Hi, How Can We Help You?

Author Archives: Francis J. McGovern, Jr., Esquire

A Guide To Attorney Fees

Posted on Author By Francis J. McGovern, Jr., Esquire

The most common arrangements for retaining attorneys are hourly, retainer, task based, contingent fee or mixed-contingent. An attorney’s ‘out-of-pocket’ expenses must be paid in addition to the attorney’s fee. These expenses can be minimal or very large. Examples of large expenses include expert fees, transcript fees and/or copying fees. The client must determine whether the attorney will advance these expenses or require the client to pay as they go. Most attorneys will require the client to pay as they go. This method not only avoids having the attorney advance the funds, it makes the client keenly aware of the expenses.

In an hourly fee arrangement the attorney is paid at an hourly rate for the time spent working on the case. The client should be provided with detailed bills showing how the attorney spent the time. Advantages of an hourly fee arrangement include: the client determines the level of effort invested and, if a case is resolved quickly, the client may pay a much lower attorney fee than the client would have been paid if the Attorney had to be paid thirty percent or more of the recovery (as would happen with a contingent fee arrangement). The disadvantage of an hourly fee arrangement is that budgeting may be more difficult and the client bears the entire risk of losing the case. If the case is lost, the client gets no recovery and must still pay the attorney fees and disbursements.

Retainer agreements provide an annual fee for a group of specified services. Retainer agreements provide ease in budgeting. With a retainer agreement, the attorney assumes the risk that the effort demanded by the Association will be greater than the retainer quoted. Because of this almost open ended risk; retainer agreements may include a ‘risk premium’. This would be a cushion between what the attorney thinks it will actually cost in terms of time to complete the tasks versus a somewhat higher retainer bid figure. Association’s that throw off other legal work (i.e. litigation, collections etc.) may be able to negotiate a lower retainer without a risk premium if the other legal work is given to the retainer attorney. Association’s seeking to avoid paying a ‘risk premium’ and mature associations who wish to closely direct attorney effort generally choose an hourly fee agreement.

With a task based arrangement, the attorney has a fixed fee schedule for set tasks or a case. For example, a certain charge for preparation of the complaint, another charge for preparation of the summons etc. This arrangement is similar to an hourly arrangement but allows the client to monitor and budget expenditures on a per task basis. Where the hourly rate structure places the risk of attorney inefficiency on the client, the fixed fee structure places inefficiency risk on the attorney.

In a contingent arrangement, the attorney is not paid unless the attorney obtains a recovery. The advantage of this is that the client does not have to pay fees up front, other than expenses. The client avoids ‘throwing good money after bad’ and the risk of losing the case is shared with the attorney. Disadvantages of this type of arrangement are that the attorney may receive a wind fall – if a case settles and is paid just after being turned over to the attorney, the attorney is still entitled to the agreed upon percentage of the recovery. Further, if the attorney does not see a prospect of significant recovery, the attorney may not pursue the matter as aggressively as the client may like.

With a hybrid or mixed-contingency fee structure (used in litigation), the attorney may work at a significantly reduced hourly rate in exchange for the chance of recovering a percentage of any award. This arrangement distributes the risk of loss between the client and the attorney and provides incentive for efficiency and for a positive result between the client and the attorney.

Regardless of the fee relationship, in the end, the client-attorney relationship should be viewed as a continuing one that may have to be modified over the course of the representation. This will depend on various variables such as the amount in controversy, how complicated or routine the work is and how much money the client has to spend on attorney fees.

In the past, many Associations have retained counsel on an annual ‘retainer’ basis because of ease in budgeting. However, because of the substantial demands of today’s community associations, many law firms and associations are moving from retainer agreements to hourly or task based agreements.

Show Me The Money – Collecting From Debtors

Posted on Author By Francis J. McGovern, Jr., Esquire

Chances are your Association doesn’t have spare money lying around.  Chances are your Association has five or more “regular debtors” – the ones who are on the arrearage list year-in and year-out.  Chances are that, since the recent recession, 10% of your budget and/or 10% of your homes are in arrears. Chances also are that some debtors have abandoned their units and the Board has had to deal with frozen pipes, mold, vandalism or all three.

