Posts Tagged ‘Associations’

Delaware Adopts HOA Ombudsman Approach

October 21, 2014

Delaware recently adopted a new law that establishes a position of ombudsman for homeowners and homeowner associations and other shared ownership schemes in Delaware.  The purpose of the law was to resolve disputes:

These communities are created by legal documents drafted by the developer and are intended to be managed by those living in these communities. This system can create difficulties for those living in these communities, especially when disputes arise.

As discussed in local coverage, the Delaware office would resolve disputes between boards and homeowners.  However, the office outlined in the law not only resolves disputes, it also provides education, provides election monitoring, accepts complaints, instigates investigations, and even publishes rules and procedures for the state.

It is an interesting approach.  I’m not sure if it would ever fly here in Idaho.  It is difficult to know if the idea would be seen as “big government.”  However, an ombudsman certainly could allay fears (justified or not) that HOAs have too much power, and could help keep minor neighborhood disputes out of court.  Perhaps this is why some other Western states have also opted for ombudsman positions.  For instance, in Nevada the ombudsman is copied on association lien filings as a form of review. In Arizona, the ombudsman plays a dispute resolution role. Colorado has an ombudsman as well, although it seems to be more advisory.  An hoa blog tried to collect comments on the practice, here, but did not end up with a definitive list.

Delaware Sources:

http://legis.delaware.gov/LIS/LIS147.nsf/93487d394bc01014882569a4007a4cb7/e0c652a7baefac6485257c39006eb432?OpenDocument

http://www.delawareonline.com/story/news/local/2014/10/20/ombudsman-weigh-homeowner-association-disputes/17639817/

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Arbitration Clauses Binding On HOAs In California (!?)

August 23, 2012

Courts: The Judicial Branch of California

On August 16, the California Supreme Court issued a ruling in Pinnacle Museum Tower Association v. Pinnacle Market Development (US), LLC, et al.  that could affect Idaho HOA cases and others here in the Ninth Circuit as well.  It could effectively strip the right to jury trial from condominium owners and associations.

As the Court summarized:

Petition for review after the Court of Appeal affirmed an order denying a motion to compel arbitration in a civil action. This case presents the following issues: (1) Is a homeowners association bound by an arbitration provision contained in the covenants, conditions and restrictions for a common interest development that were executed and recorded prior to the time the association came into existence? (2) Did the Court of Appeal err by applying the state law doctrine of unconscionability only to the arbitration provision, and not to other provisions in the covenants, conditions and restrictions, in light of federal law prohibiting the application of state law to treat arbitration provisions differently from other provisions of the same agreement? (See Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265.)

Historically, many have argued against the application of arbitration clauses to HOAs.  A developer creates the HOA, after all, and drafts the CC&Rs, representing both his own interests and (to a much lesser extent) those of the future HOA.  The future owners and future association have little or no say in any of the terms that the developer inserts into the CC&Rs.  As a result, many courts have found that it would be unconscionable to enforce arbitration clauses against the party that had no representation in the drafting of the documents.

The Pinnacle opinion held, to the contrary:

…even though the association did not exist as an entity independent of the developer when the declaration was drafted and recorded, it is settled under the statutory and decisional law pertaining to common interest developments that the covenants and terms in the recorded declaration reflect written promises and agreements that are subject to enforcement against the association.  We conclude that the arbitration clause binds the association and is not unconscionable.

What is interesting for those of us outside of the Golden State is that the California Supreme Court based its opinion on provisions in the Federal Arbitration Act.  The same federal provisions would apply to any state.  In particular, the Court held:

…the FAA pre-empts state laws which ‘require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration…Likewise, the FAA precludes a court from construing an arbitration agreement “in a manner different from that in which it otherwise construes nonarbitration agreements under state law.  Nor may a court rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what . . . the state legislature cannot.

I will leave it to the courts and legal scholars to analyze the strength of California’s analysis.  However, if the arguments relied on by this Court are seen as persuasive, we may be seeing a major shift in how condominium and association construction defects are handled across the country.

Thanks to California’s Miller Law Firm for summarizing the decision.