Complying With CC&R's Is Important

Covenants, Conditions and Restrictions ("CC&R's") are limitations and rules that are placed on a group of homes. The CC&R's can be written by the builder, developer, neighborhood association or a homeowner association. It's common knowledge that all condominiums and townhomes have CC&R's. However, most planned unit developments and even established neighborhoods may have CC&R's as well. It is very important for all parties to read the CC&R's and comply with them to the fullest extent, particularly in the event of a disagreement.

In the Zari Mansouri v. The Superior Court of Placer County case, it is seen how not complying with the CC&R's can be costly. This particular case came about because Zari Mansouri ("Mansouri") remodeled her patio area. The Fleur Du Lac Estates Association ("HOA") felt that Mansouri went outside of the approved plans, encroached on common areas, interfered with a drainage channel and interfered with the privacy of neighboring units.

The HOA requested that Mansouri submit this dispute to binding arbitration to a single arbitratator that the HOA would select. Mansouri refused. The HOA sought to compel binding arbitration against Mansouri since the CC&R's called for arbitration. The trial court granted the HOA's petition to compel binding arbitration. The court also granted over $8,000 in attorneys fees to the HOA. Mansouri appealed this decision.

The CC&R's arbitration provision clearly provided for a three arbitrator panel. The first arbitrator was to be chosen by the HOA, the second to be chosen by the homeowner (in this case, Mansouri). The third arbitrator was to be chosen by the first two arbitrators. This is not the scenario that the HOA laid out for Mansouri when she rejected the offer to arbitrate. Therefore, she argued that the petition to compel binding arbitration was not enforceable because it was unconscionable and did not comply with applicable statutory requirements.

The Court of Appeal indicated that in order for the arbitration provision to have been ruled unconscionable, it must be procedurally unconscionable as well substantively unconscionable. Substantive unconscionability deals with the actual terms of the agreement and determines whether the terms are oppressive to the weaker party. In this matter, the ruling was that unconscionability did not exist because the arbitration provision of the CC&R's did not limit the obligations or liability of either side.

The matter left was whether the HOA complied with statutory requirements. According to the CC&R's, the HOA was responsible for offering Mansouri the three-person arbitration panel prior to filing a petition to compel binding arbitration. Because of this, the Court of Appeal overturned the trial court's order compelling the arbitration and attorneys fees. They also awarded Mansouri her attorneys fees on the appeal.

Although this matter deals with arbitration only, it carries over into other matters as well. As this case shows, it is always very important to strictly follow what is in the association's governing documents in order be able to enforce anything in the legal system.

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