Hill Wallack LLP‘s Community Association Practice Group will be exhibiting at the 2014 New Jersey Cooperator’s Condo, HOA and Co-op Expo on Wednesday, May 7, 2013, 10:00 a.m. to 4:30 p.m., at the Meadowlands Exposition Center in Secaucus, New Jersey. Join board members, property managers, building owners and real estate professionals and meet building service companies, attend educational seminars and get your questions answered by a member of our team.

Hill Wallack LLP Partner Caroline Record, Esq. is among the featured panelists of experts at the Educational Seminar titled “Breaking Bad – The Insiders Guide to By-Laws & Rules.” This seminar will discuss how by-laws and rules are the keys to maintaining a harmonious community, provided that they are reasonable and properly enforced. The panel will discuss the keys to drafting, enacting and enforcing by-laws and house rules. Topics to be explored include when to change by-laws/rules; the proper and legal method of changing them; the role of your association’s attorney; how your governing documents affect by-laws/rules, and much more.

For more information or to register to attend, click here!

By Jonathan H. Katz, Esq.

In Jerry Maguire, Tom Cruise plays a sports agent who writes a mission statement about perceived dishonesty in the sports management business – “The Things We Think and Do Not Say: The Future of Our Business.” This is my mission statement, Bob Sugar.

Since the mortgage crisis began in the late 2000s, some community associations were (and still are) dealing with the fallout of extraordinary delinquencies, mortgage lenders who either cannot or refuse to pursue foreclosure actions, and, in some cases, units that are so “under water” that owners have literally walked away and abandoned their units. In response to these delinquencies, law firms that represent community associations, including Hill Wallack LLP, have attempted to find creative solutions to collect these past due common expense assessments. One such solution is to request that the Court appoint a rent receiver to take over control of an abandoned unit, rent it out, and use the proceeds to pay down the outstanding arrears due to the Association.

That seems like a workable solution to a problem, right? Why should a unit sit vacant for months or even years waiting for the mortgage lender to complete a foreclosure when the unit can be used to satisfy the outstanding and ongoing common expeense assessments for that unit?

We are going to let you in on a dirty secret: rent receivers in community associations are a work of judicial fiction.

What does that mean, you ask? Put simply, unlike most traditional mortgage instruments, which specifically allow for the appointment of a rent receiver, the vast majority of community associations are granted no such authority and no such right.

So to the extent that your association is currently benefiting from rental payments as the result of a rent receiver application granted by the Court, as many of Hill Wallack’s association clients are, that is due solely to the discretion of a Judge and, most likely, the persuasive argument of community association counsel.

The Appellate Division makes that fact abundantly clear in a recent case denying the appointment of a rent receiver. In Woodlake at King’s Grant Condominium Association, Inc. v. Coudriet, the Association’s request to appoint a rent receiver was denied by the Trial Court. The Association appealed, and the Appellate Division agreed with the Trial Court that the Association failed to demonstrate any entitlement to the appointment of a rent receiver. Moreover, both the Trial Court and the Appellate Division were quick to point out that the Association’s counsel neglected to put the mortgage lender on notice of the rent receiver application, which would have afforded the lender the opportunity to be heard.

The truth is that the appointment of a rent receiver is and has always been a discretionary decision to be made by the Court subject to certain equitable considerations, even in the unlikely event that there is a contractual provision allowing the assignment of rents to the Association. And generally, a receiver will only be appointed when it appears necessary for the protection of the requesting party, such as when there is an inability of the owner to pay the debt and the owner fails to make repairs, resulting in waste of the property.

So what is the moral of this story? The answer is simple. Rent receivers may still be a viable avenue for associations to collect delinquent assessments, but these applications must be prosecuted correctly, on notice to the mortgage lender, and clearly address the equitable considerations of concern to the Court. In addition, since the appointment of a rent receiver is a discretionary, whether the Court will grant an association’s request depends on several factors, most important of which is what Judge is deciding the request, which will be based on the location of your association. However, there is more than one way to skin a cat, and rent receiver applications are not the only way to collect from delinquent unit owners.

The attorneys in Hill Wallack’s Community Association’s group are recognized for providing insight and innovation in the collection of delinquent assessments. Our experience spans more than 30 years, and we aggressively represents associations in assessment collection matters (including bankruptcies and foreclosures). And most importantly, we can assist your association in collecting delinquent assessments the correct way, the right way. If you have questions about assessment collection, rent receivers or what Hill Wallack can do to assist your association, please reach out to one of our Community Associations attorneys.

You can read the Appellate Division’s decision in Woodlake at King’s Grant here.

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By Jonathan H. Katz, Esq.

Owners of foreclosed residential properties in New Jersey are now required to notify both the municipality and the association or common interest community where the property is located when they take title to such a property by way of sheriff’s sale or deed in lieu of foreclosure. Owners taking title to foreclosed properties will now have to provide their names and addresses information as well as a designated agent within New Jersey if they are outside of the state. This change in the law will make it easier for community associations to contact the new owners to address issues with the unit, whether related to necessary repairs, access to the unit, or collection-related problems.

On January 18, 2012, Governor Chris Christie signed this legislation into law, which takes effect immediately. The language of the legislation provides in pertinent part that:

The owner of any non-owner occupied residential property who takes title to the property as the result of a sheriff’s sale or deed in lieu of foreclosure … shall provide notice, within 10 business days, to the municipal clerk, or any other designated municipal official, of the municipality wherein the property is located and to any association or common interest community, of which the residential property is a part… providing the name and address of the owner.

CAI-NJ’s Legislative Action Committee, of which Hill Wallack LLP Partner Ronald L. Perl, Esq. is a member, was instrumental convincing the bill’s sponsors to amend the language above to include specific notification to associations and common interest communities.

You can view the entire text of the new law here.

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

By Jonathan H. Katz, Esq.

Just what is a bank’s responsibility with respect to a foreclosed property in a community association?

The Office of the Comptroller of the Currency (“OCC”) recently issued guidance to national banks and federal savings associations regarding the obligations and risks related to all foreclosed properties, including those within community associations. On December 14, 2011, OCC released Bulletin 2011-49, which confirms that lenders who acquire title to foreclosed properties assume the primary responsibilities of the owner, including maintenance and security, paying taxes and insurance, and, most importantly, assume liability for payment of ongoing community association assessments.

The Bulletin also provides notice to banks that they must record their ownership interest in local land records and should communicate with municipalities and community associations about specific requirements once title to the foreclosed property is transferred. You can view Bulletin 2011-49 here.

In a letter dated January 6, 2012, CAI Chief Executive Officer Thomas M. Skiba expressed appreciation to the OCC for its recognition that management of foreclosed properties is a critical issue to community associations. Mr. Skiba pointed out that a recent CAI survey indicated that less than 30% of bank-owned properties pay the required assessments in a timely fashion, putting strain on the rest of the owners within the association. You can read CAI’s letter to the OCC here.

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