IN THE SUPREME COURT OF THE STATE OF DELAWARE

BON AYRE LAND LLC, §

§

Appellant Below-Appellant, § No. 221, 2015

§

v. § Court Below: Superior Court

§ of the State of Delaware

BON AYRE COMMUNITY § 

ASSOCIATION, § C.A. No. K14A-08-001 

§

Appellee Below-Appellee. §

Submitted: February 24, 2016

Decided: February 25, 2016

Before STRINE, Chief Justice; HOLLAND, VALIHURA, VAUGHN, Justices; 

and GLASSCOCK, Vice Chancellor,*constituting the Court en banc.

O R D E R

This 25th day of February 2016, having considered this matter on the briefs 

filed by the parties and after oral argument, we find it evident that:

(1) This appeal is centered on a disagreement about a rent increase 

between Bon Ayre Land LLC (the “Landlord”), the owner of a manufactured 

homes community, and Bon Ayre Community Association (the “Homeowners‟

Association”), which represents the interests of the individual homeowners who 

lease land from the Landlord. The parties dispute various issues regarding the 

propriety of an arbitrator‟s resolution of their dispute under a new statute that 

 

*

Sitting by designation under Del. Const. art. IV, § 12.
2

limits the ability of property owners leasing land to owners of manufacture homes

to increase rent above the applicable consumer price index.

1

This appeal comes to 

us from the Superior Court, which reversed the decision of the arbitrator and 

denied the Landlord the right to implement any rent increase by relying on one 

ground. That ground involved the Superior Court‟s de novo determination that 

when the Landlord convened the meetings with the homeowners required under 25 

Del. C. § 7043(b), the Landlord failed to “in good faith, disclose all of the material 

factors resulting in the decision to increase the rent”2because it did not present a 

market rent study that it attempted to introduce at the later arbitration, or any other 

verifiable documentation.

3

The market rent study provided a detailed perspective 

on rents at allegedly comparable properties in support of the Landlord‟s position 

that the proposed rent increase was justified by “market rent,” which is one of the 

potential grounds for a rent increase under the statute.

4

The Superior Court held

that “[b]ecause [the Landlord] has failed to comply with the procedural 

 

1

25 Del. C. §§ 7040 et seq. (prior versions). 

2

Id. § 7043(b) (prior version).

3

Bon Ayre Land LLC v. Bon Ayre Cmty. Ass’n, 2015 WL 893256, at *8 (Del. Super. Feb. 26, 

2015).

4

“One or more of the following factors may justify the increase of rent in an amount greater than 

the [Consumer Price Index For All Urban Consumers in the Philadelphia-Wilmington-Atlantic 

City area (“CPI-U”)] . . . (7) Market rent.--For purposes of this section, “market rent” means that 

rent which would result from market forces absent an unequal bargaining position between the 

community owner and the homeowners. In determining market rent, relevant considerations 

include rents charged by comparable manufactured home communities in the applicant‟s 

competitive area. To be comparable, a manufactured home community must offer similar 

facilities, services, amenities and management.” 25 Del. C. § 7042 (prior version).
3

requirements of 25 Del. C. § 7043(b), any rental increase above the [applicable 

consumer price index] is denied.”5 

(2) In reaching the issue of whether the Landlord had met its obligation 

under 25 Del. C. § 7043(b) to disclose all material factors resulting in its proposal 

to raise the rent, the Superior Court necessarily made a de novo determination 

because the arbitrator held that the Homeowners‟ Association had waived that 

issue in the course of the proceedings, not only by virtue of a formal stipulation 

stating that “[a] meeting between the parties was held pursuant to 25 Del. C. 

§ 7043(b)”6but, more importantly, by its conduct both on the way to and during 

the arbitration. During that time period, the Homeowners‟ Association appears to 

have agreed that the parties would focus solely on the issue of whether the 

proposed rent increase was justified on the basis of comparable market rent and 

that the Landlord would win if it could demonstrate that the rent increase was 

justified on that basis.

7

 Only after two of the Landlord‟s witnesses had testified at 

 

5

Bon Ayre Land LLC, 2015 WL 893256, at *9.

6 App. to Answering Br. at 24 (Stipulated Facts).

7 According to the arbitrator, during a May 7, 2014 teleconference between the parties, the 

Homeowners‟ Association‟s attorney initially said that he planned to challenge the validity of the 

meetings for failure to comply with the statutory requirements, but then agreed that the Landlord 

would win if it could prove that the proposed rent increase was justified by comparable market 

rent. Over the next three weeks, the parties and the arbitrator exchanged letters and emails, but 

there was no mention of challenging the validity of the meetings. Then, at the hearing, the 

arbitrator asked: “Do the parties agree a meeting was held in accordance and pursuant to Title 

25, Delaware Code 7043(b)?” To which the Homeowners‟ Association‟s attorney replied: “Yes. 

