Alex Merritt and Michael B. Wilmar – November 21, 2011<\/p>\n
This month the Second District Court of Appeal concluded that the developer of a condominium complex lacked standing to enforce the declaration of covenants, conditions, and restrictions (CC&R’s) after it had sold all the units in the complex.<\/p>\n
Western Pacific Housing and Playa Capital Company (the “Developers”) constructed and sold a 90-unit condominium complex in Playa Vista, California. The homeowners association (“HOA”) for the complex later filed suit against the Developers, alleging construction defects. The Developers sought to enforce a binding arbitration provision in the CC&R’s.<\/p>\n
The Second District Court of Appeal upheld the trial court’s rejection of a motion to compel arbitration. It reasoned that the Developers could have enforced an arbitration provision in a\u00a0contract<\/em>. However, CC&R’s are not contracts, but rather\u00a0equitable servitudes<\/em>, which may only be enforced by a property owner or an HOA.<\/p>\n The court relied on California Civil Code section 1354, which states that CC&R’s “shall be enforceable equitable servitudes” and may be enforced “by any owner of a separate interest or by the association, or by both.” Relying on the plain meaning of section 1354, the court decided that “the Developers cannot enforce the CC&R’s once they have completed the project and sold all the units” because “they no longer have any ownership interest in the property.”<\/p>\n