The Second Appellate District of the California Court of Appeal held that arbitration clauses are unenforceable in continuing care retirement community tenancy agreements.

Harris and four other residents (“Harris”) live in the University Village Thousand Oaks (UVTO) continuing care and retirement community. Residents of UVTO must sign a contract before moving in. Pursuant to the contract, residents pay various monthly fees for a residence, care, and services. The contracts include the right to live in a specified living unit. The monthly fee is based upon the type of unit. Additionally, UVTO contracts require tenants to agree to binding arbitration to resolve any claims or disputes related to UVTO.

Harris sued UVTO alleging that UVTO made false representations about facility security, future increases in monthly fees, and what charges monthly fees cover. The trial court ordered arbitration of Harris’ claims over their objections. At arbitration the arbitrator issued an award for UVTO on all causes of action. Harris filed a motion with the trial court to vacate the award arguing that arbitration clauses are not enforceable in tenancy agreements in retirement communities. The trial court denied their motion and Harris appealed.

California Civil Code Section 1953(a)(4) prohibits the waiver of procedural litigation rights, such as requiring mandatory arbitration, in any dwelling lease or rental agreement. The trial court ruled that continuing care retirement community tenancy agreements are not standard residential leases. Therefore, Section 1953(a)(4) did not apply and the arbitration language in UVTO’s contract was enforceable.

Section 1953(a) states “Any provision of a lease or rental agreement of a dwelling” that requires tenants to waive their rights to engage in litigation is unenforceable. The California Civil Code chapter that includes Section 1953 is located within California Civil Code Section 1940. Section 1940(a) specifies the chapter’s provisions apply to “all persons who hire dwelling units located within this state including tenants, lessees, boarders, lodgers, and others, however denominated.” Section 1940(c) defines “dwelling unit” to mean a structure or part of a structure that is used as a home, residence, or sleeping place. The appeals court found that the language regarding “boarders” and “lodgers” applies to the board and lodging provisions of continuing care contracts.

Accordingly, the Court found that the plain language of these California Civil Code provisions means that tenants of continuing care retirement communities are entitled to the same rights as tenants under more common residential leases. The Court remanded the case for trial on Harris’ original claims.