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Become A Notary Public

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

Managers Who Are Notaries Help Their Associations
A Notary Public witnesses the signing of documents and acknowledgement of signatures. Too
often, assessment liens, resolutions and governing document amendments are approved and
signed, but no notary is readily available. This delays the recording of these documents and
sometimes results in increased attorney fees. Managers who become notaries can expedite the
recording process by notarizing the required signatures immediately instead of the signers having
to go to a bank or an attorney’s office.

Becoming a Notary is Easy and Cheap
Becoming a notary is easy and cheap. The Department of Treasury’s Notary Public page:
http://www.state.nj.us/treasury/revenue/dcr/programs/notary.shtml contains an overview of
Notary Public requirements. Most importantly, this page contains an Online Notary Application
link that allows you to apply and pay the fee online. The fee is only $30 and the cost for the
stamp and notary journal is only about $25.

Completing the application only takes about fifteen minutes. Once the application is completed,
it will be submitted to your local representative for approval. Within 90 days from when you
receive the approval package, you must go to the County Clerk’s office in your County and be
sworn in. It’s that simple.

McGovern Legal Services, LLC is currently offering Notary Public seminars to management
company employees to assist them in becoming New Jersey Notaries. Please contact us for
information or to arrange a seminar at your company.

DCA Proposes New Association Regulations

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

DCA Proposes New Association Regulations Including Fines & Penalties

On June 3, 2019 the New Jersey Department of Community Affairs published proposed new association regulations. A copy of the DCA’s summary and the full text of the proposed amendments and new rules can be found here:

https://www.nj.gov/dca/divisions/codes/codreg/pdf_rule_proposals/PRED_Election_Regs.pdf

The proposed requirements are granular, and the proposed enforcement and penalty provisions should be carefully considered by board members, managers, management companies and professionals.

If you desire to submit an opinion, your opinions on the proposed amendments and new rules must be submitted in writing by August 2, 2019 to:

Geraldine Callahan

Department of Community Affairs

P.O. Box 800, Trenton, NJ 08625

e-mail: Geraldine.callahan@dca.nj.gov

(fax) (609)984-6696

Some proposed sections of note include:

N.J.A.C. 5:26-8.9(h)3 which proposes that: “All ballots shall be cast in an anonymous manner.”

N.J.A.C. 5:26-8.9(h)4 which proposes that: “If the bylaws permit, and the association member consents, a ballot may be cast electronically if it is administered by a neutral third party and anonymity is maintained.”

N.J.A.C. 5:26-8.10(a)2 which proposes that: “When affordable units represent a minority of units in the development, the bylaws shall reserve a seat or seats on the executive board for election by owners of affordable units.”

N.J.A.C. 5:26-8.12(a)2 which proposes that: “The board shall provide a brief explanation of the basis for and cost entailed in the matter that is the subject of any binding vote and include the explanation in the minutes for the meeting.”

N.J.A.C. 5:26-8.12(e)2. which proposes that: “A vote taken at a closed meeting shall not be binding. If the matter requires a binding vote, it shall be taken at a subsequent open meeting in a manner that does not disclose any confidences.”

N.J.A.C. 5:26-8.14(e) which proposes that: “The Department may levy and collect fines and may issue penalties as set forth in N.J.A.C. 5:26-11. 1. For associations that are controlled by unit owners, the Department may issue cease and desist orders, may issue a monetary penalty, may transmit the case to the Office of Administrative Law, or may file and action in the Superior Court.”

Please contact me with any questions.

Francis J. McGovern, Jr., Esquire

Nick Foles On Leadership

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

In his article this morning, Inc.com journalist Justin Bariso highlighted Eagles’ Nick Foles’ team leadership style.  During the post-game Press conference, Foles said “I think that the big thing that helped me was knowing that I didn’t have to be Superman. I have amazing teammates, amazing coaches around me and all I had to do was just go play as hard as I could and play for one another and play for those guys…”.

Bariso’s application of Foles’ comments to corporate leadership generally is also applicable to Association leadership in particular.  Associations are administered, lead, by a team.  Each team member has a role.  The manager leads day to day by implementing the global policies set by the board.  The vendors: legal, financial, engineering and trades are called upon as needed to counsel and make specific things happen.

