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Is An Arbitration Provision in Recorded CC&R’s Ever Enforceable by the Developer?

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Related Practices: Common Interest Development, Construction Claims & Litigation

As this article goes to press, the Fourth District Court of Appeal has received the parties' supplemental briefs, and is preparing to rehear Villa Vicenza Homeowners Association v. Nobel Court Development, LLC, a case squarely presenting the issue whether a provision in a declaration of covenants, conditions and restrictions ("CC&Rs") recorded by a project developer requiring a yet-to-be-formed homeowners association to arbitrate any future construction defect claims against the developer is enforceable as an agreement to arbitrate. Prior to granting rehearing, the Court of Appeal had issued a decision (no longer citable) holding that such a provision is not enforceable. Moreover, the same division of the same District Court of Appeal has just issued another decision, Pinnacle Museum Town Association v. Pinnacle Market Dev. (US) ("Pinnacle"),in which it decided both that a binding arbitration provision in recorded CC&Rs is not enforceable by the developer/declarant against a subsequently-formed homeowners association, and that if it were, the provision under consideration would still be unenforceable because it is unconscionable.

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