Along with associations’ ability to sell units by foreclosing on liens, they can also sell units to satisfy money judgments – if they can prove the owner has no other personal assets.  A New Jersey court rule and statute both permit a judgment creditor to levy upon a debtor’s real property if the creditor cannot find assets to satisfy the judgment elsewhere.  In other words, if the association sends an information subpoena to the debtor, performs asset searches and sends the Sheriff to the debtor’s property to inventory personal property, and there are no assets found that can satisfy the judgment, the court rules and statute allow the association to levy the debtor’s real property and sell it at Sheriff’s sale. At Sheriff’s sale, either a third party will purchase the property or ownership will revert back to the association and the association can rent the property.

This process was recently confirmed by the Appellate Division.  On behalf of an association, this firm filed a motion to permit sale since no personal assets could be found.  The motion judge denied the motion because there was an outstanding mortgage on the property and the judge felt that it would not be fair for the association to sell or rent the property and collect its judgment while the mortgagee was foreclosing.  This firm appealed the motion judge’s decision and argued the matter before the Appellate Division.  The Appellate Division reversed the motion judge’s decision in the unpublished opinion, Birch Glen Condominium Association, Inc. v. Boahene.  We successfully argued that the outstanding mortgage on the property is irrelevant to the association’s motion.  The Appellate Division agreed with this firm’s position that the motion judge erred by failing to base his decision on whether the association had taken adequate steps to try to satisfy the judgment out of personal property.  The case was remanded back to the motion judge with instructions that the judge determine whether the association made reasonable efforts to located the defendants’ assets to satisfy its judgment.

New Jersey, along with many other states, has adopted a Smoke-Free Air Act (the “Act”) that bans smoking tobacco or electronic cigarettes in the workplace and in indoor public places. Most people are aware that this ban extends to restaurants and stores, but the definition of “indoor public place” also includes an “apartment building lobby or other public area in an otherwise private building.” (N.J.S.A. 26:3D-57). Most agree that this definition includes common areas in condominium associations and cooperatives, but banning smoking in common areas is not where the challenge of creating a smoke-free community lies.

Even though a board may ban smoking in common areas, such rules do nothing to stop secondhand smoke in units from filtering into a non-smoker’s unit. This can become a critical quality of life and health issue for the non-smoker next door. According to the Centers for Disease Control and Prevention (CDC), “There is no risk-free level of exposure to secondhand smoke.”[i] The CDC goes on to note that research has shown that exposure to secondhand smoke increases the risk of heart disease, lung cancer, Sudden Infant Death Syndrome (SIDS) and numerous other health risks, especially for children. In other words, secondhand smoke is more than just a nuisance.

The only way to completely eliminate secondhand smoke from homeowners’ living spaces in a condominium or cooperative association is to ban smoking within the units themselves.

Banning Smoking Within Units.

Although, there are no published cases in New Jersey on the enforceability of banning smoking within condominium or cooperative units, case law around the country suggests that the trend is toward upholding these types of smoking restrictions. However, since few boards have the power to establish these rules on their own, the most effective way to enact a rule that bans smoking within units is to amend the association’s bylaws in a condo association or the proprietary lease in a cooperative.

Since the amendment process requires a membership vote, there is an additional benefit – greater acceptance by homeowners, even those that did not vote for the amendment. When a person buys into a condominium or cooperative association, they know – or should know – that the membership is empowered to change the rules. For most people, a change made through a vote of the membership is easier to accept than the vote of a few board members.

Enforcement of Smoking Bans

The biggest obstacle to creating a smoke-free community is enforcing a smoking ban. While voluntary compliance would be a nice fairytale ending to the implementation of such a rule, it is unlikely. Also, boards should remember that the real goal in passing a smoking ban is not to run people’s lives and turn their homes into boot camps. The goal is to protect residents and owners who are concerned about the health effects of secondhand smoke. Focusing on this “goal” is important, as it should guide an association’s enforcement efforts and help them to steer clear of witch hunts for smokers.

Before issuing a violation notice for smoking, there needs to be an eyewitness or “nosewitness” to the smoking. This person should be required to file a complaint that is submitted to the association’s ADR process. If ADR and fines do not result in compliance, an association may choose to sue a smoker.