Too often today, management services have been bid down to unrealistic rates.  This leaves a leadership vacuum where a Board Member is compelled to step in as Superman/Wonderwoman, vendor expenses spiral as vendors struggle to fill the void, and the Membership loses its mind as things don’t get done in a timely manner.  Associations are real corporations, intimately impacting their Members’ lives.

Board members should not be Superman or Wonderwoman running the day to day affairs.  Instead, Management, suited to the task and paid its worth, should manage.  Team is what it’s about and, with the right team, everybody wins.  Justin Bariso’s article is available at Inc.com and Nick Foles’ post-game Press conference is available at Youtube.com.

Bipartisan Legislation Limits Municipalities Ability to Protect Associations

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

Senate Bill 3233/Assembly Bill A1425 from the 2016-2017 Legislative Session was signed into law by Governor Christie on January 16, 2018.

Unfortunately, per the Assembly Judiciary Committee Statement, and with very limited exception, “a municipality will only be able to require developers to post performance guarantees that cover improvements being dedicated to a public entity”.  One has to wonder where this legislation came from.  Presumably not the League of Municipalities as municipalities are in the best position to help associations and their members during build-out.  Especially with respect to typically-bonded items like grading and drainage, roadways, sidewalks and storm sewers.

Perhaps the builders?  But won’t the lack of bonding just lead to more litigation by Associations directly?  In the past, often (but not always) defects in these items were corrected as part of the bond reduction/release process.  Suffice it to say, going forward, Associations and their members will have one less protection and will face greater challenges in making sure they get what they paid for.

Contingent Fee Agreements For Transition Litigation

Posted on Author By Damon M. Kress, Esquire

Litigating against a community’s developer over construction defects and other issues is a long, slow and expensive process.  An average transition lawsuit can take between five (5) and seven (7) years to reach conclusion.  As if the glacial pace were not bad enough, if an association pays for its transition litigation “out of pocket”, attorney fees could cost $750,000 or more, even if the matter does not reach trial.  In addition to engaging an attorney, associations must hire forensic engineers, and often forensic accountants to substantiate their claims against the developer and numerous sub-contractors.  The cost of those forensic services can easily add another $200,000 to $600,000 to the cost of the litigation.  Therefore, the total average cost of transition litigation can easily range from $750,000 to more than $1,000,000.  In certain cases, the total cost of the litigation can substantially exceed $1,000,000.

Few associations can afford to spend such substantial sums on litigation, especially when recovery is not guaranteed.  Even those associations that could amass sufficient funds from the membership, to pay those costs, may prefer not to because increased assessments may be unpopular with the members.  Whatever the reason, over the last decade, contingent fee agreements have become a more popular option for transition litigation.

Most people have little to no actual experience entering into contingent fee agreements with attorneys. Instead, most people’s only familiarity with contingent fee agreements comes from movies and television where lawyers always seem to get paid a third (1/3) of whatever they recover for the plaintiff.  Unlike television, however, in New Jersey the Supreme Court adopted very specific rules and limits for how much an attorney may charge as a contingent fee for the majority of claims an association would pursue against a developer, and its sub-contractors.  Those rules are found in Court Rule 1:21-7.

As explained in Court Rule 1:21-7(c), in any matter where the association’s claims for damages are based upon the alleged “tortious conduct” of another (tortious conduct generally means civil wrongful acts, or an infringement of rights, that arise out of something other than a contractual agreement), a contingent fee arrangement may not exceed the limits set forth in the Rule.  The Rule lays out a five-tiered framework for calculating the contingent fee, where each tier establishes a ceiling on the percentage of the recovery the lawyer can charge the client as a contingent fee.

Under a tort-based contingent fee arrangement, the Association’s attorney may only collect:

  1. 33⅓% on the first $750,000 recovered;
  2. 30% on the next $750,000 recovered;
  3. 25% on the next $750,000 recovered;
  4. 20% on the next $750,000; and
  5. On all amounts recovered in excess of $3,000,000 the attorneys must apply to the Superior Court for a determination of a reasonable fee in light of all the circumstances.

It is also important to remember that, pursuant to Court Rule 1:21-7(d), the contingent fee is computed on the net sum recovered after deducting all disbursements in connection with the litigation, regardless of whether those disbursements were advanced by the attorney or by the client.  These disbursements include investigation expenses, expenses for expert or other testimony or evidence, and any interest included in the judgment pursuant to certain Court Rules.

