ASSEMBLY, No. 1102

 

STATE OF NEW JERSEY

 

Introduced Pending Technical Review by Legislative Counsel

 

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

 

 

By Assemblyman CORODEMUS

 

 

An Act concerning common interest ownership of property, revising parts of the statutory law and enacting chapter 8E of Title 46 of the Revised Statutes.

 

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

    1.

TITLE 46

CHAPTER 8E

UNIFORM COMMON INTEREST OWNERSHIP

 

Article 1. In General

46:8E-1.          Short title.

46:8E-2.          Definitions.

46:8E-3.          Variation by agreement.

46:8E-4.          Separate titles and taxation.

46:8E-5.          Applicability of local ordinances, regulations and building codes.

46:8E-6.          Eminent domain.

46:8E-7.          Supplemental general principles of law applicable.

46:8E-8.          Construction against implicit repeal.

46:8E-9.          Uniformity of application and construction.

46:8E-10.        Severability; interpretation.

46:8E-11.        Unconscionable agreement or term of contract.

46:8E-12.        Obligation of good faith.

46:8E-13.        Remedies to be liberally administered.

46:8E-14.        Adjustment of dollar amounts.

46:8E-15.        Applicability to new common interest communities; Existing common interest communities.

46:8E-16.        Applicability to new common interest communities; Existing common interest communities; exception for small cooperatives.

46:8E-17.        Applicability to new common interest communities; Existing common interest communities; Exception for small and limited expense liability planned communities.

46:8E-18.        Applicability to pre-existing common interest communities.

46:8E-19.        Applicability to pre-existing common interest communities. Exception for small pre-existing cooperatives and planned communities.

46:8E-20.        Amendments to governing instruments.

46:8E-21.        Applicability to nonresidential and mixed use common interest communities.

46:8E-22.        Applicability to out-of-state common interest communities.

 

                        Article 2. Creation, Alteration, and Termination                               of Common interest communities.

46:8E-23.        Creation of common interest communities.

46:8E-24.        Unit boundaries.

46:8E-25.        Construction and validity of declaration and bylaws.

46:8E-26.        Description of units.

46:8E-27.        Contents of declaration.

46:8E-28.        Leasehold common interest communities.

46:8E-29.        Allocation of allocated interests.

46:8E-30.        Limited common elements.

46:8E-31.        Plats and plans.

46:8E-32.        Exercise of development rights.

46:8E-33.        Alterations of units.

46:8E-34.        Relocation of unit boundaries.

46:8E-35.        Conveyance of units within a cooperative .

46:8E-36.        Subdivision of units.

46:8E-37.        Boundaries of units.

46:8E-38.        Use for sales purposes.

46:8E-39.        Easement rights.

46:8E-40.        Amendment of declaration.

46:8E-41.        Termination of common interest community.

46:8E-42.        Rights of secured lenders.

46:8E-43.        Master associations.

46:8E-44.        Merger or consolidation of common interest communities.

46:8E-45.        Addition of unspecified real estate.

46:8E-46.        Master planned communities.

 

                        Article 3. Management of or by the Common Interest                         Community

46:8E-47.        Organization of unit owners'association.

46:8E-48.        Powers of unit owners'association.

46:8E-49.        Executive board members and officers.

46:8E-50.        Transfer of special declarant rights.

46:8E-51.        Termination of contracts and leases of declarant.

46:8E-52.        Bylaws.

46:8E-53.        Upkeep of common interest community.

46:8E-54.        Meetings.

46:8E-55.        Quorums.

46:8E-56.        Voting; Proxies.

46:8E-57.        Tort and contract liability.

46:8E-58.        Conveyance or encumbrance of common elements.

46:8E-59.        Insurance.

46:8E-60.        Surplus funds.

46:8E-61.        Assessments for common expenses.

46:8E-62.        Lien for assessments.

46:8E-63.        Other Liens.

46:8E-64.        Association records.

 46:8E-65.        Association as trustee.

46:8E-66.        Assignment of rents.

 

Article 4. Protection of Purchasers

46:8E-67.        Applicability; Waiver.

46:8E-68.        Liability for pubic offering statement requirements.

46:8E-69.        Public offering statement - The Planned Real Estate Development Full Disclosure Act.

46:8E-70.        Public offering statement - The Planned Real Estate Development Full Disclosure Act. Common interest communities subject to development rights.

46:8E-71.        Public offering statement - The Planned Real Estate Development Full Disclosure Act. Time Shares.

46:8E-72.        Resale of units.

46:8E-73.        Release of liens.

46:8E-74.        Express warranties of quality.

46:8E-75.        Statute of limitations for warranties.

46:8E-76.        Effect of violations on rights of action; Attorney's fees.

46:8E-77.        Labeling of promotional material

46:8E-78.        Declarant's obligation to complete and restore.

46:8E-79.        Substantial completion of units.

46:8E-80.        Alternative dispute resolution.

46:8E-81.        Phased resolution of claims involving common elements and other improvements to be maintained by association.

 

ARTICLE I. IN GENERAL

 

    46:8E-1. Short title. This chapter shall be known and may be cited as the "Uniform Common Interest Ownership Act."

    46:8E-2. Definitions.

    As used in this chapter, unless specifically provided otherwise:

    "Affiliate of a declarant" means any person who controls, is controlled by, or is under common control with a declarant. A person "controls" a declarant if the person (1) is general partner, officer, director, or employer of the declarant, (2) directly or indirectly or acting in concert with one or more other persons, (3) through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 20 percent of the election of a majority of the directors of the declarant, or (4) has contributed more than 20 percent of the capital of the declarant. A person "is controlled by" a declarant if the declarant (5) is a general partner, officer, director, employer of the person, (6) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 20 percent of the voting interest in the person, (7) controls in any manner the election of a majority of the directors of the person, or (8) has contributed more than 20 percent of the capital of the person. Control does not exist if the powers described in this paragraph are held solely as security for an obligation and are not exercised.