Although lawsuits are often time consuming and expensive, a case to enforce a smoking ban will likely be a good candidate for a relatively quick summary judgment motion, unless the defendant alleges that s/he does not smoke in their unit.

The best way to enforce any rule is to encourage voluntary compliance. Providing convenient locations for smokers outside of residential building(s) is one option that can help encourage compliance and reduce litter from discarded cigarette butts. These locations could range from a simple smoker’s stand, to actual covered areas away from doors and windows of residential buildings. Designating certain areas for smoking also shows the membership that the association is concerned about all members’ ability to use and enjoy their homes, as long as it does not endanger the health, safety or welfare of other owners or residents.

 

In Etelson v. Shore Club Urban Renewal LLC, a Hudson County jury found that the developer, the LeFrak Organization, Inc., Newport Associates Development Company and James LeFrak violated the Consumer Fraud Act and Planned Real Estate Development Full Disclosure Act (“PREDFA”) in their advertising and marketing of a luxury high rise riverfront condominium in Jersey City (Shore Complex, North and South Towers). The jury found that the developer and its marketing materials misled purchasers of condominium units by advertising breathtaking and panoramic views of the water and Manhattan skyline when the developer knew those views would be blocked in the near future.

The jury relied upon several key facts in order to find the Developer liable for consumer fraud.  The developer’s marketing materials included a painting of the Shore Complex showing a smaller 11- 12 story building to be constructed across the street and northeast, between the Shore Complex and the Hudson River.  The developer’s sales brochure and website did not show any buildings located between the shore Complex and the Hudson River. There were some drawings that showed a smaller building to be constructed in the future.  In addition, to the Developer’s marketing materials, the developer’s sales staff told potential purchasers that a smaller building (12-15 story) might be constructed on the nearby parcel. All the while the Developer was constructing a larger building that would block the view of the river and the Manhattan skyline.

The unit owners testified that they purchased these units for the views of the river and the Manhattan skyline. The unit owners also testified that they would not have purchased the units if they were informed that a taller building was going to be constructed across the street blocking their views.

The jury awarded the unit owners $1,253,420 in damages representing the reduction in value of their units without the views. Because the jury found that the developer violated the Consumer Fraud Act, the plaintiffs were awarded treble damages, plus their costs and attorneys fees for a total damage award of $4,817,638.12.  The developer appealed and the Appellate Division affirmed the jury verdict and found that it was supported by the evidence.

The evidence at trial showed that while actively marketing the Shore Complex, the developer had submitted plans to the City planning board seeking approval for a 31 story rental apartment building tower to be constructed which would block the Shore Complex unit owners’ views of the river and the Manhattan skyline. The developer did not change its marketing material and did not disclose this to potential purchasers. Instead the developer continued to market the units by advertising spectacular views knowing that they would not last for long.

The jury found that the developer had misrepresented the views and failed to disclose their plan to develop the taller 31 story tower that would block the views. None of the developer’s sales agents told prospective purchasers that a taller building would be constructed between the Shore Complex and the Hudson River.  The Developer’s sales staff was not told about the plans to construct a 31 story tower.  They assured potential purchasers that the building to be constructed in the future would not block views for anyone residing on the 15th floor or higher.  Interestingly, the Developer’s sales staff testified that if they had known of plans to construct a 31 story tower between the Shore Complex and the river, they would have disclosed this to potential purchasers.

At trial, the developer argued that it did not mislead the purchasers because there were disclaimers on the marketing material and in the Public Offering Statement. The Appellate Court noted that these disclaimers were not dispositive on the issue of misrepresentation and indicated that the developer would still be liable if the jury found that there were misrepresentations or omissions that induced a purchaser to buy a unit.

This case is significant to Associations who are in the process of transition, the transfer of control from the developer to the Association and the identification and resolution of construction defects and financial defects.  The court affirmed that a developer can be liable to individuals for consumer fraud in the marketing and advertising of the condominium. The court also noted the significance of marketing materials, advertisements and conversations that were not part of the sales contract or the POS.