An example of how to calculate a contingent fee for a hypothetical transition litigation should help put the application of these concepts and rules into context.

Example:

Association entered into a contingent fee agreement with Lawyer to sue Developer.  The contingent fee agreement was written in accordance with the limits set forth in Court Rule 1:21-7.  Association succeeds in its case and wins a $3,000,000 judgment against Developer.  Association paid a total of $500,000 to cover various disbursements spent in furtherance of the Association’s successful litigation.  Developer immediately pays the $3,000,000 into Lawyer’s attorney trust account satisfying the Association’s judgment in full.

Question:        How much does Association owe Lawyer pursuant to the contingent fee agreement?

Gross sum recovered:             $3,000,000

Less – Disbursements:            ($500,000)

Net sum recovered:                 $2,500,000

Contingent Fee Calculation:

  1. 33⅓% on the first $750,000 recovered           –           $750,000 x .3333 =     $250,000
  2. 30% on the next $750,000 recovered             –           $750,000 x .30 =         $225,000
  3. 25% on the next $750,000 recovered             –           $750,000 x .25 =         $187,500
  4. 20% on the next $750,000; recovered             –           $250,000 x .2 =           $50,000

Total Contingent Fee:           $712,500

Answer:          In this case, the Association owes Lawyer a contingent fee of $712,500.  In this example, Court Rule 1:21-7 did not require an application to the Superior Court because the net sum recovered did not exceed $3,000,000.

It is important to understand the limits the Supreme Court placed on the calculation of contingent fees because it can dramatically affect how much an association pays for these legal services.  For example, in the scenario described above, if the fee agreement simply provided that Lawyer would receive one-third (1/3) of the gross sum recovered ($3,000,000) Association would owe Lawyer a $1,000,000 contingent fee.  Not only would Association’s fee agreement violate Court Rule 1:21-7, the improper fee agreement would also result in Association overpaying Lawyer $287,500 for this litigation ($1,000,000 – $712,500 = $287,500).

Moreover, if the fee agreement simply provided that Lawyer would receive one-third (1/3) of the net sum recovered ($2,500,000), Association would owe Lawyer a $833,333 contingent fee.  This fee agreement would also violate Court Rule 1:21-7 and the improper fee agreement would result in Association overpaying Lawyer $120,833 ($833,333 – $712,500 = $120,833).  Either way, both improper fee agreements result in Association overpaying significantly for the legal services.

These examples demonstrate how easy it is for an association to overpay for legal services under a contingent fee agreement if the board of trustees does not take precautions to ensure the agreement complies with Court Rule 1:21-7.  The overpayment can potentially skyrocket in instances where the net sum recovered exceeds $3,000,000.   Furthermore, even if the agreement itself complies with the Court Rule, board members should also be vigilant to ensure that any contingent fee the association ultimately pays to the lawyer is calculated in compliance with Court Rule 1:21-7.

How can a board of trustees reduce the possibility the association is overcharged under a contingent fee agreement?

An independent attorney could review the contingent fee agreement for compliance with Court Rule 1:21-7.  As explained above, the Court Rule provides a very simple tiered framework for the calculation of contingent fees.  An independent counsel should have little difficulty determining whether the agreement the association is considering entering into, or already entered into, complies with the Court Rule.

In addition to reviewing the agreement for compliance with the Rule, when the litigation reaches conclusion, the association may also wish to have independent counsel review the calculation of the contingent fee for compliance with Court Rule 1:21-7.  Having independent counsel evaluate the actual contingent fee payment for compliance with the Court Rules should provide the board of trustees the greatest assurance that the association is not overpaying.

An association may benefit from having an independent counsel review the contingent fee payment at the conclusion of the litigation regardless of whether the association had independent counsel initially evaluate the agreement.  Court Rule 1:21-7 is very clear, “an attorney shall not contract for, charge, or collect a contingent fee in excess of the following limits.”  In light of this language, even if the Association voluntarily enters into a contingent fee agreement that does not comply with the Rule, the attorney is expressly prohibited from charging or collecting a contingent fee from the Association that is calculated in a manner that does not comply with the methodology established by Court Rule 1:21-7.