Our job is to get non-payers out, get vacant units occupied and get cash flowing.  We do this in one or more of the following ways.  Unless you want to increase the bad debt expense line item in your budget year after year, you should be pursuing one or more of these methods:

  • Payment Plans/Settlement Agreements.
  • Amnesty Programs.
  • Membership Privilege Suspension (Pools and Parking Too!)
  • Money Judgment Lawsuits.
  • Bank Account Levies.
  • Wage Executions.
  • Rent Levies.
  • Lien Filing.
  • Foreclosure Lawsuits.
  • Receivers in Aid of Execution.
  • Rent Receivership.
  • Rent Sharing Agreements.
  • Mortgagee In Possession Lawsuits.
  • Quit Claim Deeds.
  • Sheriff’s Sales Based on Foreclosure or Money Judgment Suits.

We give presentations, throughout New Jersey, on various collection techniques, including those listed above.  Please contact us if you would like to schedule a free collection presentation for your New Jersey Home Owners Association, Condominium Association or Co-Op.

Lipstick On A Pig

Posted on Author By Francis J. McGovern, Jr., Esquire

Putting lipstick on a pig makes the animal no less a pig.  Cladding the lobby in marble and installing fancy fixtures makes an old building no younger.  Converting old buildings, especially high rise buildings, to condominiums raises unique due diligence, developer-transition, construction defect, financing and litigation issues.  Although the refinished lobby may look great there is much more there than meets the eye.

What due diligence process has the converting developer/sponsor gone through in acquiring the building?  Has the unit owner-controlled board obtained the developer/sponsor’s due diligence documentation?  Was there/is there a fuel storage tank on the property?  Was there/is there asbestos on the property?  Was there/is there lead paint on the property?

What about the water supply – where does it come from?  Is there a water tank on the property?  Is the water supply plumbing system serviceable?  What about sanitary plumbing?  What about airshafts and other conduit?  Has the elevator been maintained, renovated or replaced?  What about the fire suppression and fire/smoke alarm systems?  How old is the roof?  What is the roof made of?

What’s under that fancy new façade and how long will the fancy new façade last?  Is there a parking deck?  Does the parking deck comport with what was described in the public offering statement?  Is the building subject to other contracts – billboards, cell phone towers, laundry rooms?  What are their terms?  Who gets the money?  Has there been any “pre-payment” to the developer/sponsor?

How old are the windows? Who owns the windows?  If the unit owners own the windows, is the Association being stuck with a water infiltration problem anyway?  How old is the HVAC equipment?  Are there detailed maintenance records?  How old is the boiler system?  What about the electrical system?

Is the Association inheriting a staff such as maintenance employees, managers, black seal building engineers etc.?  Do any of these employees live on site?  Are there employee leases in place?  Are there employment agreements in place?  Are the employees unionized?  Are the staff members adequately experienced and trained?  Are they loyal to the association rather than the developer?

The questions go on and on.  The point is that, although purchasers may be dazzled by cosmetic enhancements, unit-owner board members must not be.  Especially in the condominium conversion context, the unit-owner board members must hire the right professionals to evaluate the Associations position from the physical to the financial to the personnel standpoints.  We assist unit owner board members in forming the professional teams necessary to evaluate the Association’s position and, where necessary, we litigate on behalf of Associations to compel the developer/sponsor to make things right.

Crime Pays

Posted on Author By Francis J. McGovern, Jr., Esquire

Crime pays and crime in community, condominium and co-op associations can pay handsomely – hundreds of thousands of dollars, if not more.  Board members must take steps to minimize the opportunity to steal.   The ultimate responsibility for safekeeping an Association’s money lies with the board members; not a single board member, not the manager, the Attorney General, the County Prosecutor or even the Association’s auditor.

As a board member, ask yourself:  “Who has check signing authority?”, “Who opens the bank statements?”, “Is there a credit card?”, “Who reviews the credit card statement?”, “When was the last time we reviewed our financial controls with the auditor?”, “What does our crime policy and related insurance cover?” etc.

Crime happens in community, condominium and co-op associations, there is no bulletproof solution but board members must do what they can to prevent it.

Legislation to Benefit Age Restricted Communities

Posted on Author By Francis J. McGovern, Jr., Esquire

There is a pending bill that may provide much needed assistance for age restricted communities that are suffering with abandoned units in their communities. The bill requires mortgage companies to maintain vacant, age-restricted units during its foreclosure process and also requires the mortgage companies to pay the ongoing monthly assessments to the Association throughout the foreclosure process.