    "Allocated interests" means the following interest allocated to each unit: (1) in a condominium, the undivided interest in the common elements, the common expense liability, and votes in the association; (2) in a cooperative, the common expense liability and the ownership interest and votes in the association; and (3) in a planned community, the common expense liability and votes in the association.

    "Association" or "unit owners' association" means the unit owners' association organized under R.S.46:8E-47.

    "Common elements" means in the case of (1) a condominium or cooperative, all portions of the common interest community other than the units; (2) in a planned community, any real estate within a planned community which is owned or leased by the association, other than a unit; and (3) in all common interest communities, any other interests in real estate for the benefit of unit owners which are subject to the declaration.

    "Common expenses" means expenditures made by, or financial liabilities of, the association, together with any allocations to reserves.

    "Common expense liability" means the liability for common expenses allocated to each unit pursuant to R.S.46:8E-29.

    "Common interest community" means real estate with respect to which a person, by virtue of his ownership of a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance, or improvement of other real estate described in a declaration. "Ownership of a unit" does not include holding a leasehold interest of less than 20 years in a unit, including renewal options.

    "Condominium" means a common interest community in which portions of the real estate are designated for separate ownership and the remainder of the real estate is designated for common ownership solely by the owners of those portions. A common interest community is not a condominium unless the undivided interests in the common elements are vested in the unit owners.

    "Conversion building" means a building that at any time before creation of the common interest community was occupied wholly or partially by persons other than purchasers and persons who occupy with the consent of purchasers.

    "Cooperative" means a common interest community in which the real estate is owned by an association, each of whose members is entitled by virtue of ownership interest in the association to exclusive possession of a unit.

    "Dealer" means a person in the business of selling units for his own account.

    "Declarant" means any person or group of persons acting in concert who (a) as part of a common promotional plan, offers to dispose of his or its interest in a unit not previously disposed of or (b) reserves or succeeds to any special declarant right.

    "Declaration" means any instruments, however denominated, that create a common interest community, including any amendments to those instruments.

    "Development rights" means any right or combination of rights reserved by a declarant in the declaration to (1) add real estate to a common interest community; (2) create units, common elements, or limited common elements within a common interest community; (3) subdivide units or convert units into common elements; or (4) withdraw real estate from a common interest community.

    "Dispose" or "disposition" means a voluntary transfer to a purchaser of any legal or equitable interest in a unit, but the term does not include the transfer or release of a security interest.

    "Executive board" means the body, regardless of name, designated in the declaration to act on behalf of the association.

    "Identifying number" means a symbol or address that identifies only one unit in a common interest community.

    "Leasehold common interest community" means a common interest community in which all or a portion of the real estate is subject to a lease the expiration or termination of which will terminate the common interest community or reduce its size.

    "Limited common element" means a portion of the common elements allocated by the declaration or by operation of subsection b. or d. of R.S.46:8E-24 for the exclusive use of one or more but fewer than all of the units.

    "Master association" means an organization described in R.S.46:8E-43, whether or not it is also an association described in R.S.46:8E-47.

    "Offering" means any advertisement, inducement, solicitation, or attempt to encourage any person to acquire any interest in a unit, other than as security for an obligation. An advertisement in a newspaper or other periodical of general circulation, or in any broadcast medium to the general public, of a common interest community not located in this State, is not an offering if the advertisement states that an offering may be made only in compliance with the law of the jurisdiction in which the common interest community is located.

    "Person" means an individual, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or other legal or commercial entity. In the case of a land trust, however, "person" means the beneficiary of the trust rather than the trust or the trustee.

    "Planned community" means a common interest community that is not a condominium or a cooperative. A condominium or cooperative may be part of a planned community.

    "Proprietary lease" means an agreement with the association pursuant to which a member is entitled to exclusive possession of a unit in a cooperative.

    "Purchaser" means a person, other than a declarant or a dealer, who by means of a voluntary transfer acquires a legal or equitable interest in a unit other than (1) a leasehold interest, including renewal options, of less than 20 years, or (2) as security for an obligation.

    "Quorum" means the number of persons required to be present pursuant to R.S.46:8E-55.

    "Real estate" means any leasehold or other estate or interest in, over or under land, including structures, fixtures, and other improvements and interests that by custom, usage, or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance. The term includes parcels with or without upper or lower boundaries and spaces that may be filled with air or water.

    "Residential purposes" means use for dwelling or recreational purposes, or both.

    "Security interest" means an interest in real estate or personal property, created by contract or conveyance, which secures payment or performance of an obligation. The term includes a lien created by a mortgage, deed of trust, trust deed, security deed, contract for deed, land sales contract, lease intended as security, assignment of lease or rents intended as security, pledge of an ownership interest in an association, and any other consensual lien or title retention contract intended as security for an obligation.

