Facts

The defendant, Lennar Homes developed Martinique at Oasis, a residential community located in Homestead, Florida comprised of 241 homes.  Lennar Homes sold each of the homes in the community to individual homeowners.  Each of the purchase agreements between Lennar Homes and the homeowners contained an arbitration provision, which required the parties to submit any dispute arising out of the sale of the property, including any alleged property damage, to arbitration.  About five years after the first homes were sold, the plaintiff, the Homeowners 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 Florida trial court on behalf of all unit owners in Martinique at Oasis, alleging the issues were caused by defective construction.

Trial Court Decision

Lennar Homes moved to dismiss the Association’s complaint, arguing that the Association was required to comply with the arbitration provision in the purchase agreements between Lennar Homes and each unit owner.  The trial court denied the motion, finding that because there was no direct agreement between the Association and Lennar Homes that required arbitration, and because the complaint only alleged defects in the common elements of the property (i.e., the exterior stucco and cladding), the Association had a right to maintain a lawsuit against Lennar Homes.  Lennar Homes appealed, seeking enforcement of the mandatory arbitration provisions.

Appellate Court Decision

The appeals court reversed the trial court’s ruling, finding that the arbitration clauses in the individual unit owners’ purchase contracts were also binding on the Association.  Central to the court’s analysis was 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 concerning property owned exclusively by the Association.  The court was primarily guided by a decision of another Florida appellate court on the same issue.  There, the court held that an Association’s rights to file a lawsuit are not “superior to those of the actual owner” when the basis of the suit is damage to an element of a unit or group of units that are individually owned by members of the Association.  The unit owners, not the Association, were the “real parties in interest” in the dispute.  Therefore, the court found that under Florida law, the Association’s right to sue in a representative capacity on behalf of its members includes an obligation to comply with any arbitration agreements signed by the members.  The court held that the Association was required to arbitrate its dispute with Lennar Homes.

LESSONS LEARNED:

1. Associations suing on behalf of their members for damage to property that is individually owned by the members may be required to comply with any arbitration agreements signed by the members; and
2. An Association may not be required to comply with an arbitration agreement signed by its members if the dispute is regarding property owned exclusively by the Association.

Lennar Homes, LLC v. Martinique at the Oasis Neighborhood Association, Inc., Not Reporter in So. Rptr, 2021 WL 6057113.