By Ronald L. Perl, Esq. and Jonathan H. Katz, Esq.

What constitutes a “housing-related dispute” in a condominium for the purposes of requiring alternative dispute resolution (“ADR”)? The Appellate Division’s answer could cause significant problems for condominiums throughout New Jersey.

The New Jersey Condominium Act, N.J.S.A. 46:8B-14(k), requires condominium associations to “provide a fair and efficient procedure for the resolution of housing-related disputes between individual unit owners and the association, and between unit owners, which shall be readily available as an alternative to litigation.” However, the Condominium Act does not specifically define the term “housing-related disputes.”

That issue was front and center in Bell Tower Condominium Association v. Haffert, a published decision released January 12, 2012. In Bell Tower, the trial court entered judgment for the association regarding a dispute with the unit owners over the payment of a special assessment. The trial court rejected the unit owners’ argument that they were entitled to ADR, which was refused by the association.

However, the Appellate Division sided with the unit owners and reversed the decision of the trial court. In its opinion, the Court broadly construed the term “housing-related disputes,” explaining that the state’s public policy favors alternative dispute resolution and the Legislature chose broad and unconditional language when it required the alternative dispute resolution of “housing-related disputes.” Thus, the Court held that “housing-related disputes” should refer to any dispute (with a few caveats) arising directly from the condominium relationship.

Unfortunately, the decision elicits more questions than answers. For example, the opinion apparently ignores the Appellate Division’s previous decision in Committee for a Better Twin Rivers v. Twin Rivers Homeowners Association, which held that the requirement to offer ADR is limited to individualized complaints. Twin Rivers, which dealt with a similar ADR provision in the Planned Real Estate Development Full Disclosure Act (“PREDFDA”), N.J.S.A. 45:22A-44, held that unit owners may not seek ADR to dispute generalized issues or complaints, such as: (1) duly enacted assessments; (2) election issues; and (3) claims of ultra vires acts by the Association (e.g., noncompliance with the law or governing documents). The difference appears to be that the PREDFDA dispute resolution requirement does not contain the words “housing related,” but rather refers just to “disputes.”

This decision means that the ADR requirements for condominium associations differ from that which govern homeowners associations or cooperatives. It is not yet known whether this decision will be appealed.

Despite the unanswered questions surrounding this opinion, we strongly advise any condominium association without an ADR policy or procedure to enact such a resolution as required by the statute. Apparently, the Court is not concerned with the method of ADR, just that the process be offered and/or utilized prior to initiating litigation. If there is any doubt whether ADR should be offered in a particular matter, consult with your attorney. However, offering ADR in advance of litigation when dealing with unit owner disputes clearly will avoid a later issue to be decided by the Court.

You can read the Appellate Division’s decision in Bell Tower Condominium Association v. Haffert here.

For more information on this issue or any other issue concerning your community association, please contact one of our Community Associations attorneys.