Contingent fee agreements are one option a board of trustees can consider.  With some relatively simple counsel and oversight, the board of trustees can ensure that their association does not overpay for the services the association receives under the contingent fee agreement.  Please contact our office regarding our contingent fee agreements or if you would like to have our firm evaluate an existing contingent fee agreement.

The information in this article is provided solely for information purposes. It should not be construed as legal advice on any specific matter and is not intended to create an attorney-client relationship. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based upon particular circumstances.  Each legal matter is unique, and prior results do not guarantee a similar outcome.

HOA Homeowners Associations

Units In Collections With No Mortgage

Posted on Author By Marlena Diaz-Cobo, Esquire

What happens when a unit is in collections and then upon a title search, we determine there is no mortgage on the property?

This is a common situation when the property was bought a long time ago, and the debtor recently fell on hard times or the debtor is a relative that inherited the unit from the deceased owner. Although the mortgage is paid, the debtor cannot pay their monthly maintenance fees.

The Association will most likely proceed with its collection efforts whether it be through a foreclosure against the debtor’s property or through a money judgment action against the debtor personally. A foreclosure’s end goal is to get to a sheriff sale, and likewise if there are no assets to collect on an outstanding money judgment, the end goal would also be a sheriff sale.

So, we are at the sheriff sale stage now, and there is no mortgage on the property! Before we actually go to the sheriff sale, we would advise the Association of all that needs to be taken into consideration to make an informed decision.

First, we would obtain a full title search to determine all docketed judgments, liens, and any tax sale certificates. If there are various judgments and liens on the property, and the Association is not interested in obtaining clear title, then the Association could bid at the sheriff sale the current amount owed. If a third-party purchaser successfully bids on the property, then the Association will be made completely whole. However, if no one bids, and the unit reverts to the Association, the Association can rent the unit until the holder of that lien or docketed judgment forecloses on the property. This can take a very long time, especially if the lien holder has not instituted any foreclosure action yet.

If there are docketed judgments and liens on the property, and the Association is interested in obtaining clear title, any judgment that is docketed, and any outstanding lien would have to be satisfied in order for the Association to gain clear title. If the unit is worth substantially more than the amount of the liens, or docketed judgments, satisfying those liens/judgments might be a good option for the Association since the Association can possibly become the outright owner, and will be able to sell the unit at the fair market value, reaping a substantial sum!

A cost/benefit analysis would have to be undertaken to determine whether it is in the Association’s best interest to gain clear title. Whether the Association is interested in obtaining clear title or not, the Association can potentially reap a lot of money by taking a unit without a mortgage to sheriff sale. The Association can either be made whole by being paid by a third-party purchaser or the Association can rent the unit pending the lien holder’s foreclosure action. If the Association becomes the outright owner, the Association can sell the unit at fair market value and reap the entire amount the unit is worth.

What’s The Buzz On Drones

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

Eric Koehler, Vice President of Falcon Drone Services and Fran McGovern from McGovern Legal Services along with Access Property Management presented the benefits of using drones in community associations on Wednesday April 12. The demonstration was open to both board members and property managers in the Hills Communities. All were excited to see how the new technology worked. The presentation provided a demonstration of the drone in use. All participants were encouraged to provide comments and questions.

Highlights of Drone Technology

Eric Koehler explained that drones are amazing pieces of technology. They allow community associations the ability to survey their communities in a cost effective way. A drone makes it easier to survey roofing projects, check gutters, and examine roads among other things. The technology of the drone allows for a more effective and efficient way of viewing the community. This technology allows the property manager, contractors, and board members to review the video on their own time.

Privacy is Important

A privacy oriented homeowner may have questions about drone usage. The community association treats the footage collected like any other site inspection or photograph that is taken while on site. All information collected would not be distributed or made public. Fran McGovern explained the legal aspect of using drones, expressing that it is important that homeowners are notified prior to the usage of drones, just as they would be during any other project. Continual updates from the community manager will provide homeowners with the times and dates of all activity.

Community associations are also very interested in keeping their interests safe and secure. The association must be sure that it maintains the rights to all data that is collected when using the drone. In addition, the association will ensure that the drone operator retains the proper insurance to indemnify and hold the association harmless like any other vendor.

