Earlier today, the California Supreme Court issued a significant opinion in the matter of Pinnacle Museum Tower Association v. Pinnacle Market Development (US), LLC, et al., holding that arbitration provisions in recorded Covenants, Conditions and Restrictions (CC&Rs) are enforceable by a developer unless proven to be unreasonable. The Court found that California law, including the detailed provisions of the Davis-Stirling Act, and the oversight of the California Department of Real Estate provides sufficient protection for purchasers who become members of a homeowners association.
This decision represents a major victory for developers who can now expect that most of these provisions will be enforced, eliminating the risk of potentially excessive jury verdicts. The full opinion can be found here.
The Pinnacle decision reverses a trend of recent decisions that found arbitration provisions in CC&Rs to be unenforceable by developers. Developers in the Villa Vicenza, Promenade, and Verano matters should now benefit from the Supreme Court’s decision in Pinnacle.