South Carolina Supreme Court Finds Mandatory Arbitration Provision Unconscionable

David Wilson

In a recent South Carolina Supreme Court decision, the Court struck a mandatory arbitration clause from purchaser contracts with a home builder because the terms were considered to be unconscionable. 

In Damico v. Lennar Carolinas, a group of home buyers in the Spring Grove Plantation community sued Lennar Carolinas for construction defect claims.  As one of its primary defenses, Lennar Carolinas pointed to the arbitration clause included in the contracts that each homeowner had signed.  These clauses required cases to be arbitrated and waived other protections normally available to a home buyer, such as trial by jury. 

The Court determined that the contracts signed by the home buyers were adhesion contracts—contracts where there is no real choice to negotiate the terms (basically a take it or leave it approach).  The Court also found that there was a substantial disparity in the bargaining power between Lennar and the home buyers.  Because the contracts were determined to be adhesion contracts, the arbitration requirements were found to not have been truly agreed to by the home buyers. 

The entire case can be reviewed here.

To discuss this case or any other matters that may involve home ownership in a community association (an HOA, townhome, or condo) contact any of our experienced community association attorneys in North Carolina or South Carolina.

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