The popularity of drones is increasing. As the technology advances, community associations can grow along side of it by adopting smart usage policies and encouraging a safer, more cost effective way to survey their community.

Transition – Evaluate, Communicate, Negotiate, Litigate

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

Transition is the due diligence process required by the board members’ fiduciary duty. In sum, the homeowner-elected board members must determine if the sponsor did what it was supposed to do and, if not, take action to get the deficiencies corrected.

Upon assuming board control homeowner-elected board members must:

  1. evaluate the association’s physical and financial condition
  2. communicate the findings to the members and the sponsor
  3. negotiate for repairs, money or a combination of repairs and money.

Evaluate.

Due diligence begins with evaluating the association’s physical and financial conditions. These evaluations must be undertaken promptly. Delay may result in losing some or all claims due to expiration of warranties, statutes of limitation and/or the statute of repose.

Engineers, architects, accountants and other experts are enlisted by the board and the association’s attorney to ferret out deficiencies and “connect the dots”. “Connecting the dots” requires experts to:

  1. Identify the duty – statutes, architectural drawings and specifications, building codes, industry standards, manufacturer’s specifications, etc.
  2. Specify how the duty was breached – for example, required building wrap was not installed
  3. Specify the damage – for example, moisture got behind the siding and was not shed down and out; instead the moisture damaged the substrate and structural members
  4. Specify how the breach caused the damage – for example, if the required building wrap had been properly installed, water that got behind the siding would have been shed down and out of the building envelope without damage to the substrate and structural members. Instead, the water was absorbed by the substrate and structural members resulting in rot and mold growth.

After “connecting the dots”, the association’s experts should carefully determine how much it will cost the association to fix the various physical and financial defects. This “cost to cure” report provides the board with a basis for prioritizing the deficiencies and evaluating how much the association should spend on attempting to compel the sponsor and others to remedy particular deficiencies. Without reputable experts solidly connecting the dots and determining the cost to cure, the association has little prospect of transition success. Assuming the experts connect the dots and accurately estimate the cost to cure, the board, its experts and counsel must finally evaluate the probability of recovery.

Is there an individual or entity that has the resources to cure the deficiencies or pay the association so that it may cure the deficiencies. Is it the sponsor? Is it the sub-contractors? Is it one or more insurance companies? Typically transition is resolved with contributions by all of these but, if there is little or no prospect of recovery, the association should carefully consider other options such as self-funding repairs, obtaining a bank loan to fund repairs or phasing repairs over time while using “Band-Aid” fixes in the meantime.

Communicate.

Many boards are reluctant to communicate expert findings to the membership. This is a mistake. Everyone hopes that the transition process will be smooth and amicable. However, transition can be long, contentious and expensive. If the membership does not support the board, management, its attorneys and experts, half of the battle is already lost. The board must share as much information as possible with the membership during the transition process so that the members know what it going on, know why various items have not yet been fixed and know why it is important for the association to spend the time and money to see the transition process through to resolution.

Negotiate.

Once the board has a comfort level with the experts’ findings and recommendations, the board and counsel will negotiate with the sponsor, developer, sub-contractors and others. In most cases this negotiation results in an amicable transition agreement whereby the sponsor and other responsible entities make repairs and/or pay the association so that it may make the repairs. In exchange, the association gives the responsible entities a release and hopefully everyone lives happily ever after.

But…should we litigate? If there is no amicable resolution, should the association litigate? This is a big decision and the “cost to cure” and “viability of recovery” evaluations become that much more important. There are many times where a litigated transition is necessary. The board should not shrink from turning to the courts on behalf of itself and its members. But, before doing so, a cost-benefit analysis must be carefully considered.

If the cost to cure and probability of recovery outweigh anticipated expert fees, attorney fees and other expenses, litigation likely makes sense but if the board finds that it is more economical, certain and timely to merely fix the deficiencies itself, it may do so and sign no release. In any case, transition releases should not be signed in exchange for nominal or no consideration. In sum transition is due diligence involving attorneys, experts, managers, board members and association members to cost-effectively resolve physical and financial deficiencies.

Associations’ Right To Sell Units

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

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.

Developer Guilty of Consumer Fraud

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

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.

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