    "Special declarant rights" means rights reserved for the benefit of a declarant to (1) complete improvements indicated on plats and plans filed with the declaration pursuant to R.S.46:8E-31 or, in a cooperative, to complete improvements described in the public offering statement pursuant to R.S.46:8E-68; (2) exercise any development right pursuant to R.S.46:8E-32; (3) maintain sales offices, management offices, signs advertising the common interest community, and models pursuant to R.S.46:8E-38; (4) use easements through the common elements for the purpose of making improvements within the common interest community or within real estate which may be added to the common interest community pursuant to R.S.46:8E-39; (5) make the common interest community subject to a master association as defined in R.S.46:8E-43; (6) merge or consolidate a common interest community with another common interest community of the same form of ownership as defined in R.S.46:8E-44; or (7) appoint or remove any officer of the association or any master association or any executive board member during any period of declarant control pursuant to subsection d. of R.S.46:8E-49.

    "Time share" means a right to occupy a unit or any of several units during five or more separated time periods over a period of at least five years, including renewal options, whether or not coupled with an estate or interest in a common interest community or a specified portion thereof.

    "Unit" means a physical portion of the common interest community designated for separate ownership or occupancy, the boundaries of which are described pursuant to paragraph (5) of subsection a. of R.S.46:8E-27.

    "Unit owner" means a declarant or other person who owns a unit, or a lessee of a unit in a leasehold common interest community whose lease expires simultaneously with any lease the expiration or termination of which will remove the unit from the common interest community, but does not include a person having an interest in a unit solely as security for an obligation. In a condominium or planned community, the declarant is the owner of any unit created by the declaration. In a cooperative, the declarant is treated as the owner of any unit to which allocated interests have been allocated (R.S.46:8E-29) until that unit has been conveyed to another person.

    46:8E-3. Variation by agreement. Except as expressly provided in this act, its provisions may not be varied by agreement, and rights conferred by it may not be waived. A declarant may not act under a power of attorney, or use any other device, to evade the limitations or prohibitions of this act or the declaration.

    46:8E-4. Separate titles and taxation.

    a. In a cooperative, a unit owners interest in a unit and its allocated interests shall be deemed to be personal property. The transfer of any interest in a cooperative shall be by means of a document recorded in the county in which the cooperative is located. The transfer document is to contain the following information:

    (1)  The name of the cooperative;

    (2)  The unit designation;

    (3)  A reference to the last prior transfer of the unit, if previously transferred;

    (4)  The full name and address of the transferror and transferee of the unit;

    (5)  An executed and acknowledged consent of the cooperative executive board authorizing and approving the transfer or assignment;

    (6)  The number of shares transferred;

    (7)  A statement of the full consideration paid for the cooperative unit which includes the purchase price paid plus the amount derived from application of the percent of ownership held in conjunction with the unit to the unpaid balance of the fee or leasehold mortgage encumbering the entire structure as of the date of the transfer or assignment; and

    (8)  All other matters, consistent with this act, which the parties may deem appropriate.

    That interest, as personal property, shall be subject to the provisions of the "Homestead Property Tax Rebate Act of 1990," P.L.1990, c.61 (C.54:4-8.57 et seq.), and sections 1, 3, 4 and 5 of P.L.1968, c.49 (C.46:15-5, C.46:15-7, C.46:15-8 and C.46:15-9 respectively) with respect to the imposition of the realty transfer fee.

    b. In a condominium or planned community:

    (1) If there is any unit owner other than a declarant, each unit that has been created, together with its interest in the common elements, constitutes for all purposes a separate parcel of real estate. A unit shall be deemed created once it has been subjected to the declaration for the common interest community by the recordation of either the declaration or an amendment to the declaration.

    (2) If there is any unit owner other than a declarant, each unit shall be separately taxed and assessed, and no separate tax or assessment may be rendered against any common elements for which a declarant has reserved no development rights.

    c. Any portion of the common elements for which the declarant has reserved any development right shall be separately taxed and assessed against the declarant, and the declarant alone is liable for payment of those taxes.

    d. If there is no unit owner other than a declarant, the real estate comprising the common interest community may be taxed and assessed in any manner provided by law. Until such time as a unit is conveyed, the assessed value of a common interest community shall not exceed that which would otherwise be assessable against it prior to the recordation of the declaration.

    46:8E-5. Applicability of local ordinances, regulations, and building codes.

    a. A construction code enforcing agent may not impose any requirement upon any structure in a common interest community which would not be imposed upon a physically identical development under a different form of ownership.

    b. The condominium or cooperative form of ownership shall not be prohibited through any zoning or land use law nor shall any such law impose a requirement upon a condominium or cooperative which would not be imposed upon a physically identical development under a different form of ownership.

    c. Except as provided in subsections a. and b., the provisions of this act shall not invalidate or modify any provision of any ordinance, rule or regulation governing the use of real estate in this State.

    46:8E-6. Eminent domain. a. If a unit is acquired by eminent domain or part of a unit is acquired by eminent domain leaving the unit owner with a remnant that may not practically or lawfully be used for any purpose permitted by the declaration, the award shall include compensation to the unit owner for that unit and its allocated interests, whether or not any common elements are acquired. Upon acquisition, unless the decree otherwise provides, that unit's allocated interests shall be reallocated to the remaining units in proportion to their allocated interests before the taking, and the association shall promptly prepare, execute, and record an amendment to the declaration reflecting the reallocations. Any remnant of a unit remaining after part of a unit is taken under this subsection shall thereafter be deemed a common element.

    b. Except as provided in subsection a., if part of a unit is acquired by eminent domain, the award shall compensate the unit owner for the reduction in value of the unit and its interest in the common elements, whether or not any common elements are acquired. Upon acquisition, unless the decree otherwise provides, (1) that unit's allocated interests shall be reduced in proportion to the reduction in the size of the unit, or on any other basis specified in the declaration and (2) the portion of the allocated interests divested from the partially acquired unit shall be reallocated to that unit and to the remaining units in proportion to their interests before the taking, with the partially-acquired unit participating in the reallocation on the basis of its reduced allocated interests.

    c. If part of the common elements is acquired by eminent domain, the portion of the award attributable to the common elements taken shall be paid to the association. Unless the declaration provides otherwise, any portion of the award attributable to the acquisition of a limited common element shall be equally divided among the owners of the units to which that limited common element was allocated at the time of acquisition.

     d. The executive board of the association, on behalf of the association and all affected unit owners, shall have the power to amend the declaration to reallocate interests in accordance with this section. The executive board shall reallocate the interests by amending the declaration and recording the amendment together with the court decree in every county in which any portion of the common interest community is located.