There were two meetings.” Id. at 26 (Transcript of Arbitration at 16, Bon Ayre Cmty. Ass’n v. 

Bon Ayre Homes, Nos. 2-2014 & 3-2014(May 28, 2014)). Further, the Homeowners‟ 

Association‟s attorney gave no opening statement and did not raise the issue of the Landlord‟s 
4

the hearing and one of them had been excused, the arbitrator found, did the 

Homeowners‟ Association then revive its contention that the Landlord failed to 

comply with the statute‟s procedural requirements. The arbitrator found that was 

unfair and held that the Homeowners‟ Association had waived its right to make 

that contention.

(3) On appeal, the Superior Court focused very narrowly on the formal 

stipulation and gave little weight to the arbitrator‟s impression of the issues that 

were to be heard and the arbitrator‟s understanding of the Homeowners‟

Association‟s position in the course of shaping the issues for hearing. 

(4) Were this a typical administrative law appeal, we would likely reverse 

the Superior Court‟s decision because it had substituted its own judgment in a 

situation when the body entrusted with the initial responsibility to hear a dispute 

had exercised its discretion reasonably. Given the arbitrator‟s close familiarity 

with the record and given the record‟s support for his impression that the 

Homeowners‟ Association had waived any challenge under 25 Del. C. § 7043(b), 

we would be loathe to find that the arbitrator had engaged in any abuse of 

discretion.

 

failure to comply with the requirements of 25 Del. C. § 7043(b) until four hours into the 

arbitration proceedings, after two of the Landlord‟s witnesses testified without being asked about 

the meetings, and one of those witnesses was dismissed. 
5

(5) But, the statute under which the Superior Court was operating was 

confusing at best, and incoherent at worst. For starters, the statute expressly 

deemed the proceeding before the arbitrator to be “nonbinding.”8 But, it then went

on to say that the arbitrator‟s ruling will be reviewed by the Superior Court and 

that the appeal will be “on the record without a trial de novo.”9 We are at a loss to 

determine what standard of review the Superior Court was supposed to apply based 

on that language. Although the statute calls for a decision by an arbitrator, it does 

not indicate that the Superior Court should use the traditionally very narrow scope 

of review available for arbitrators‟ decisions.10 And by suggesting that the 

 

8

25 Del. C. § 7043(c) (prior version).

9

Id. § 7044 (prior version).

10 See, e.g., SPX Corp. v. Garda USA, Inc., 94 A.3d 745, 750 (Del. 2014) (“„[R]eview of an 

arbitration award is one of the narrowest standards of judicial review in all of American 

jurisprudence.‟”) (internal citation omitted); TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel 

Sec., Inc., 953 A.2d 726, 732 (Del. Ch. 2008) (quoting Kashner Davidson Sec. Corp. v. Mscisz, 

531 F.3d 68, 70 (1st Cir. 2008)) (“Arbitration awards . . . are not lightly disturbed, and „Courts 

must accord substantial deference to the decisions of arbitrators.‟”); Travelers Ins. Co. v. 

Nationwide Mut. Ins. Co., 886 A.2d 46, 48 (Del. Ch. 2005) (“As a general rule, a decision 

reached by an arbitration panel is not reviewed on the merits by Delaware courts. The grounds 

for vacating an arbitration award, where they exist, are narrowly circumscribed.”); Rancone v. 

Phx. Payment Sys., Inc., 2014 WL 6735210, at *4 (Del. Ch. Nov. 26, 2014) (noting that 

according substantial deference to arbitrators‟ decisions is “[c]onsistent with public policy 

favoring alternative dispute resolution”) (internal citation omitted); RBC Capital Mkts. Corp. v. 

Thomas Weisel Partners, LLC, 2010 WL 681669, at *10 (Del. Ch. Feb 25, 2010) (noting the 

“broad deference generally accorded arbitrators”); see also W.R. Grace & Co. v. Local Union 

759, Int’l Union of United Rubber, Cork, Linoleum & Plastic Workers of Am., 461 U.S. 757, 764 

(1983) (noting that a court “may not overrule an arbitrator‟s decision simply because the court 

believes its own interpretation of the contract would be the better one”); Totes Isotoner Corp. v. 