The bill was introduced into the Assembly on June 6, 2013 as A4169 and is sponsored by Assemblyman Gregory P. McGuckin and Assemblyman David W. Wolfe. An identical bill was introduced into the Senate on May 30, 2013 and is sponsored by Senator James W. Holzapfel.

Pursuant to the bill, all mortgage companies that are foreclosing on any residential unit will be required to notify the municipality in which the unit is located within ten days of filing a mortgage foreclosure complaint (or within thirty days if the mortgage company already instituted a foreclosure action). The notice must provide the municipality with the contact information for the mortgage company’’ s representative that is responsible for receiving complaints of property maintenance and code violations.

If the unit owner abandons the unit that is being foreclosed upon and the property is found to be a nuisance or in violation of any state or local code, then the local public officer may notify the mortgage company and the mortgage company shall then be liable to abate the nuisance or correct the violation. If the mortgage company does not correct the nuisance or violation, then the municipality may do so and charge back the mortgage company for the costs incurred.

If the abandoned unit is located within an age-restricted community, then the mortgage company will be liable to pay the ongoing monthly assessments to the Association as well as maintain the property while the unit is in foreclosure. The mortgage company will be held jointly and severally liable along with the owner to pay the ongoing monthly assessments to the Association. Therefore, in the event that the monthly assessments are not paid, the Association will be able to pursue the mortgage company as well as the owner in a collection action. As a result, this bill will greatly assist age restricted communities with collecting assessments on abandoned units. However, this bill has only recently been introduced and we will continue to monitor its progress.

How Is Your Association’s Immune System?

Posted on Author By Francis J. McGovern, Jr., Esquire

Around this time each year many people get vaccinated against the common but debilitating illness, the flu. If you ask these people why they get their annual flu shot, they may respond with that common expression, “an ounce of prevention is worth a pound of cure.” Since prevention is at the forefront of so many people’s minds this time of year it is also a good time to determine whether your association is properly immunized against a common but debilitating condition affecting so many communities, the slip-and-fall or trip-and-fall personal injury lawsuit.

One of the most powerful tools an association can use to protect itself against these claims is the tort immunity afforded to community associations pursuant to N.J.S.A. 2A:62A-12. et seq. According to these statutes, as long as the necessary language is included within the Association’s bylaws, the association will not be liable in any personal injury lawsuit brought by a unit owner for bodily injury occurring on the association’s property. See, N.J.S.A. 2A:62A-13(a). However, the immunity afforded under these statutes will not apply if the association’s willful, wanton or grossly negligent conduct causes the unit owner’s injury. See, N.J.S.A. 2A:62A-13(b).

The power of this statutory immunity to insulate an association from liability was recognized by our State Judiciary as recently as September 25, 2013. In the Unpublished Decision in Marion Costa v. Shadow Lake Village Condominium Association, Inc., et al., 2013 N.J. Super. Unpub. LEXIS 2342 (App. Div. 2013) the Appellate Division of the New Jersey Superior Court affirmed the trial court’s decision to dismiss a unit owner’s claims against the association, and the association’s property manager, for injuries arising out of a slip-and-fall on the common property, because a tort immunity provision was included within that association’s bylaws. In Shadow Lake, both the Appellate Division and the trial court concluded that the circumstances leading up to the unit owner’s injuries may, at worst, be characterized as simple negligence. Fortunately for the association in Shadow Lake, the language within the association’s bylaws rendered it immune to such claims.

Although the tort immunity afforded by N.J.S.A. 2A:62A-12. et seq, is a powerful tool against personal injury claims, the overwhelming majority of bylaws implemented by developers during original construction do not include the language that is necessary to secure this protection. If that is the case in your community, tort immunity is only one simple amendment away. According to N.J.S.A. 2A:62A-14(a) tort immunity can be added to any set of bylaws by an amendment approved by a two-thirds vote of the association’s membership. Once adopted, the immunity will then apply to any actions for injuries sustained after the date the new bylaw provision becomes operative. See, N.J.S.A. 2A:62A-14(s). Please give us a call if you would like to discuss implementing tort immunity in your association.

New Jersey – Manager Licensing Bill

Posted on Author By Francis J. McGovern, Jr., Esquire

Today, January 9th 2014, the New Jersey State Senate passed the “Manager Licensing Bill”.

The bill will now go to the Governor for his signature.

The bill is available for viewing and downloading here.

This bill was first introduced in 2012 and has been working its way through the system.

