Morrison Law Journal
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The Morrison Law Journal
May 2021
Volume XVI, Edition 5

When The Vote Does Not Matter: California Legislature Enacts Legislation Which
Provides That The Failure To Comply With Covenants, Conditions, And Restrictions
Insofar As A Pre-Lawsuit Vote In Favor Of A Construction Defect Lawsuit Cannot Stand
As A Bar To A Construction Defect Lawsuit

By: Edward F. Morrison, Jr., Esq.
Larry A. Schwartz, Esq.

As many are aware, the California Legislature enacted Civil Code section 5986, effective January 1, 2020. Civil Code section 5986 renders pre-litigation member vote requirements imposed by the project developer – such as a 50 percent vote of homeowners in favor of a construction – null and void. The newly enacted statute abrogates the defense that noncompliance with a voting requirement shall bar a construction defect claim (the statute does not apply if the voting requirement is adopted by association members who are not affiliated with the developer). The Legislature also expressly provided the statute would apply retroactively to claims initiated before the effective date of the legislation (except for claims which have been resolved through an executed settlement, a final arbitration decision, or a final judicial decision on the merits).

In a matter that garnered quite a bit of attention, the San Diego County Superior Court granted Summary Judgment in favor of the developers of the Smart Corner development in San Diego, a 19-story mixed-use development with 301 residential units and common areas. The trial court ruled in favor of the developer on the basis that the Smart Corner Owners Association had failed to obtain the consent of more than 50 percent of its condominium owners before filing a construction defect lawsuit, as required by the governing Declarations, Covenants, Conditions, & Restrictions. The Association complained that this could permit which developer retained control of a sufficient number of units to block a defect lawsuit until the time to file a defect lawsuit expired (or at least a claim for certain defects). The Association also complained that the Trial Court improperly concluded that a subsequent vote of ratification, held after the filing of the operative Complaint, could not satisfy the members' consent requirement. The developer, on the other hand, argued that the August 2018 decision in Branches Neighborhood Corp. v. CalAtlantic Group, Inc. (2018) 26 Cal.App.5th 743 ("Branches"), which upheld a developer sponsored voting requirement, was controlling.

The Smart Corner Owners Association appealed. After the filing of the Notice of the Appeal, the Legislature enacted the above-referenced new Civil Code section 5986. In an Opinion published on May 20, 2021, in Smart Corner Owners Association v. Smart Corner LLC (2021) Westlaw 2010152 ("Smart Corner case"), the Court of Appeal, Fourth District, reversed the grant of summary judgment ruling that Civil Code section 5986 applied. The Court of Appeal also ruled that the new statute applies retroactively and also held, as an independent ground for reversal, that the pre-litigation vote requirement at issue


violated fundamental state public policy. It is noted that another 2020 decision, Aldea Dos Vientos v. CalAtlantic Group, Inc. (2020) 44 Cal.App.5th 1073, also held that a provision in project CC&Rs requiring a vote in order to commence arbitration of construction defect claims was unreasonable and unconscionable if interpreted to give a veto power to developer to block an arbitration initiated prior to vote by owners authorizing arbitration (disagreeing with Branches).

The Smart Corner case, taken together with Civil Code section 5986, is very important in that it takes away or removes a bar to construction defect lawsuits when a project developer retains a number of units and uses its votes to thwart a lawsuit for defects. However, if an independent Board of Directors approve a lawsuit, or non developer affiliated members vote against filing suit, that can still stand as a bar.

About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at .

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Disclaimer Note: The legal article presented above is intended to provide general information which may be of interest or use to clients and colleagues of The Morrison Law Group and should not be construed as legal advice on any matter.