    46:8E-7. Principles of law supplement provisions of act. Unless displaced by particular provisions of this act, the principles of law and equity, including the law of corporations and unincorporated associations, the law of real property, and the law relative to capacity to contract, principal and agent, eminent domain, estoppel, fraud, misrepresentation, duress, coercion, mistake, receivership, substantial performance, or other validating or invalidating causes supplement its provisions.

    46:8E-8. Construction against implicit repeal. As this act is a general act intended as a unified coverage of its subject matter, no part of it shall be construed to be impliedly repealed by subsequent legislation if that construction can reasonably be avoided.

    46:8E-9. Uniformity of application and construction. This act shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this act among states enacting it.

    46:8E-10. Severability; Interpretation. a. If any provision of this act or the application thereof to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of this act which can be given effect without the invalid provisions or applications, and to this end the provisions of this act are severable.

    b. In interpreting the terms of this act it is intended that: (1) any action, power, or right of an association, executive board, declarant or unit owner which is not expressly prohibited by this act or other law shall be permitted; and (2) any provision of a declaration which is not in conflict with this act or other law shall be valid.

    46:8E-11. Unconscionable agreement or term of contract. A court, upon finding as a matter of law that a contract or contract clause relative to real estate owned or to be owned under a form of common interest ownership was unconscionable at the time the contract was made, may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or limit the application of any unconscionable clause in order to avoid an unconscionable result.

    Whenever it is claimed, or appears to the court, that a contract or any contract clause is or may be unconscionable, the parties, in order to aid the court in making the determination, shall be afforded a reasonable opportunity to present evidence as to:

    a.    The commercial setting of the negotiations;

    b.    Whether a party has knowingly taken advantage of the inability of the other party reasonably to protect his interests by reason of physical or mental infirmity, illiteracy, inability to understand the language of the agreement, or similar factors; and

    c. The effect and purpose of the contract or clause.

     46:8E-12. Obligation of good faith. Every contract or duty governed by this act imposes an obligation of good faith in its performance or enforcement.

    46:8E-13. Remedies to be liberally administered. a. The remedies provided by this act shall be liberally administered to the end that the aggrieved party is put in as good a position as if the other party had fully performed. However, consequential, special, or punitive damages may not be awarded except as specifically provided in this act or by other rule of law.

    b. Any right or obligation declared by this act shall be enforceable by judicial proceeding.

    46:8E-14. Adjustment of dollar amounts.

    As used in this section:

    "Index" means the changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers; U.S. City Average, All Items 1967 - 100, compiled by the Bureau of Labor Statistics, United States Department of Labor,

    "Reference Base Index" means the index for December 1979, which was 230.

    a. From time to time, the dollar amount specified in R.S.46:8E-17 shall be adjusted, as provided in subsections b. and c.

    b. The dollar amount specified in R.S.46:8E-17 and any amount stated in the declaration pursuant to that section, shall be adjusted on July 1 of each year if the percentage of change, calculated to the nearest whole percentage point, between the Index at the end of the preceding year and the Reference Base Index is 10 percent or more; however

    (1) The portion of the percentage change in the Index in excess of a multiple of 10 percent shall be disregarded and the dollar amount shall be adjusted only in multiples of 10 percent of the dollar amount in effect on the date of enactment;

    (2) The dollar amount shall not be adjusted if the amount required by this section is that currently in effect pursuant to this act as a result of earlier application of this section; and

    (3) In no event may the dollar amount be adjusted below the amount in effect on the date of enactment.

    c. If the Index is revised after December, 1979, the percentage of adjustment pursuant to this section shall be calculated on the basis of the revised Index. If a revision of the Index changes the Reference Base Index, a revised Reference Base Index shall be determined by multiplying the Reference Base Index then applicable by the rebasing factor furnished by the Bureau of Labor Statistics. If the Index is superseded, the index referred to in this section shall be the one represented by the Bureau of Labor Statistics as reflecting most accurately the changes in the purchasing power of the dollar for consumers.

    46:8E-15. Applicability to new common interest communities; Existing common interest communities. a. Except as provided in R.S.46:8E-16 and 17, this act applies to all common interest communities created within this State after the effective date of this act.

    b. Common interest communities created prior to the effective date of this act may elect to be subject to this act, as follows: (1) if the executive board of a common interest community is controlled by the declarant, by the declarant filing a declaration in the county recording office of each county in which the common interest community is located expressly stating that the common interest community shall be subject to this act; or (2) if the executive board of a common interest community is controlled by non-declarant unit owners, by adopting, by the affirmative vote of 75 percent of the entire executive board, a resolution in recordable form expressly stating that the common interest community shall be subject to this act and the recording of the resolution in each county in which the common interest community is located.

    This act shall be applicable to a common interest community which was created prior to the effective date of this act upon the recording of the declaration or resolution as provided above. Notwithstanding any provision of this act, the recording of a declaration or resolution as provided in this section shall not affect the priority of any lien recorded prior to the recording of such declaration or resolution.