We will keep you updated on any progress with regard to the actual signing of the bill by the Governor.

 

 

History of the bill:

3/8/2012 Introduced, Referred to Assembly Regulated Professions Committee
6/18/2012 Reported out of Assembly Comm. with Amendments, 2nd Reading
6/25/2012 Passed by the Assembly (51-26-1)
6/28/2012 Received in the Senate, Referred to Senate Commerce Committee
6/13/2013 Reported from Senate Committee with Amendments, 2nd Reading
6/13/2013 Referred to Senate Budget and Appropriations Committee
12/5/2013 Reported from Senate Committee, 2nd Reading
1/9/2014 Substituted for S2578 (1R)
1/9/2014 Passed by the Senate (29-7)
1/9/2014 Received in the Assembly, 2nd Reading on Concurrence

Bill
Manager Licensing Bill

Health Care Providers – Compliance Issues

Posted on Author By Francis J. McGovern, Jr., Esquire

Health care providers are increasingly scrutinized for compliance with health care and insurance laws.  In light of this, health care providers must be proactive in creating and implementing a compliance program.

A compliance program is a framework, voluntarily implemented by the health care provider, to help insure compliance with laws, reveal breaches of law and provide a mechanism for addressing any improper conduct uncovered.  Through increased budgets and a large array of enforcement tools, State and Federal agencies as well as third party payers have pursued enforcement of health care and insurance laws with increased tenacity.  The increased enforcement budgets result from Governments’ acknowledgment of the tremendous amount of money spent on Health Care (especially Medicare and Medicaid), a perception that past spending practices have made the health care field fertile ground for fraud and a recognition that health care fraud negatively impacts the quality of care.

Though health care providers cannot do much about the increased funds spent on enforcement, health care providers should carefully note the consequences of a failure to comply with applicable laws.  These consequences include: loss of professional licenses, criminal conviction with jail time, substantial fines, ineligibility to receive payments from government programs (i.e. Medicare), disgorgement of payments, fines, interest, attorneys fees and punitive damages (i.e. double and treble damages).

In light of the well funded and aggressive compliance initiatives and the onerous nature of the consequences for failure to comply, a provider compliance program is a must.  Not only will a health care compliance program help ensure compliance with law, reveal problems and provide a mechanism for addressing improper conduct, if a compliance program is in place, it may also avoid implementation of a more burdensome governmentally imposed program.  Further, if a compliance program is in place and a violation is found the penalty may be substantially less than the penalty that would have otherwise been imposed.

The Department of Health, Office of the Inspector General (‘OIG’) promotes voluntary compliance programs for health care providers.  The OIG maintains a website at http://www.dhhs.gov/progorg/oig which provides information on compliance with health care laws and, though much of this information relates to hospitals and other entities rather than providers, there is substantial information for providers.  For example, a fraud alert addressing physician certification for home health services.

The OIG and others have used the United States Sentencing Commission Guidelines as a reference point for the minimum requirements of a compliance program.  The compliance program should include the following:

  1. The development and distribution of written standards of conduct as well as written policies and procedures that promote the health care provider’s commitment to compliance and that address specific areas of potential fraud such as self referral, unbundling of services, up coding and improper claims submission.
  2. The designation of a compliance officer charged with operating and monitoring the compliance program.
  3. The development and implementation of regular, effective education and training programs for all relevant employees.
  4. The maintenance of a process, such as a hotline, to receive complaints and to protect whisleblowers from retaliation.
  5. The development of a system to respond to allegations of improper/illegal activities and the enforcement of appropriate discipline with respect to employees who have violated compliance policies or requirements of federal, state or private health care programs.
  6. The use of audits and/or other evaluation techniques to monitor compliance and assist in the reduction of identified problem areas.
  7. The investigation and remediation of problems and the development of program modifications to address future offenses.

The scope of each portion of the compliance program will depend upon the size and complexity of the health care provider.  The larger and more complex the provider, the broader the scope and the more formal the development and implementation.