Do they really mean “golf carts” or are they talking about “low speed vehicles” a/k/a “neighborhood electric vehicles”.  Golf carts in the strict sense are “off road vehicles”, that being said, LSVs and NEVs are not.  LSVs and NEVs are typically limited to 25 or 30 miles per hour and are subject to National Highway Traffic Safety Administration regulations as well as to certain Federal Motor Vehicle Safety Standards.  We represent many active adult communities and although we have not had to prepare such a resolution yet (some just allow golf carts), we encourage our age restricted communities to seriously consider golf cart/LSV/NEV resolutions.  Not only are these vehicles, if properly regulated, convenient, as residents “age in place” there is a strong probability that such vehicles will permit residents enhanced mobility and/or be required as “reasonable accommodations” for certain handicapped people – we have already seen such cases come out of Florida courts

It happens every winter. The Association is hit with yet another bad snowstorm. The snow removal crew arrives early and is attempting to clear the snow faster than it falls. Meanwhile a resident has decided to take his daily constitutional around the Association. The resident slips at the end of his driveway on a patch of ice and breaks his wrist during the fall. He sues the Association and is awarded significant damages. In addition to a snow assessment to cover the unpredicted snowfall, owners can now expect increased insurance premiums due to the slip-and-fall lawsuit.

This situation occurs frequently within associations.  However, an association can protect itself from this expense by passing a Tort Immunity Amendment. A Tort Immunity Amendment helps insulate an association from liability in a lawsuit filed by one of its members for a personal injury, such as a slip-and-fall claim.  Without this amendment in place, if an owner slips and falls on the association’s common property, the association often times is held liable for damages. This expense is then passed on to all owners through increased insurance premiums.

With a Tort Immunity Amendment in place, an owner’s ability to be successful in a lawsuit against the association is limited. It is important to note that this amendment does not grant the association complete immunity to act without the potential for liability.  The association may still be held responsible for any willful, wanton or grossly negligent act or failure to act.

With the winter months quickly approaching, it is imperative to review your association’s governing documents to ensure that the association and its members are protected against personal injury claims that frequently arise during this season and the resulting expenses. If an association does not yet have tort immunity, it can adopt an amendment to its bylaws providing for such immunity. By statue, at least 2/3 of the membership must vote to approve such an amendment.

In these tough economic times, it seems no association is immune to the burden of vacant units. While failure to pay assessments is the most obvious problem, vacant units can introduce a host of other problems from squatters to burst pipes. While there is no quick fix or magic formula to correct the scourge of vacant units, there are steps that every association can take to ease and even eliminate the financial and maintenance burden vacant units can create.

If the association is willing to rent units, often the best option is to contact the owner of a vacant unit to see if they would consider signing a quitclaim deed or a rental agreement. A quitclaim deed transfers ownership of the unit to the association, subject to any mortgage or other liens on the property. A quitclaim deed offers two enormous benefits. First, the association can rent the unit and begin recouping the arrears that have been accumulating. Second, the association can monitor and control the unit and ensure that it does not become a health and safety hazard in the community. A rental agreement provides the association with the authority to rent the unit on behalf of the landlord and collect the rents. It offers many of the same benefits as a quitclaim deed, but without the permanency of actually transferring ownership. In either case, the association should ensure that the unit is in rentable condition – or can be made rentable for a reasonable cost – prior to entering into any agreements.

In New Jersey, a mortgagee who takes possession of a unit is responsible for pay ongoing assessments throughout its possession. If a mortgagee has taken possession of a unit, the association can pursue the mortgagee directly for unpaid assessments. It is a fact sensitive inquiry as to when a mortgagee has taken possession. Whenever it appears that a mortgagee has become involved with a unit, it is best to contact the association’s attorney to determine what options the association may have.

Beyond collections, vacant units also can create nuisances and even health and safety hazards. N.J.S.A. 46:10B-51 requires foreclosing mortgagees to maintain vacant and abandoned properties. While the mortgagee does not have to keep a property in pristine condition, it is responsible to ensure that the property does not become a nuisance or violate any state or local code. If a vacant unit is in disrepair, the association can demand that the mortgagee make the necessary repairs and, if it fails to do so, notify code enforcement who should then force the mortgagee to make necessary repairs and perform necessary maintenance.

