In September 2016, the U.S. Department of Housing and Urban Development (“HUD”) released final regulations relating to housing discrimination, which now require community associations to investigate claims of harassment by one resident of another resident who is a member of a “protected class.” Under the Fair Housing Act, a protected class includes race, color, national origin, religion, sex, familial status and disability/handicap. In the past, if an association resident harassed another association resident, the association’s board or community manager may have viewed this as a personal issue, which would not be within the association’s scope of responsibility to investigate/address. This position was based on the belief that the association neither encouraged nor participated in the alleged harassing conduct and, therefore, could not be responsible for the conduct of its residents.
Regarding the Radburn: New Law Enhances Voting Participation Rights in New Jersey Community Associations
On July 13, 2017, New Jersey Governor Chris Christie signed into law P.L. 2017, Ch. 106 (S-2492/A-4091). The new law makes significant changes to the Planned Real Estate Development Full Disclosure Act (“PREDFDA”), N.J.S.A. 45:22A-43 et seq., with respect to procedures for board elections and voting participation rights. Although the legislation comes in direct response to complaints over a specific association – the Radburn Association in Fair Lawn – it will affect most, if not all, of the estimated 7,000 community associations located in New Jersey.
As outlined in a January 2017 article, the historic Radburn was established in 1929 as a “Town for the Motor Age.” The Radburn boasts 18 acres of internal parks, a shopping plaza, an elementary school, and “other remnants of the founders’ ambitious attempt to create a self-sufficient community.” However, for the past decade, pressure has been increasing from residents seeking to change what they considered to be an outdated and secretive process that the Raburn utilizes to elect its Board of Trustees. Specifically, not every owner in the Radburn was granted the right to either run for or vote for its Board. These issues led to litigation and caused so much uproar that State Senator Robert Gordon (D-Fair Lawn) introduced this legislation to make the election/voting process more inclusive and transparent.
Now that this legislation has been signed into law, it will change not only the Radburn’s elections, but will also have implications for most of New Jersey’s condominiums and homeowners associations. In fact, most of these newly enacted provisions will trump every association’s current by-laws. The most relevant provisions of the new legislation are as follows:
New Jersey Appellate Division Closes the Door on Mortgagee in Possession Actions: Woodlands Community Association, Inc. v. Mitchell
Over the past ten or so years, community associations in New Jersey have struggled with delinquent owners who, for numerous reasons, have ignored their responsibility to pay their common expense assessments and, in some cases, abandoned their homes. Many of these homes sat (or still sit) vacant for years due to the fact that mortgage lenders did not – or for a few years were prohibited by the courts from – prosecuting mortgage foreclosure actions. Since we are only now starting to see some increasing movement with mortgage foreclosures and Sheriff’s sales, associations were required to find creative ways to collect these past due assessments.
When traditional collection methods failed, some associations opted to foreclose the assessment lien(s) on the delinquent homes. Some obtained authority to rent vacant homes with the assistance of a court-appointed receiver (rent receivers), when and if the courts were amenable to such remedy, which is not always the case. In other circumstances, where the mortgage lender changed the locks or winterized a home, associations sought to hold the mortgage lender responsible for the assessments, claiming that the lender was a “mortgagee in possession”; however, due to a recent published decision, that avenue to collect delinquent assessments has been prohibited in most cases.
On June 6, 2017, the Appellate Division issued a decision in Woodlands Community Association, Inc. v. Mitchell. That decision, which was approved for publication, held that a mortgage lender’s act of securing its interest in the unit (changing the locks and “winterizing” the unit) did not amount to possession and did not create a duty for the lender to pay the ongoing assessments due to the association.
On March 2, 2017, the New Jersey Appellate Division decided the case of Medford Lakes Colony Club v. Maida, which dealt with unpaid assessments and the authority to remove a dock on association property. While the decision is unpublished (and does not constitute precedent), it made enough of an impression for Jonathan H. Katz to pen this brief write up:
In Medford a Club owned a lake,
Fees for its upkeep members make.
Docks on the lake were permitted,
As long as such fees were remitted.
Ms. Maida refused to pay fees,
Despite the Club’s numerous pleas.
So after the passage of time,
The Club removed the dock on Maida’s dime.
Maida objected but the Judge she directed,
The Club could remove the dock Maida erected.
So the moral of the story is not lost,
If you don’t pay your case will get tossed,
You’ll get dragged into Court,
For breach of contract or tort,
And you may have to pay all the cost.
You can read the Appellate Division’s much less poetic decision in Medford Lakes Colony Club v. Maida by clicking here.
For more information on this case or any other issue concerning your community association, please contact one of our Community Associations attorneys. For breaking news or updates on new blog posts, follow us on Twitter at: @njcondolaw.
Hill Wallack LLP’s Community Association Practice Group will be exhibiting at the 2016 CAI-NJ Annual Conference & Expo, which is being held on Wednesday, October 26, 2016, from 10:00 a.m. to 3:00 p.m. at the Garden State Exhibit Center in Somerset, New Jersey.
This year’s conference returns to Central Jersey, so do not miss out on the exciting lineup of networking events, educational sessions, informative exhibits and more! Registration is FREE for all homeowners and board members (pre-registration is recommended). There will be plenty of giveaways and FREE breakfast and lunch. Come see us at Booth 505!
Also, join Terry A. Kessler, Esq. and Jonathan H. Katz, Esq. of Hill Wallack LLP and Denise Becker, PCAM, of Homestead Management Services, Inc. for their 12:00 p.m. presentation entitled Batman vs. Superman: The Struggle Regarding Ethics and Confidentiality for Board Members & Property Managers. Program Description: “In a world where association board members are faced with issues regarding ethics and confidentiality on a daily basis, who can you turn to in order to work through these complex problems? In this battle of good versus evil, you can’t rely on the Man of Steel or the Dark Knight. This program will arm you with the necessary information and discuss the relevant law in order to help you properly navigate these thorny issues.”
For more information and to register to attend the 2016 CAI-NJ Annual Conference & Expo, click here.
On September 27, 2016, the Federal Housing Administration (FHA) proposed new regulations governing the condominium project approval process. These proposed regulations seek to address issues created by certain onerous requirements of Mortgage Letter 2011-22 as well as to respond to the changing conditions in the condominium market.
The notable proposed regulations include:
- Minimum Owner-Occupancy Requirements – FHA currently requires a minimum of fifty (50) percent of the units occupied by owners. FHA is specifically inviting comment on this issue and is proposing to establish an allowable range of owner-occupancy between twenty-five (25) and seventy-five (75) percent. The range would allow FHA to choose a specific percentage that is responsive to future market changes.
NJ Supreme Court Decision Paves the Way for Condominium Associations in Transition to Recover Damages against the Developer and Subcontractors
On August 4, 2016, the New Jersey Supreme Court issued its decision in Cypress Point Condominium Association, Inc. v. Adria Towers, LLC, et al., which held that faulty workmanship by a subcontractor that causes property damage is a covered loss under the developer’s/general contractor’s commercial general liability (CGL) insurance policy. The ruling holds that this consequential damage constitutes an “occurrence” under the CGL policy and, as such, may allow community associations to recover for water infiltration and other defective construction.
In this case, Cypress Point Condominium Association instituted transition litigation against the project’s developer/general contractor for water leaks and other construction defects, which caused damage to the units and common property. The developer’s insurance company argued that the Association’s claims were not covered under the various CGL policies obtained by the developer because the alleged faulty workmanship by the developer’s subcontractors did not amount to an “occurrence” and that the resulting damages did not constitute “property damage” under the policies.