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Florida Court Of Appeal Says Neighborhood Association Is Bound By Arbitration Agreement

In Lennar Homes, LLC v. Martinique at the Oasis Neighborhood Association, Inc., No. 3D20-1732, 2021 WL 6057113 (Fla. Dist. Ct. App. Dec. 22, 2021), the Third District Court of Appeal reversed the trial court’s decision to deny Lennar Homes, LLC’s (“Lennar Homes”) Motion to Compel Arbitration. The Court of Appeal held the arbitration provision was enforceable against Martinique at the Oasis Neighborhood Association, Inc. (“Neighborhood Association”).

Lennar Homes was a building developer for a residential community named Martinique at the Oasis. The residential community was comprised of individually owned townhomes. When a townhome sold, Lennar Homes and the individual purchaser executed a purchase and sale agreement with an arbitration clause. Each purchaser was also issued a special warranty deed which included an arbitration clause with identical wording.

In 2018, the Neighborhood Association sued Lennar Homes for alleged construction defects in the stucco stone cladding on the exterior of the townhomes. Lennar Homes moved to enforce the arbitration provision in the individual purchase agreements and special warranty deeds. The trial court denied the Motion to Compel Arbitration because there was no agreement between the Neighborhood Association and Lennar Homes. The trial court also held any arbitration provision between the Neighborhood Association and Lennar Homes would have been null and void as against public policy because it would have prohibited or restricted the Neighborhood Association’s right to maintain a lawsuit against Lennar Homes.

On appeal, Lennar Homes argued the Neighborhood Association should be bound by the arbitration provisions in the purchase agreements and special warranty deeds because the Neighborhood Association brought the suit in its representative capacity on behalf of the homeowners. The Court of Appeal agreed, adopting the holding in Pulte Home Corp. v. Vermillion Homeowners Ass’n, Inc., 109 So. 3d 233 (Fla. Dist. Ct. App. 2013).

In Pulte, the Second District Court of Appeal held a homeowners’ association is bound by its members’ individual agreements to arbitrate when it is suing in a representative capacity. Here, the Court reasoned the Neighborhood Association was suing Lennar Homes in a representative capacity because the subject of the lawsuit was the defects in the stucco on each individual townhome. The lawsuit did not involve property owned by the Neighborhood Association, so the Neighborhood Association was not the real party in interest. The Neighborhood Association was bound by the arbitration agreements in the purchase and sale agreements and special warranty deeds.

The Court also rejected the public policy argument. Florida law states provisions prohibiting or restricting lawsuits in homeowners’ association documents are against public policy. The Court held this law does not apply because the arbitration provision was included in sale agreements and warranty deeds rather than homeowners’ association documents.