Lastly, with the temperature continuing to drop, associations may be forced to take some maintenance and repairs into their own hands. If a vacant property has not been winterized by the mortgagee, every association with attached units should hire a plumber to winterize any vacant units. Pursuant to the Condominium Act, N.J.S.A. 46:8B-15(b), an association has the right to enter a unit during reasonable houses “to perform emergency repairs necessary to prevent damage to common elements or to any other unit or units.” Therefore, the association may step in to winterize properties in order to prevent the extensive damage that can be caused by a burst pipe. The association can also bill back the costs of the repairs to the unit owner. While this may seem like an added cost to the association, the cost of winterization is minimal compared to the costs of repairing the area surrounding a burst pipe, not to mention the inconvenience to the surrounding units. This same logic can be applied to other unit owner responsibilities, like a broken window or door. Keeping vacant units secure is the best way to protect the entire association and to prevent much greater costs down the road.

While vacant units are never welcome, they can be controlled and even become income generating assets if the association is proactive.

It’s that time of year again… when extreme cold can cause pipes to burst in vacant units.  In light of this, it is important that managers gain access into known vacant units to winterize them.  This avoids unnecessary insurance claims and premium increases caused by ruptured water lines.

The Condominium Act provides authority for condominium associations to gain access into a unit for the purposes of protecting the common elements and adjoining units.  The statute, N.J.S.A. § 46:8B-15(b), also permits the condominium association to charge any costs incurred in gaining access and winterizing the unit back to the unit owner.  However, prior to gaining access into the unit, the Association should provide reasonable notice to the unit owner and advise that the unit owner that they will be liable for any costs incurred in gaining access and winterizing the unit.

Further, N.J.S.A. § 45:22A-44(b) authorizes homeowner and townhome association boards to exercise its powers in a way that protects the health, safety and general welfare of the residents of the community.  In addition, each association’s governing documents typically provide additional authority permitting the Association to gain access into units in the event of an emergency.  Between the authority granted  in the association’s governing documents and N.J.S.A. § 45:22A-44(b),  homeowner and townhome associations generally have sufficient authority to gain access into vacant units upon reasonable notice to the owner to winterize them for the purpose of protecting adjoining units and common elements.

So, if there is any indication that a particular unit is vacant and not winterized, then we advise that management or our office send a notice to the owner advising that the Association will gain access to the unit to determine whether it is vacant and whether it has been winterized.  If vacant and not winterized, then the association will winterize the unit and charge the unit owner back any costs incurred.

You hated them as a kid. You wish they were no longer necessary as an adult. But in community living, having some rules is a necessity. Many of these rules are established in the process of creating a condominium, homeowners or cooperative association. To change these initial rules, which are most often found in the declaration, master deed, bylaws or proprietary lease, associations must typically obtain a vote of the membership to amend the governing documents.

However, Boards of Trustees are also empowered with certain rule-making authority. Such rules are best adopted via a board resolution, which must be voted on by the board at an open meeting of the membership – whether any members show up to the meeting, or not. Each association may have unique needs that have to be addressed with unique rules, but almost every association can benefit from implementing certain standard rules and regulations.

Rules that May Reduce Increases in Insurance Premiums

Although there is no direct correlation between these rules and an association’s insurance premiums, when associations implement policies that reduce the likelihood of lawsuits and insurance claims – two important factors in determining insurance premiums – there is a strong chance that their future premium increases will be lower. Some of these rules are:

  1. Adopt a board resolution requiring owners to conduct dryer vent and chimney cleanings and inspections at least every two years. This reduces the risk of lint and soot-related fires – fires that could result in increased insurance premiums.
  2. Adopt a board resolution requiring owners to replace water heaters after a specific number of years. Water heaters are generally expected to have useful life of eight to twelve years. Unfortunately, without a rule requiring timely replacement, many people will wait until their water heater malfunctions before replacing it, and water heater malfunctions frequently result in insurance claims for water damage and increased premiums.
  3. Adopt a board resolution requiring owners to install burst resistant washing machine hoses. Along with failed water heaters, leaking or burst washing machine hoses are probably the top causes of insurance claims for water damage in associations. Stop this problem before it happens.
  4. Pass a Tort Immunity Amendment to the Bylaws. This limits an association’s liability for injuries that occur on the association’s property, but it does require at least a two-thirds vote of the membership. The two-thirds requirement is a minimum set by statute, but if the bylaws that are being amended have a higher amendment threshold, then the higher voting percentage will apply.