Int’l Chem. Workers Union Council/UFCW Local 664C, 532 F.3d 405, 411 (6th Cir. 2008) 

(quoting Tenn. Valley Auth. v. Tenn. Valley Trades & Labor Council, 184 F.3d 510, 514 (6th Cir. 

1999)) (“[I]n the context of arbitration, „courts play only a limited role when asked to review the 

decision of an arbitrator.‟”); Way Bakery v. Truck Drivers Local No. 164, 363 F.3d 590, 593 (6th 

Cir. 2004) (“A court‟s review of an arbitration award is one of the narrowest standards of judicial 
6

arbitrator‟s decision would be nonbinding, the statute provided no guidance as to 

what weight, if any, was to be given to the arbitrator‟s decision on appeal.11

(6) For that reason, we cannot conclude that the Superior Court erred by 

determining that the challenge to the Landlord‟s compliance with the requirements 

of 25 Del. C. § 7043(b) was not waived, as the statute in its muddled form can be 

read as indicating that the Superior Court should decide the dispute de novo. That 

 

review in all of American jurisprudence. Disagreement with an arbitrator‟s factual findings does 

not constitute grounds for a court‟s rejection of those findings.”) (internal citations omitted)

(internal quotation marks omitted); Am. Arbitration Ass‟n App. R. A-10 (“A party may appeal 

on the grounds that the Underlying Award is based upon: (1) an error of law that is material and 

prejudicial; or (2) determinations of fact that are clearly erroneous.”).

11 The General Assembly has now removed the term “nonbinding” from the statute. That 

removal and the new provision for appeal leaves the statute in a more understandable form, as 

the new appeal provision provides that any review by the Superior Court will be “on the record 

and the Court shall address written and/or oral arguments of the parties as to whether the record 

created in the arbitration is sufficient justification under the Code for the community owner‟s 

proposed rental increase in excess of the CPI-U.” 25 Del. C. § 7044. That usage, although 

loose, is associated with the kind of review that is given to determinations by administrative 

agencies. Under that form of review, if a factual finding of the initial tribunal is supported by 

substantial evidence, that finding must be given deference. See, e.g., 29 Del. C. § 10142 

(providing, similar to the old version of the statutes, that an appeal of an administrative agency‟s 

decision shall be “on the record without a trial de novo” but also providing that the trial court‟s 

“review, in the absence of actual fraud, shall be limited to a determination of whether the 

agency‟s decision was supported by substantial evidence on the record before the agency”);

Angstadt v. Red Clay Consol. Sch. Dist., 4 A.3d 382, 387 (Del. 2010) (“On appeal of an 

administrative agency‟s adjudication, this Court‟s sole function is to determine whether the 

Board‟s decision is supported by substantial evidence and is free from legal error.”) (internal 

citations omitted); Falconi v. Coombs & Coombs, Inc., 902 A.2d 1094, 1098 (Del. 2006) (“We 

will accept the Board‟s findings of fact if there is substantial evidence to support them. 

Substantial evidence is more than a mere scintilla, but less than a preponderance of the evidence. 

Substantial evidence is such relevant evidence that a reasonable mind might accept as adequate 

to support a conclusion. The appellate court does not weigh the evidence, determine questions of 

credibility, or make its own factual findings.”). As it applies here, the statutory amendment 

would suggest that any ultimate determination by the arbitrator of whether and to what extent a 

rent increase is justified should be given deference if based on substantial record evidence and 

not tainted by any error of law. That said, even the amended statute is less than ideally clear, and 

it would be helpful if the statute would explicitly incorporate a recognized form of judicial 

review.
7

said, we do conclude that the Superior Court erred by failing to give weight to the 

consequences of its determination. Precisely because the Landlord reasonably 

understood the Homeowners‟ Association to have waived the failure to comply 

argument and so did the arbitrator, the Landlord had no reason to put on evidence 

to show that it had disclosed all of the material factors resulting in its decision to 

raise the rent at the meetings with the homeowners. In fairness, any reversal of the 

arbitrator‟s decision on this basis, therefore, should have resulted in a remand to 

the arbitrator to allow him to take additional evidence on this claim.