    46:8E-16. Applicability to small cooperatives. If a cooperative contains no more than 10 units and is not subject to any development rights, it shall be subject only to R.S.46:8E-5 and R.S.46:8E-6, unless the declaration provides that the cooperative shall be subject to the entire act.

    46:8E-17. Applicability to small and limited expense liability planned communities.

    a. If a planned community:

    (1) contains no more than 10 units; or

    (2) provides, in its declaration, that the annual average common expense liability of all units restricted to residential purposes, exclusive of optional user fees and any insurance premiums paid by the association, may not exceed $300, as adjusted pursuant to R.S.46:8E-14, the planned community shall be subject only to R.S.46:8E-4, R.S.46:8E-5 and R.S.46:8E-6, unless the declaration provides that the community shall be subject to the entire act.

    b. The exemption provided in paragraph (1) above shall apply only if:

    (1) The declarant reasonably believes in good faith that the maximum stated assessment will be sufficient to pay the expenses of the planned community; and

    (2) The declaration provides that the assessment may not be increased during the period of declarant control without the consent of all unit owners.

    46:8E-18. Applicability to pre-existing common interest communities. Except as provided otherwise in R.S.46:8E-2, R.S.46:8E-4, R.S.46:8E-5, R.S.46:8E-6, R.S.46:8E-19, R.S.46:8E-25, R.S.46:8E-26, R.S.46:8E-43, paragraphs (1) through (6) and (11) through (16) of subsection a. of R.S.46:8E-48, R.S.46:8E-57, R.S.46:8E-62, R.S.46:8E-64, R.S.46:8E-72, R.S.46:8E-76 and to the extent necessary in construing any of those sections, each such section shall apply to all common interest communities created in this State before the effective date of this act; however, these sections shall apply only with respect to events and circumstances occurring after the effective date of this act and shall not invalidate existing provisions of a declaration, bylaws, or plats or plans of those common interest communities.

    46:8E-19. Applicability to small pre-existing cooperatives and planned communities. If a cooperative or planned community created within this State before the effective date of this act contains no more than 12 units and is not subject to any development rights, it shall be subject only to R.S.46:8E-4, R.S.46:8E-5, and R.S.46:8E-6, unless the declaration is amended to provide that the small pre-existing cooperative or planned community shall be subject to all sections of this act.

    46:8E-20. Amendments to governing instruments. Notwithstanding any law or regulation to the contrary, the declaration, bylaws, or plats and plans of any common interest community created before the effective date of this act may be amended to conform to this act.

    An amendment to the declaration, bylaws, or plats and plans authorized by this section must be adopted in conformity with any procedures and requirements for amending the instruments specified in those instruments or, if there are none, in conformity with R.S.46:8E-40. If an amendment grants to any person any rights, powers, or privileges under this act, all correlative obligations, liabilities, and restrictions imposed by this act shall also apply to that person.

    46:8E-21. Applicability to nonresidential and mixed use common interest communities.

    As used in this section:

    a. "Nonresidential common interest community" means a common interest community in which all units are restricted exclusively to nonresidential purposes.

    b. A nonresidential common interest community is not subject to this act unless the declaration otherwise provides.

    c. The declaration of a nonresidential common interest community may provide that this act in its entirety applies to the community or that only R.S.46:8E-4, R.S.46:8E-5 and R.S.46:8E-6 apply.

    d. If a nonresidential common interest community has opted to be subject to this act in its entirety, then the declaration may also require, subject to R.S.46:8E-11 that:

    (1) Notwithstanding the provisions of R.S.46:8E-51 (Termination of contracts and leases), any management contract, employment contract, lease of recreational or parking areas or facilities, and any other contract or lease between an association and a declarant or an affiliate of a declarant, shall continue in force after the declarant turns over control of the association; and

    (2) Notwithstanding the provisions of R.S.46:8E-3 (Variation by agreement), purchasers of units may be required to execute proxies, powers of attorney, or similar devices in favor of the declarant regarding particular matters enumerated in those instruments.

    e. A common interest community that contains units restricted exclusively to nonresidential purposes and other units which may be used for residential purposes shall not be subject to this act unless the units that may be used for residential purposes would comprise a common interest community in the absence of the nonresidential units, or the declaration provides that this act applies as provided in subsections c. or d. of this section.

    46:8E-22. Applicability to out-of-state common interest communities. This act shall not apply to common interest communities or units located outside this State which are governed by the "Real Estates Sales Full Disclosure Act," P.L.1989, c.239 (C.45:15-16.27 et seq.).

 

ARTICLE 2

 

CREATION, ALTERATION, AND TERMINATION OF

COMMON INTEREST COMMUNITIES

 

    46:8E-23. Creation of common interest communities. A common interest community may be created pursuant to this act only by recording a declaration executed in the same manner as a deed and, in a cooperative, by conveying the real estate subject to that declaration to the association. The declaration must be recorded in every county in which any portion of the common interest community is located and must be indexed in the grantee's index in the name of the common interest community and the association and in the grantor's index in the name of each person executing the declaration.

    46:8E-24. Unit boundaries. Except as provided by the declaration:

    a. If walls, floors, or ceilings are designated as boundaries of a unit, all lath, furring, wallboard, plasterboard, plaster, paneling, tiles, wallpaper, paint, finished flooring, and any other materials constituting any part of the finished surfaces thereof are a part of the unit, and all other portions of the walls, floors, or ceilings are a part of the common elements.

    b. If any chute, flue, duct, wire, conduit, bearing wall, bearing column, or any other fixture lies partially within and partially outside the designated boundaries of a unit, any portion thereof serving only that unit is a limited common element allocated solely to that unit, and any portion thereof serving more than one unit or any portion of the common elements is a part of the common elements.

    c. Subject to paragraph b., all spaces, interior partitions, and other fixtures and improvements within the boundaries of a unit are a part of the unit.

    d. Any shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios, and all exterior doors and windows or other fixtures designed to serve a single unit, but located outside the unit's boundaries, are limited common elements allocated exclusively to that unit.

