On August 16, 2012 developers won a major victory in the Pinnacle Museum Tower case. The California Supreme Court reversed direction from prior decisions and held that homeowner associations are bound by arbitration provisions in their CC&Rs, even though those provisions were written and recorded by the developers. The Pinnacle decision eliminates the right by associations to go to court for a trial before a judge and a jury.
The expected benefit to developers is the elimination of large jury verdicts by removing juries from the process. Historically, monetary awards by judges and arbitrators are smaller than those given by juries. As a result of the Pinnacle decision, developers may offer smaller settlements for construction defects. If their offers are rejected, HOAs will be forced to prove their cases in binding arbitration. Even so, the arbitration process is streamlined and less expensive than litigation and could produce good results if the association can prove its case to the arbitrator.
Recommendation: If a development is less than ten years old, various statutes of limitations are running on any defect claims the association may have. To avoid losing rights, boards should contact legal counsel to determine their best course of action. To read the case in its entirety, see Pinnacle Museum Tower v. Pinnacle Market Development.
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