(7) We implement that remedy now and decline to reach any of the other 

issues on this appeal. Many of the issues that have been raised can be better 

addressed in the wake of a fresh arbitration based on the amended form of the 

statute, which attempted to clarify some of the problematic issues with the initial 

form.12 Moreover, a remand will allow the parties to more clearly argue to the 

arbitrator what the statutory phrase “disclose all of the material factors resulting in 

the decision to increase the rent”13 means. But, we do note that nothing about that 

 

12 The new provision for an appeal provides: 

The community owner, the home owners‟ association, or any affected home 

owner may appeal the decision of the arbitrator within 30 days of the date of 

issuance of the arbitrator‟s decision. The appeal shall be to the Superior Court in 

the county of the affected community. The appeal shall be on the record and the 

Court shall address written and/or oral arguments of the parties as to whether the 

record created in the arbitration is sufficient justification under the Code for the 

community owner‟s proposed rental increase in excess of CPI-U. 

25 Del. C. § 7044. 

13 25 Del. C. § 7043(b) (prior version).
8

statute necessarily precludes a property owner from presenting the key elements of 

its reason for a rent increase in an effort to reach accommodation with the 

homeowners, and then only later procuring a formal expert report if a contentious 

and expensive arbitration ensues. Rather than dilate further on this issue on a 

confused record,14 it is best that the arbitrator and the Superior Court, if necessary, 

consider this issue afresh with new briefs from the parties. 

(8) Once the arbitrator concludes whether a meeting valid under 25 Del. 

C. § 7043(b) was held, his task on remand will be complete. He can enter an order, 

leaving the parties to then present any disagreements with his rulings to the 

Superior Court. The arbitrator need not revisit his determinations as to the 

appropriate rent increase. Rather, that and other issues previously determined by 

the arbitrator shall be revisited by the Superior Court as necessary (e.g., if the 

 

14 By way of example of the confusion in the record, the Landlord faults the arbitrator for failing 

to give collateral effect to a prior arbitration between the Homeowners‟ Association, on behalf of 

certain homeowners who are not parties in this case, and the Landlord. In so ruling, the 

arbitrator relied upon the following statement by the arbitrator in that case: “It is stipulated that 

this decision only affects eight tenants and that more tenants will be addressing these problems in 

the future. This decision should not be considered controlling on whether future rent increases 

could be justified.” Answering Br. Attach. 2 (Arbitrator‟s Decision, Bon Ayre Cmty. Ass’n v. 

Bon Ayre Land, LLC, No. 4-2013, at 6–7 (Dec. 30, 2013)). We can understand the reluctance of 

the arbitrator to give the effect to this prior ruling (in which the arbitrator held that the Landlord 

had justified a rent increase from $309 to $349 per month) in view of this ambiguous statement 

about it being “stipulated” that his ruling would only have this effect. Although it seems 

unlikely that past proceedings involving homeowners‟ associations and property owners should 

have no collateral effect, parties can agree that such proceedings will not have that effect. The 

record here is confusing, and it would be hazardous to second-guess the arbitrator as to this issue 

without a firmer understanding of what the Landlord and the Homeowners‟ Association 

understood when they engaged in a prior arbitration about eight different homeowners‟ rent, and 

what they told that arbitrator.
9

arbitrator determines that the meeting was valid and his determination is upheld by 

the Superior Court). In any review of that determination, the arbitrator‟s thorough 

decision on the economic merits of the rent increase dispute, or any other ruling of 

the arbitrator, the Superior Court shall apply the amended statute.15

(9) Furthermore, our remand will allow the parties to consider their 

respective positions with cool heads and warm hearts. They can decide whether a 

new 25 Del. C. § 7043(b) meeting should be held, or whether, in retrospect, they 

can live with the arbitrator‟s original decision, which assessed the record evidence 

carefully and came to a conclusion that the Landlord was justified in raising the 

rent substantially above the applicable consumer price index, but not to the levels it 

sought, even though that decision did not give either side everything it wanted. If 

they cannot, then the parties can proceed before the arbitrator anew, formally brief 

to him the complicated legal issues they now present, and accord him the 

opportunity to consider them under the amended statute.16

 

15 See supra note 11.

16 Finally, we note that the arbitrator took this contentious case very seriously. Due to the burden 

of the remand upon him, the parties are expected to share the costs of the arbitrator‟s fee, as if 

this were an entirely new arbitration. The remand is occasioned by circumstances having 

nothing to do with the arbitrator‟s own performance, because he addressed thoroughly the issues 

fairly presented to him by the parties.
10

NOW, THEREFORE, IT IS ORDERED that the judgment of the Superior

Court is REVERSED and the case is REMANDED to the arbitrator for further 

proceedings consistent with this Order.

BY THE COURT:

/s/ Leo E. Strine, Jr.

Chief Justice