Condominium

Condominium Associations Bringing Lawsuits on Behalf of Owners Must Adhere to Arbitration Provisions | Husch Blackwell LLP

Facts

The defendant, Lennar Homes, developed Martinique at Oasis, a residential community located in Homestead, Florida consisting of 241 condominiums. Lennar Homes has sold each of the units in the community to individual owners. Each of the purchase agreements between Lennar Homes and the owners contained an arbitration clause, which required the parties to submit any dispute arising from the sale of the property, including any alleged property damage, to arbitration. About five years after the first units were sold, the plaintiff, the Condominium Association, began noticing potential construction defects in the stucco, stone cladding, and decorative shapes on the exterior of the buildings. The Association sued Lennar Homes in the Florida District Court on behalf of all Martinique unit owners at Oasis, alleging the problems were caused by faulty construction.

Court of first instance decision

Lennar Homes moved to dismiss the Association’s complaint, arguing that the Association was required to comply with the arbitration clause in the purchase agreements between Lennar Homes and each unit owner. The trial court dismissed the motion, finding that since there was no direct agreement between the Association and Lennar Homes requiring arbitration, and the complaint only alleged defects in the common elements of the property (i.e. exterior stucco and siding), the Association had the right to sue Lennar Homes. Lennar Homes appealed, requesting the application of the mandatory arbitration provisions.

Court of Appeal decision

The appeals court reversed the trial court’s decision, finding that the arbitration clauses in the individual unit owners’ purchase contracts were also binding on the Association. At the heart of the court’s analysis was the fact that the Association was suing in “a representative capacity” on behalf of the unit owners regarding a “matter of common interest to the [Association’s] members.” The Association did not argue that it was suing over property owned exclusively by the Association. The court was primarily guided by a decision by another Florida Court of Appeals on the same issue. In this case, the court ruled that an association’s rights to sue are not “greater than those of the beneficial owner” where the basis of action is damage to an item of a unit or of a group of units individually owned by members of the association. Association. The unit owners, not the Association, were the “true interested parties” in the dispute. Therefore, the court found that under Florida law, the Association’s right to sue on behalf of its members includes the obligation to comply with any arbitration agreement signed by the members. the Association was required to arbitrate its dispute travels with Lennar Homes.

LESSONS LEARNED:
  1. Associations that sue on behalf of their members for damages to individually owned member property may be required to comply with any arbitration agreement signed by the members; and
  2. An Association cannot be required to comply with an arbitration agreement signed by its members if the dispute relates to property belonging exclusively to the Association.

Lennar Homes, LLC v. Martinique at Oasis Neighborhood Association, Inc., No Reporter in So. Rptr, 2021 WL 6057113.

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