Bon Ayre Land, LLC v. Bon Ayre Community Association
K15A-09-005 JJC
| Del. Super. Ct. | Dec 2, 2016Background
- Bon Ayre Land, LLC (community owner) sought a market rent increase under Delaware’s Manufactured Home Owners and Community Owners Act; an arbitrator denied the increase on Aug. 24, 2015.
- This matter is the third related rent-increase dispute between the same parties at the same community; prior appeals reached the Delaware Supreme Court.
- After briefing and oral argument, the Superior Court stayed this appeal pending the Delaware Supreme Court’s decision in Bon Ayre II; the stay was lifted after that decision.
- The Delaware Supreme Court in Bon Ayre II held that (1) a proposed market rent increase must be "directly related to operating, maintaining, or improving" the community, and (2) advertised rents are admissible evidence of market rent.
- The arbitrator in this case had applied a contrary standard, excluded advertised rents as incompetent evidence, and rejected the community owner’s expert largely for that reason.
- The Superior Court found the arbitrator failed to apply the correct legal standard and remanded for further proceedings so the arbitrator can reassess evidence (including whether to admit additional evidence) consistent with Bon Ayre II and consider §7043(b) disclosure issues.
Issues
| Issue | Plaintiff's Argument (Bon Ayre Community Ass'n) | Defendant's Argument (Bon Ayre Land) | Held |
|---|---|---|---|
| Whether a market-rent increase must be directly related to operating, maintaining, or improving the community | The community owners contend the community owner failed to disclose required written "material factors" under §7043(b) and thus waived/forfeited the increase | Community owner argues the arbitrator applied the old (erroneous) standard and should be allowed to present additional evidence on the required relationship on remand | Court applied Bon Ayre II: the increase must be directly related; remanded so arbitrator can address §7043(b) issues and accept further evidence at his discretion |
| Whether advertised rents are competent evidence of market rent | Homeowners argued arbitrator reasonably excluded community owner’s expert for credibility issues and decision should stand without remand | Community owner argued advertised rents should have been considered and remand is necessary to evaluate expert evidence under correct standard | Court held advertised rents are admissible per Bon Ayre II; because arbitrator excluded them, remand is required for reconsideration under the proper standard |
| Proper scope of Superior Court review of arbitrator decisions under the Act | Homeowners urged affirmance and that remand is unnecessary or should be limited to existing record | Community owner sought remand permitting new evidence given prior inconsistent guidance and unfairness | Court followed Bon Ayre I guidance: Superior Court applies substantial-evidence and legal-error review and remanded to arbitrator to determine scope of further proceedings |
| Whether the Superior Court should make factual findings in place of the arbitrator | Homeowners suggested harmless-error doctrine applies and Superior Court could affirm on current record | Community owner opposed substitution of factfinding, citing fairness and prior misapplication of law | Court declined to make de novo factual findings and remanded for arbitrator to reassess credibility and evidence under clarified law |
Key Cases Cited
- Bon Ayre Land, LLC v. Bon Ayre Community Ass’n, 133 A.3d 559 (Del. 2016) (remand appropriate when arbitrator failed to examine relevant issues; outlines scope of appellate review)