J.J. from Los Angeles County, California writes:
Dear Mister Condo,
My question is whether a mandatory arbitration clause in the CCR’s would apply to the following situation. Due to the HOA’s negligence, a homeowner’s condo unit suffered substantial water damage, mold etc. Also, the homeowner suffered personal injuries due to the water damage. The HOA made a claim to the HOA’s own insurance company and received a check which the HOA was supposed to use to pay for the homeowner’s damages. However, the HOA/Board kept the money instead.
The CCR’s contain a mandatory arbitration clause which states that (except for injunctive relief and collection of HOA dues), all disputes “arising from” or related to the “enforcement” or “interpretation” of the governing documents must be resolved by binding arbitration. (see below language)
So, do you think the claim by the homeowner against the HOA would be subject to the Arbitration Clause? If the HOA’s claim is for breaching the CCR’s, then the Arbitration Clause probably applies. But, what if the claim is for negligence (which is based in part on the CCR’s requirement that the HOA maintain the common areas)? What if the claim is for breach of fiduciary duty (e.g., failure to maintain the common areas and/or misappropriating the insurance check)? Can the homeowner file a civil lawsuit in Superior Court rather than Arbitration?
The Arbitration language is: “Alternative Dispute Resolution. Except for declaratory relief, injunctive relief and the collection of Assessments, any dispute arising from or related to the interpretation or
enforcement of the Association’s Governing Documents shall be resolved by final and binding arbitration before a retired superior court judge (“Arbitrator”) without a jury.”
Mister Condo replies:
J.J., you have written to me in third person so I don’t know if this is your problem or someone else’s issue. Either way, I am sorry for the homeowner’s distress caused by the HOA’s negligence in upkeep. I am not an attorney so I cannot offer you any legal advice in this column. As you know, the Davis Stirling Act largely dictates how disputes between condo and HOA unit owners and their associations. The sheer volume of potential disagreements and lawsuits that could arise between owners and associations makes the arbitration process far more efficient than handling all items through the courts. Still, there are times when arbitration simply isn’t the remedy. This may be such a case but only a locally qualified attorney can give you an opinion as to whether the matter is worth pursuing outside of arbitration. From a practical standpoint, is there a reason that you would prefer not to use arbitration? From what you have described, the facts of the case seem fairly compelling. Why wouldn’t you go down the path of arbitration as is commonly done by others? The personal injury angle, on the other hand, may not be something that is covered under arbitration. Only an attorney who practices law in your area can give you a qualified legal opinion. My best advice is that you consult a lawyer and see if legal remedy outside of arbitration is recommended, All the best!