Arbitration clause in your rental agreement

California law seems to prohibit rental agreements from compelling mandatory arbitration of disputes. However, there is a conflict between two laws that the courts have not yet resolved.

California Civil Code section 1953 states “any provisions of a lease or rental agreement that of a dwelling by which the lessee (the tenant) agrees to modify or waive any of the following rights shall be void as contrary to public policy . . . [¶] His procedural rights in litigation . . .” This means a tenant cannot waive in advance the right to have a jury trial when he signs her lease. The law was interpreted in a case where the Jaramillos, who were tenants, sued their landlord and the property management company for housing code violations, among other things. The landlord asked the court to enforce a clause in their lease that stated that all disputes had to be arbitrated. The court of appeal noted the weaker bargaining position of tenants as compared to landlords in holding that the arbitration clause could not be enforced. The court said that no law prevents tenants and landlords from entering into an independent agreement that is separate from the rental agreement.

There is another law in California that seems to allow landlords to force tenants into binding arbitration when tenants sign the rental agreement. Civil Code section 1942.1 provides that landlords and tenants may agree in writing to arbitration concerning habitability violations. The court of appeal in the case discussed above examined the conflict of the two laws but did not come to any conclusion. The prudent tenant should be wary and seek legal advice before agreeing to sign away her right to a jury trial. Arbitration can be very expensive and the arbitrator’s decision can only be challenged in court for extremely limited procedural reasons.

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Mary Catherine Wiederhold

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