    46:8E-25. Construction and validity of declaration and bylaws.

    a. All provisions of the declaration and bylaws shall be severable.

    b. The Rule Against Perpetuities shall not apply. Any provision of a declaration, bylaws, rules, or regulations adopted pursuant to paragraph (1) of subsection a. of R.S.46:8E-47 shall not be subject to or held to be in violation of any principle of law against perpetuities or restraints on alienation.

    c. In the event of a conflict between the provisions of the declaration and the bylaws, the declaration shall prevail except to the extent the declaration is inconsistent with this act.

    d. Title to a unit and common elements shall not be rendered unmarketable or otherwise affected by reason of failure of the declaration to comply with this act.

    46:8E-26. Description of units. A description of a unit which sets forth the name of the common interest community, the recording data for the declaration, the county and municipality in which the common interest community is located, and the identifying number of the unit, shall be a legally sufficient description of that unit and all rights, obligations, and interests appurtenant to that unit which were created by the declaration or bylaws.

    46:8E-27. Contents of declaration.

    a. The declaration shall contain:

    (1) The names of the common interest community and the association and a statement that the common interest community is either a condominium, cooperative, or planned community;

    (2) The name of every county in which any part of the common interest community is situated;

    (3) A legally sufficient description of the real estate included in the common interest community;

    (4) In a condominium or planned community, a description of the boundaries of each unit created by the declaration, including the unit's identifying number, its size or number of rooms, and its location within a building if it is within a building containing more than one unit;

    (5) A description of any limited common elements, other than those specified in subsection b. and d. of R.S.46:8E-24, together with a statement that they may be so allocated;

    (6) A description of any real estate, except real estate subject to development rights, that may be allocated subsequently as limited common elements, other than limited common elements specified in subsections b. and d. of R.S.46:8E-24, together with a statement that they may be so allocated;

    (7) A description of any development rights and other special declarant rights reserved by the declarant, together with a legally sufficient description of the real estate to which each of those rights applies, and a time limit within which each of those rights must be exercised;

    (8) If any development right may be exercised with respect to different parcels of real estate at different times, a statement to that effect together with (a) either a statement fixing the boundaries of those portions and regulating the order in which those portions may be subjected to the exercise of each development right or a statement that no assurances are made in those regards, and (b) a statement as to whether, if any development right is exercised in any portion of the real estate subject to that development right, that development right must be exercised in all or in any other portion of the remainder of that real estate;

     (9) Any other conditions or limitations under which the rights described in paragraph (8) may be exercised or will lapse;

    (10) An allocation to each unit of the allocated interests in the manner described in R.S.46:8E-29;

    (11) Any restrictions (a) on alienation of the units, including any restrictions on leasing which exceed the restrictions on leasing units which executive boards may impose pursuant to subsection c. of R.S.46:8E-47, and (b) on the amount for which a unit may be sold or on the amount that may be received by a unit owner on sale, condemnation, or casualty loss to the unit or to the common interest community, or on termination of the common interest community;

    (12) The recording data for recorded easements and licenses appurtenant to or included in the common interest community or to which any portion of the common interest community is or may become subject by virtue of a reservation in the declaration; and

    (13) All matters required by R.S.46:8E-28 through R.S.46:8E-31, R.S.46:8E-39, and subsection d. of R.S.46:8E-49.

    b. The declaration may contain any other matters the declarant considers appropriate, including any restrictions on the uses of a unit or the number or other qualifications of persons who may occupy units.

    46:8E-28. Leasehold common interest communities.

    a. Any lease the expiration or termination of which may terminate the common interest community or reduce its size must be recorded. Every lessor of such leases in a condominium or planned community shall sign the declaration. The declaration must state:

    (1) The recording data for the lease;

    (2) The date on which the lease is scheduled to expire;

    (3) A legally sufficient description of the real estate subject to the lease;

    (4) Any right of the unit owners to redeem the reversion and the manner whereby those rights may be exercised, or a statement that they do not have those rights;

    (5) Any right of the unit owners to remove any improvements within a reasonable time after the expiration or termination of the lease, or a statement that they do not have those rights; and

    (6) Any rights of the unit owners to renew the lease and the conditions of any renewal, or a statement that they do not have those rights.

    b. After the declaration for a leasehold condominium or leasehold planned community is recorded, neither the lessor nor the lessor's successor in interest may terminate the leasehold interest of a unit owner who makes timely payment of a unit owner's share of the rent and otherwise complies with all covenants which, if violated, would entitle the lessor to terminate the lease. A unit owner's leasehold interest in a condominium or planned community is not affected by failure of any other person to pay rent or fulfill any other covenant.

    c. Acquisition of the leasehold interest of any unit owner by the owner of the reversion or remainder does not merge the leasehold and fee simple interests unless the leasehold interests of all unit owners subject to that reversion or remainder are acquired.

    d. If the expiration or termination of a lease decreases the number of units in a common interest community, the allocated interests shall be reallocated in accordance with subsection a. of 46:8E-6 as if those units had been taken by eminent domain. Reallocations shall be confirmed by an amendment to the declaration which shall be prepared, executed, and recorded by the association.

