Governor Murphy just signed into law an important bill that directly impacts the rights of community associations in the developer transition process in New Jersey. We are pleased to report on this new law as it will benefit our common interest community clients going forward, especially those in the developer transition process, and in that regard we commend the CAI Legislative Action Committee-NJ for their efforts to initiate, support and advance this bill into law.
Public Law 2021 c.379 (A4903/S396) adjusts the Statute of Limitations on damage claims for construction defects in common interest communities in New Jersey. This is extremely important for newer common interest communities which are either in the process of transitioning control of their association from the developer/declarant to the homeowners, or have recently completed that transition. The Statute of Limitations in this context is a law that requires a common interest community to file a damages lawsuit against a developer, builder or subcontractor for any design or construction defects within a certain time period from the date the damages were discovered or should have been discovered, or lose the legal right to do so. For many years until the NJ Supreme Court’s 2017 opinion in a case entitled Palisades at Fort Lee Condominium Association v. 100 Old Palisade LLC, the applicable time period (the “limitations period”) did not begin to run until the time the damages were discovered or should have been discovered, or the date on which the homeowners took control of the association’s executive board by way of election, which ever occurred later. The Court’s opinion drastically changed that starting date, ruling that the limitations period began to run as soon as the damages were discovered or should have been discovered by the Association, regardless of whether or not the developer was still in control of the executive board. This ruling put associations at an extreme disadvantage in discovering and timely filing suit against the developer, the builder and/or the contractors if the developer still controlled the executive board. This new law reverses that portion of the Court’s decision by restoring the previous law providing that the applicable limitations period does not begin to run until the date the damages were discovered or should have been discovered, or the date on which the homeowners took control of the association’s executive board by way of election, which ever occurred later.
If you have questions about how this new law (or any other laws) affects your community association, we invite you to contact any of the lawyers in the Community Associations Practice Group of Hill Wallack LLP.