In March of 1999 the Office of Inspector General and the Health Care Compliance Association co-sponsored a government-industry roundtable discussion so that the Health Care compliance industry could inform the OIG of issues surrounding the implementation and maintenance of compliance programs.  This meeting was also an opportunity for the OIG to present policy objectives underlying compliance program guidelines.  The report on this roundtable meeting, which is posted on the OIG’s website, highlighted some of the comments and suggestions raised.  These are summarized below:

Developing a Compliance Program

  1. Providers were concerned that the OIG’s compliance guidance appears to focus on compliance to the exclusion of medical ethics and this may discourage some providers from implementing a compliance program.  Further, some providers expressed concern over the cost of compliance programs.
  2. It was noted that emphasis on federal health care programs, especially Medicare, detracted from the need to scrutinize the same issues when dealing with private payees.  Risk areas are generally identifiable through OIG information including fraud alerts, OIG work plans and fraud settlements.  However, self analysis should be a source of risk identification and prioritization especially if there has been a particular history of violation
  3. Smaller providers which may not have a designated compliance committee, can form a task force to address compliance concerns as they arise.
  4. Close collaboration between personnel and compliance personnel is required especially in areas of training, hiring, discipline, establishment of a hotline and complaint follow-up.
  5. Conflicts for compliance officers might be minimized by establishing a strong and active compliance steering  committee on assigning compliance to a well respected manager.
  6. Compliance officers can be more effective if they have an open door policy and are pro-active rather than reactive.
  7. Compliance efforts may be outsourced but cost in an issue, especially when many providers found the concerns raised were often personnel rather than compliance issues.
  8. Compliance training in the areas of billing and coding was perceived as imperative.

Evaluating Compliance Program Effectiveness

  1. Continuous Review is necessary.  Further three types of audits were recommended:

a) Baseline audits (initial audits)
b) Proactive audits based on identified risk areas (i.e. OIG fraud alerts etc.).
c) Issue based audits (where a provider knows there is a problem and is attempting to determine the depth of the problem.)

Thorough interviewing of potential auditors was suggested and an annual forensic audit of major risk areas was recommended.  Compliance personnel noted that audits had a chilling effect on individual physicians and some compliance auditors noted physician downcoding and have directed attention to proper documentation rather than fraud and abuse concerns.

In demonstrating effectiveness of the compliance plan, documentation is very important.  The following must be documented: audit results, logs of hotline calls and their resolution, corrective action plans, due diligence efforts regarding business transactions, disciplinary action and modification of plans and procedures.  Further documentation of billing irregularities and disclosures of refunds of overpayments was encouraged.  Documentation of employee training was also strongly endorsed.  Additionally providers should document all communications with the Health Care Financing Administration.  Even with thorough documentation however, the OIG evaluates the effectiveness of a compliance program based on how it works in day to day practice, not merely what it is on paper.

Internal investigation and self disclosure requires that the provider ask itself the following questions:

—        What is the origin of the issue being investigated

—        When did the issue under investigation originate

—        How far back should an investigation go  (i.e. inquiry should be expanded if the results of an initial review suggest a broader problem.)

The following may be used by the compliance officer in prioritizing issues:

—        Has the OIG required the compliance officer to focus on certain issues

—        Does the problem pertain to a discontinued practice or a current practice with prospective exposure

—        Can deficient billing be suspended or ceased until a review can be completed

—        Can the issue under investigation have a significant impact on providers Medicare cost reports or interim payments

—        Does an issue present evidence of ongoing misconduct that may violate criminal, civil or administrative law and does it require immediate disclosure to a government authority

—        Has the provider established a standard of time required to address incoming billing concerns.

The attorney-client privilege and the attorney work product doctrine should also be properly used to withhold results of an investigation if appropriate but abuse of these doctrines may result in their waiver.

Upon discovery of billing mistakes, the provider should return the funds to the affected provider and add the issue to its list of topics to be reviewed during internal monitoring. The obligation to disclose to the government may depend on the size of the error and whether the error represents a pattern.  For example, a small isolated error may merely require return of an improper payment while a large overpayment or a pattern of over payment may require proceeding through the OIG’s provider self disclosure protocol.

In sum, governmental agencies are looking for conscientious and consistent implementation of comprehensive compliance programs combined with prompt, effective remedial action if problems are discovered.  Providers should consult with their counsel and auditor regarding design and implementation of a compliance program and/or addressing any known problems.  If a provider does not have an attorney or accountant/consultant that is familiar with compliance issues, this does not mean that the provider must replace its counsel or accountant.  Many practitioners who focus on compliance programs will partner with the current counsel and/or accountant as part of the compliance initiative.