    46:8E-29. Allocation of allocated interests.

    a. The declaration must allocate to each unit:

    (1) In a condominium, a fraction or percentage of undivided interests in the common elements and in the common expenses of the association as enumerated in subsection a. of R.S.46:8E-61, and a portion of the votes in the association;

    (2) In a cooperative, an ownership interest in the association, a fraction or percentage of the common expenses of the association as enumerated subsection a. of R.S.46:8E-61, and a portion of the votes in the association; and

    (3) In a planned community, a fraction or percentage of the common expenses of the association as enumerated in subsection a. of R.S.46:8E-61, and a portion of the votes in the association.

    b. The declaration must state the formulas used to establish allocations of interests. Those allocations may not discriminate in favor of units owned by the declarant or an affiliate of the declarant.

    c. If units may be added to or withdrawn from the common interest community, the declaration must state the formulas to be used to reallocate the allocated interests among all units included in the common interest community after the addition or withdrawal.

    d. The declaration may provide: (1) that different allocations of votes shall be made to the units on particular matters specified in the declaration; (2) for cumulative voting only for the purpose of electing members of the executive board; and (3) for class voting on specified issues affecting the class if necessary to protect valid interests of the class. A declarant may not utilize cumulative or class voting for the purpose of evading any limitation imposed on declarants by this act nor may units constitute a class because they are owned by a declarant.

    e. Except for minor variations due to rounding, the sum of the common expense liabilities and, in a condominium, the sum of the undivided interests in the common elements allocated at any time to all the units must each equal one if stated as a fraction or 100 percent if stated as a percentage. In the event of a discrepancy between an allocated interest and the result derived from application of the pertinent formula, the allocated interest prevails.

    f. In a condominium, the common elements shall not be subject to partition, and any purported conveyance, encumbrance, judicial sale, or other voluntary or involuntary transfer of an undivided interest in the common elements made without the unit to which that interest is allocated is void.

    g. In a cooperative, any purported conveyance, encumbrance, judicial sale, or other voluntary or involuntary transfer of an ownership interest in the association made without the possessory interest in the unit to which that interest is related is void.

    46:8E-30. Limited common elements.

    a. Except for the limited common elements described in subsections b. and d. of R.S.46:8E-24, the declaration shall specify to which unit or units each limited common element is allocated. An allocation may not be altered without the consent of the unit owners whose units are affected.

    b. Except as the declaration otherwise provides, a limited common element may be reallocated by an amendment to the declaration executed by the unit owners between or among whose units the reallocation is made. The persons executing the amendment shall provide a copy thereof to the association, which shall record it. The amendment must be recorded in the names of the parties and the common interest community.

    c. A common element not previously allocated as a limited common element may be so allocated only pursuant to provisions in the declaration made in accordance with paragraph (7) of subsection a. of R.S.46:8E-27. The allocations must be made by amendments to the declaration.

    46:8E-31. Plats and plans.

    a. Plats and plans shall be a part of the declaration, and shall be required for all common interest communities except cooperatives. Separate plats and plans are not required if all of the information required by this section is contained in either a plat or plan. Each plat and plan shall be clear and legible and contain a certification that the plat or plan contains all of the information required by this section.

    b. Each plat shall show or project:

    (1) The name and a survey or general schematic map of the entire common interest community;

    (2) The location and dimensions of all real estate not subject to development rights, or subject only to the development right to withdraw, and the location and dimensions of all existing improvements within that real estate;

    (3) A legally sufficient description of any real estate subject to development rights, labeled to identify the rights applicable to each parcel;

    (4) The extent of any encroachments by or upon any portion of the common interest community;

    (5) To the extent feasible, a legally sufficient description of all easements serving or burdening any portion of the common interest community;

    (6) Except as provided in subsection h., the approximate location and dimensions of any vertical unit boundaries not shown or projected on plans recorded pursuant to subsection d. and that unit's identifying number;

    (7) The location with reference to an established datum of any horizontal unit boundaries not shown or projected on plans recorded pursuant to subsection d. and that unit's identifying number;

    (8) A legally sufficient description of any real estate in which the unit owners will own only an estate for years, labeled as "leasehold real estate";

     (9) The distance between non-contiguous parcels of real estate comprising the common interest community;

    (10) The approximate location and dimensions of any porches, decks, balconies, garages, or patios allocated as limited common elements, and shall also show or contain a narrative description of any other limited common elements; and

    (11) In the case of real estate not subject to development rights, all other matters customarily shown on land surveys.

    c. A plat may also show the intended location and dimensions of any contemplated improvement to be constructed anywhere within the common interest community. Any contemplated improvement shown shall be labeled either "MUST BE BUILT" or "NEED NOT BE BUILT".

    d. Except as provided in subsection h., to the extent not shown or projected on the plats, plans of the units shall show or project:

    (1) The approximate location and dimensions of the vertical boundaries of each unit, and that unit's identifying number;

    (2) The approximate location of any horizontal unit boundaries, with reference to an established datum, and that unit's identifying number; and

    (3) The approximate location of any units in which the declarant has reserved the right to create additional units or common elements as enumerated in subsection c. of R.S.46:8E-32, identified appropriately.

    e. Unless the declaration provides otherwise, the horizontal boundaries of part of a unit located outside a building shall have the same elevation as the horizontal boundaries of the inside part, and need not be depicted on the plats and plans.

    f. Upon exercising any development right, the declarant shall record either new plats and plans necessary to conform to the requirements of subsections a., b., and d., or new certifications of plats and plans previously recorded if those plats and plans otherwise conform to the requirements of those subsections.

    g. Any certification of a plat or plan required by this section shall be made by a professional surveyor, architect, or engineer who has been licensed by this State.

    h. Plats and plans need not show the location and dimensions of the units' boundaries or their limited common elements if:

    (1) The plat shows the location and dimensions of all buildings containing or comprising the units; and

    (2) The declaration includes other information that shows or contains a narrative description of the general layout of the units in those buildings and the limited common elements allocated to those units.