Rules that May Increase Revenue

Assessments are the financial lifeblood of associations. Unfortunately, over the past five to six years, delinquencies have increased substantially. Some people just do not have the money to pay, but others may simply have put their assessments further down their list of priorities. In order to increase collections and revenue from other sources, associations should consider the following rules:

  1. Adopt a Parking and Towing Resolution. Not only should this resolution contain parking rules, but it can – and should – contain provisions that permit the towing of delinquent unit owners’ vehicles. It is amazing how often a payment plan is proposed after a trip to the vehicle impound. (Of course, it is critical to ensure that all towing is conducted in compliance with the Predatory Towing Prevention Act.)
  2. If an association has the authority to fine unit owners, it should set up a system and schedule of fines for violations of the rules. Ideally, the bylaws permit the board to set the amount of fines, and in such cases, it is possible to establish an escalating system of fines, such as $50 for the first violation, $75 for the second and $100 for the third and subsequent violations. However, it is important to remember that, before these fines can be collected, the member charged with the violation(s) must be given an opportunity to participate in alternative dispute resolution (ADR).
  3. Associations that do not have the authority to assess fines, charge late fees or accelerate assessments should attempt to adopt an amendment to their governing documents to establish these powers. Since these powers must generally be in the bylaws, master deed, proprietary lease or declaration, an amendment is necessary to add them. Without the “teeth” of a fining authority, it is very difficult to enforce rules. Without the ability to charge late fees, it is very difficult to enforce timely payment of assessments, and without the ability to accelerate assessments, associations’ liens and judgments will almost always be less than the amount truly owed within a month.
  4. Adopt a leasing amendment to empower the association to immediately collect the rents of delinquent owners who lease their units. Not only can a leasing amendment allow associations to collect tenants’ rents, but it can also increase associations’ ability to enforce rules against the tenants. If a landlord does not evict his problem tenants, the association can step into his shoes and conduct the eviction – charging the costs back to the landlord.

These lists are just a sampling of the strategies that associations can implement when making rules that can lead to reduced expenses, improved enforcement and increased revenue. We have an expansive fixed fee “menu” of various resolutions we could discuss with the board.

The Community Associations Institute (CAI) is a national, non-profit organization dedicated to providing the education and resources necessary to foster vibrant, responsive, competent, community associations and helping them promote harmony and responsible leadership.

Community Association Volunteer Leaders (CAVLs), Community Managers, Community Management Companies as well as Business Partner members made up of professionals and service providers, rely on CAI as the definitive source for:

  • The most up-to-date information on association management and operations to keep communities on the leading edge
  • Best practices in the community association industry
  • Innovative educational courses centered on creative learning
  • Networking forums for professionals, service providers, managers and community association volunteer leaders

The following is the text of a speech given by Francis J. McGovern, Jr., Esquire at the New Jersey Chapter’s December 10, 2014 Chapter Retreat held at Clearbrook Community Association in Monroe Township, NJ.  The audience was composed of New Jersey Chapter volunteer leaders and staff.

Good Morning.  I usually speak extemporaneously but today there are a few specific points I’d like to make so I’m reading from a prepared speech.

Preliminarily, I’d like to thank the Board members and, in particular, Marie Mirra and Nina Stanton.  Marie and Nina are two women who have inspired me.

I also have to credit a young man named Roger Nicholson for many of the thoughts that are in my speech today.  Since the first day that Roger joined the Board, he has regularly reminded us of our mission.

I.  Our Mission.

CAI-New Jersey is dedicated to enhancing the quality of community association living, through education, legislative advocacy and professional development.

II. Our Money Comes From Us.

Although relatively small rebates come from CAI National, the lion’s share of CAI-NJ’s funds come from your and my pockets.

This has to be kept in mind when thinking about “what I get for my sponsorship money”.  What we, as sponsors, should “get” above all else is education, advocacy and professional development which is naturally more focused on managers and community association volunteer leaders.

Networking, business development, beach parties and golf outings are secondary benefits of doing well by doing good.  We do well by doing good.
III.  Managers and Management Companies are the Glue That Binds Us Together

Managers and management companies are the glue that binds us together.  We must educate managers.  When I say “we”, I mean CAI-NJ.