Sources:  OIG ‘Building a Partnership for Effective Compliance’ – A report on Government -Industry Roundtable, April 2, 1999 available at http://www.dhhs.gov/progorg/oig/modcomp/roundtable.htm.  Health Care Fraud and Abuse, New Jersey Institute for Legal Education, New Brunswick, N.J. pub # S526.98 Bograd, Bonney, DiPasquale, Frey, McFadden, Kearney, Levy, Nittoly & Zoubek 1998; 1999 Health and Hospital Law Symposium, New Jersey Institute for Continuing Legal Education, New Brunswick, N.J. pub # S025a.99 Schaff, Benesch, Dobro, Faulk, Friedman & Lubic 1999.

Francis J. McGovern, Jr. is a 1988 graduate of Rutgers School of Business and a 1992 graduate of Rutgers Law – Camden.  Mr. McGovern has his practice, McGovern Legal Services, LLC, in New Brunswick where his practice focuses on corporate affairs and creditors’ rights.

Business Use Of Home Or Lot

Posted on Author By Francis J. McGovern, Jr., Esquire

Absolute Standard Versus Association Impact

May a Home and/or Unit within an Association be used for a business purpose and, if not, what would constitute a prohibited business use. Many Associations’ Master Deeds or Declarations contain provisions that purport to prohibit Association residents from conducting any business in their homes.

Twenty years ago conducting business at home was not as hot an issue as it is now.  Further, disputes regarding conducting business out of the home often involved activities that were easily identifiable as businesses for example, music schools and dentist’s offices.  However, the proliferation of personal computers, modems and fax machines combined with early retirements, corporate downsizing and alternative working arrangements for women and men with children increase the probability that residents will attempt to conduct some sort of business out of their homes.

As the following case examples demonstrate, covenants restricting use of units and/or homes to residential use are upheld almost without exception.

In The Four Hundred Condominium Association v. Gatto the court held that a restrictive covenant prohibited doctors from maintaining offices in certain areas of a condominium complex; in Diefenthal v. Longue Vue Management Corporation the court held that restrictive covenants banning commercial activities would be enforced although some commercial activities were acquiesced to by the adjacent property owners; in Greater Middleton Association v. Homes Lumber Co. the court held that a Covenant included in the majority of the deeds to lots in a subdivision over a period of forty-five years restricted the use of the lots to “residential purposes exclusively”; in Walton v. Carnigan the court found that when the restrictive covenant language is clear and unambiguous it will be enforced; therefore, operation of a day care center violated the restriction on commercial activity; in Fick v. Weedon the court found that Deed restrictions were not ambiguous in restricting use of the property to a private dwelling for one family, therefore, use of the property as a bed and breakfast violated the restriction and was enjoined; in Fox v. Smidt the court found that phrase “residential lot” in a subdivision indenture precluded the use of a building for commercial purposes, even though the building sought to be used as a warehouse had the exterior appearance of a residence; in Metzner v. Wojdyla the court found that a “bright line” rule should be applied to prohibit any business activity in a subdivision subject to a restrictive covenant providing that the property may be used for residential purposes only; in Gerber v. Hamilton the court found that enforcement of a restrictive covenant regarding home business depends on whether the residential character of subdivision is compromised.  In Gerber a beauty salon was prohibited; in Robbins v. Walter  the court found that the use of a residence as a bed and breakfast violated a covenant restricting use of lots to noncommercial use.

The above decisions do not involve decisions by New Jersey Courts.  However, New Jersey has long recognized and upheld restrictions limiting use to residential purposes.  This is demonstrated by the 1924 case of Dottsloff v. Hockstetter where the limitation of use to residential purposes was upheld and a corner grocery store was prohibited.

Though the above cases upheld restrictions against conducting business activity, they did not provide a framework for determining what constituted use of property for a non-residential or business purposes.  Instead, they applied a “we’ll know it when we see it” analysis.  However, two of the above courts did supply some guidance.  In the Metzner case a “bright line” rule was applied to prohibit any business activity in a subdivision subject to a restrictive covenant providing that property may be used for residential purposes only.  The Metzner Court tackled the analysis by evaluating the home owner’s actions.  For example, a major factor considered in determining whether the defendants were “conducting a business” was whether they accepted money for services. Since accepting money for services constituted “conducting a business” the home owners’ activity was banned.

