In response to the association’s action, the developer filed a motion to compel arbitration based on a clause in the recorded declaration of covenants, conditions, and restrictions providing that the association and the individual owners agreed to resolve any construction dispute with the developer through binding arbitration. The trial court determined that the clause embodied an agreement to arbitrate between the developer and the association but invalidated the agreement because the court determined that it was unconscionable. The court of appeal affirmed. The Supreme Court reversed, holding that the arbitration clause bound the association and was not unconscionable.

See case decision: Pinnacle_Tower_v_Pinnacle_Market_Development