By the end of March, 2015, I would like the Board and its committees, with the help of former chapter leaders, to formulate and begin implementing a plan for getting as many CAI-NJ managers to the CMCA level as soon as possible.

I would like such planning to include CAI-NJ reimbursing successful CMCA candidates for all or part of their course and test fees.

For 2015, CAI-NJ’s Legislative Action Committee is requesting $48,000 in funds and the Political Action Committee is requesting $7,300 in funds. I support these requests.  However, CAI-NJ should also be spending at least that much on Manager Education and Certification.

I would like the management companies to support CAI-NJ in this effort by, among other things, allowing managers time off to take the required courses and sit for the required exams without using PTO time.

We must educate managers.  Without educated managers, we are failing association volunteers, members, vendors, professionals, developers and government.

At a time when CAI-NJ faces unprecedented competition for participants and sponsors from the likes of the Co-Operator, IREM, Large Scale Management Companies and In-house education, CAI-NJ must step up to its mission or become irrelevant.

Anyone can give a course, hold a trade show or publish a magazine.  It’s everyone in this room’s job to fulfil CAI-NJ’s promise of education and advocacy.  The business partners fund it, the management companies provide the personnel and the CAVL’s must demand it.

IV. You Are The Future of CAI-NJ

There has been much said recently about using the talents of our past chapter leaders.

The Board has responded by appointing Ron Perl to the ADR task force, voting to invite past leaders to assist various committees and modifying the speakers’ bureau rules to allow greater participation.  My understanding is that in the near future the board will also be revisiting committee membership limitations.

Not only will these initiatives tap our membership talent, it will increase the quality of CAI-NJ’s offerings whether they are seminars, events or publications.

That being said, you are the future.  You must support your committee, get the job done and get to this [the Board] table so that you can carry CAI-NJ’s mission of education and advocacy into the future.

Thank you.

Information on CAI-NJ membership may be found at www.cainj.org

Passing a leasing amendment is desirable because it helps to maintain the quality and character of the community.  A leasing amendment benefits a community in two main ways:

  1. By providing an association with a means of evicting nuisance tenants
  2. By enabling the association to collect rent directly from tenants when unit owners become delinquent.

A leasing amendment will also pay for itself in the time and money saved in these two scenarios.

Scenario 1: The Problem Tenant

Every association encounters problem tenants.  However, without a leasing amendment, many associations are limited in their ability to evict such tenants.  A leasing amendment provides an association with the authority to evict a nuisance tenant if the owner fails to do so in a timely manner.  Thus, a leasing amendment enables an association to quickly and effectively remove problem tenants from the community.  This not only saves time, it also maintains a pleasant community atmosphere which helps to attract and retain good unit owners and tenants.

Scenario 2: The Delinquent Unit Owner

Unit owners who fail to pay assessments have a huge effect on an association’s bottom line.  A leasing amendment permits an association to collect rent directly from a unit owner’s tenant when the unit owner becomes delinquent.  This is particularly beneficial to an association because the association can do so without taking on the duties of a landlord.  Instead, the owner remains responsible for all duties as landlord.  Once the association has collected enough rent from a tenant to satisfy the owner’s obligations, the owner simply resumes collecting the rent.

Without a leasing amendment, an association will usually be forced to file a complaint against the landlord, obtain a judgment and attempt to execute a rent levy. Compared to the automatic assignment of rents that can be implemented through a lease amendment, this is a long and expensive process.   A leasing amendment solves the collections problem when a tenant is paying rent in a delinquent unit.  Not only can the association avoid going to court, the association has automatic access to a source for collections.  The collections obtained based upon adopting a leasing amendment can easily pay for the amendment itself—usually with the first rent check collected.

Why Not Just Pass a Resolution instead of an Amendment?

An amendment to an association’s governing documents takes more time and effort than the board passing a resolution.  Why not pass a resolution to deal with the issues outlined above?  The simple answer is that while a resolution may be easier to pass in the short term, it can create enforcement challenges down the road.  In order to be able to enforce the same type of provisions outlined above with a resolution, every tenant would have to sign a lease rider permitting the association to collect rent directly.  This creates excess administrative work and takes up valuable time—if it can even be accomplished.