However, through a more subtle analysis, largely arising because of specific governing document language, the Gerber Court analyzed restricted action by reviewing the impact the home owners’ activity had on the community.  Here, factors that the Court found should be considered when determining whether a resident was conducting a professional or prohibited commercial activity included:

  1. Whether the residential character of the subdivision is compromised
  2. Whether client visitation is required
  3. Whether the activity produced additional traffic, noise and activity

The way many documents are written, it appears that Courts could apply a “bright line” test and hold that any activity that is not strictly residential is prohibited as in the Metzner case.  This would eliminate the home/office fax/computer arrangement, even if it had no impact on the community.

However, New Jersey courts have read a reasonableness requirement into restrictive covenants and their enforcement.  See, Billig v. Buckingham Towers Condom Association I, Inc., 287 N.J.Super. 551 (1996).  It is likely that application of this “reasonableness factor” will cause courts to evaluate “doing business,” not by a “bright line” test but by more of a case by case “community impact” test using factors such as the three listed above.  This is even more likely in light of the growth of the internet, fax machines and computers.  Further, this “impact” standard frees the Association and its manager from the virtually impossible task of enforcing a “bright line” standard.  Rather than having to ferret out every home/office, the Association will likely only have to intervene where a community impact is created.

In conclusion, in enforcing ‘residential purposes only’ restrictions, board members should be aware that Courts may evaluate ‘conducting business’ by varied standards.  Until a clear decision is made regarding ‘conducting business’, associations must weigh the value of enforcing a ‘bright line’ standard for ‘conducting business’ and risk losing an action to enjoin the business activity against the value of enforcing a ‘community impact’ standard and risk being sued for failing to enforce the provisions of the governing documents.  In light of the technological progress and societal changes noted above, it is likely that courts will turn to a ‘community impact’ standard to determine what activities are prohibited in communities that restrict activity to residential purposes.

Homeowners Must Install Carbon Monoxide Detectors

Posted on Author By Francis J. McGovern, Jr., Esquire

In the fall of 1994, international tennis star Vitas Gerulaitis died while staying in the guest house of a Long Island Estate.  His death was caused by carbon monoxide which came from a faulty heater.  Some sources estimate that carbon monoxide is the number one cause of death by poisoning in the United States.  Further estimates suggest that in excess of one thousand people per year die from exposure to high indoor concentrations of carbon monoxide.  In addition, even if carbon monoxide levels are not lethal, headaches, nausea, fatigue, dizziness, brain damage and aggravation of heart problems may occur.

Carbon monoxide is a toxic gas that is produced when fuel is burned with incomplete combustion.  Home fuel burning appliances (for example: furnaces, fire places, hot water heaters, stoves, generators etc.) produce carbon monoxide.  Carbon Monoxide is especially dangerous because it cannot be smelled, tasted or seen.  The United States Consumer Product Safety Commission suggests that the best line of defense against Carbon Monoxide is to have your home fuel burning appliances inspected each year, preferably before the start of the home heating season, to make sure these appliances are in good working order.

At the time of Vitas Gerulaitis’ death, effective, low cost Carbon Monoxide detectors/alarms were not available.  Since then, relatively inexpensive Carbon Monoxide detectors/alarms have become widely available (check hardware and home supply stores).  In light of this, the New Jersey Legislature has mandated the installation of Carbon Monoxide detectors. The statute provides that every unit of dwelling space in a multiple dwelling (a condominium etc.) shall be equipped with one or more carbon monoxide sensor devices that bear the label of a nationally recognized testing laboratory and have been tested and listed as complying with the most recent Underwriters Laboratories standard 2034, or its equivalent.  This statute became effective February 8, 1999 and applies to Condominiums and other multiple dwellings.  The Department of Community Affairs Commissioner has released a regulation which specifies that single station carbon monoxide alarms shall be installed and maintained in full operating condition in the immediate vicinity of each sleeping area in any room or dwelling unit in a building that contains a fuel-burning appliance or has an attached garage.  There are some very limited exceptions to this however, most often the exceptions do not apply.

The required carbon monoxide alarms must be manufactured, listed and labeled in accordance with UL 2034 and must be installed in accordance with the requirements of the regulation and NFPA 720.  Installation and operation instructions should be provided by the manufacturer.  Carbon monoxide alarms must be battery-operated, hard-wired or of the plug-in type.

Department of Community Affairs’ inspections will check units for compliance with the carbon monoxide regulations and will likely enforce this regulation by assessing fines against those who do not comply.

1 2 3 4 5 6 7