Villa Milano Homeowners Ass'n v. Il Davorge

In this case of first impression, we decide whether a developer can use a declaration of covenants, conditions and restrictions (CC & R's) containing a binding arbitration clause as a device to preclude homeowners, and the homeowners association of which they are members, from pursuing an action for construction or design defect damages in a court of law. When homeowners purchase property subject to CC & R's, they agree to be bound by those CC & R's, including any arbitration clause contained therein. But that agreement, like any other, will not be enforced if it is unconscionable. Code of Civil Procedure section 1298.7 provides home buyers the right to bring a judicial action for construction or design defect damages even when the purchase agreement contains a binding arbitration clause. Public policy will not permit a developer, who is unable to use a purchase agreement to block a home buyer's access to a judicial forum, to cut off that access by circuitous means—the CC & R's.

II Davorge, a California limited partnership, was the developer of the Villa Milano condominium complex located in Huntington Beach. In order to create a "condominium project" governed by the…