    46:8E-32. Exercise of development rights.

    a. To exercise any development right reserved under paragraph (8) of subsection a. of R.S.46:8E-27, the declarant shall prepare, execute, and record an amendment to the declaration (R.S.46:8E-39) and, in a condominium or planned community, comply with R.S.46:8E-31. The declarant shall be the unit owner of any units thereby created. The amendment to the declaration shall assign an identifying number to each new unit created, and, except in the case of subdivision or conversion of units described in subsection b., reallocate the allocated interests among all units. The amendment shall describe any common elements and any limited common elements thereby created and, in the case of limited common elements, designate the unit to which each is allocated to the extent required by R.S.46:8E-30 (Limited common elements).

    b. Development rights may be reserved within any real estate added to the common interest community if the amendment adding that real estate includes all matters required by R.S.46:8E-27 or R.S.46:8E-28, as the case may be, and, in a condominium or planned community, the plats and plans include all matters required by R.S.46:8E-31. This provision does not extend the time limit on the exercise of development rights imposed by the declaration pursuant to paragraph (8) of subsection a. of R.S.46:8E-26.

    c. Whenever a declarant exercises a development right to subdivide or convert a unit previously created into additional units, common elements, or both:

    (1) If the declarant converts the unit entirely to common elements, the amendment to the declaration shall reallocate all the allocated interests of that unit among the other units as if that unit had been taken by eminent domain (R.S.46:8E-6); and

    (2) If the declarant subdivides the unit into two or more units, whether or not any part of the unit is converted into common elements, the amendment to the declaration must reallocate all the allocated interests of the unit among the units created by the subdivision in any reasonable manner prescribed by the declarant.

d. If the declaration provides, pursuant to paragraph (7) of subsection a. of R.S.46:8E-27, that all or a portion of the real estate is subject to a right of withdrawal:

    (1) If all the real estate is subject to withdrawal, and the declaration does not describe separate portions of real estate subject to that right, none of the real estate may be withdrawn after a unit has been conveyed to a purchaser; and

    (2) If any portion is subject to withdrawal, it may not be withdrawn after a unit in that portion has been conveyed to a purchaser.

    46:8E-33. Alterations of units.

    Subject to the provisions of the declaration and other provisions of law, a unit owner:

    a. May make any improvements or alterations to his unit that do not impair the structural integrity or mechanical systems or lessen the support of any portion of the common interest community;

    b. May not change the appearance of the common elements, or the exterior appearance of a unit or any other portion of the common interest community, without permission of the association; or

    c. After acquiring an adjoining unit or an adjoining part of an adjoining unit, may remove or alter any intervening partition or create apertures therein, even if the partition in whole or in part is a common element, if those acts do not impair the structural integrity or mechanical systems or lessen the support of any portion of the common interest community. Removal of partitions or creation of apertures under this paragraph is not an alteration of boundaries.

    46:8E-34. Relocation of unit boundaries. a. Subject to the provisions of the declaration and other provisions of law, the boundaries between adjoining units may be relocated by an amendment to the declaration upon application to the association by the owners of those units. If the owners of the adjoining units have specified a reallocation between their units of their allocated interests, the application must state the proposed reallocations. Unless the executive board determines, within 30 days, that the reallocations are unreasonable, the association shall prepare an amendment that identifies the units involved and states the reallocations. The amendment must be executed by those unit owners, contain words of conveyance between them, and, on recordation, be indexed in the name of the grantor and the grantee, and in the grantee's index in the name of the association.

    b. Subject to the provisions of the declaration and other provisions of law, boundaries between units and common elements may be relocated to incorporate common elements within a unit by an amendment to the declaration upon application to the association by the owner of the unit who proposes to relocate a boundary. Unless the declaration provides otherwise, the amendment may be approved only if persons entitled to cast at least 67 percent of the votes in the association, including 67 percent of the votes allocated to units not owned by the declarant, agree to the action. The amendment may describe any fees or charges payable by the owner of the affected unit in connection with the boundary relocation and the fees and charges are assets of the association. The amendment must be executed by the unit owner of the unit whose boundary is being relocated and by the association, contain words of conveyance between them, and on recordation be indexed in the name of the unit owner and the association as grantor or grantee, as appropriate.

    c. The association in a condominium or planned community shall prepare and record plats or plans as necessary to show the altered boundaries of affected units, and their dimensions and identifying numbers. The association in a cooperative shall prepare and record amendments to the declaration, including any plans, as necessary to show or describe the altered boundaries of affected units, and their dimensions and identifying numbers.

    46:8E-35. Conveyance of units within a cooperative. If a unit in a cooperative is sold, conveyed, voluntarily or involuntarily encumbered, or otherwise transferred by a unit owner, the interest in that unit which is sold, conveyed, encumbered, or otherwise transferred is the right to possession of that unit under a proprietary lease, coupled with the allocated interests of that unit, and the association's interest in that unit shall not be thereby affected.

    46:8E-36. Subdivision of units. a. If the declaration expressly so permits, a unit may be subdivided into two or more units. Subject to the provisions of the declaration and other relevant provisions of law, upon application of a unit owner to subdivide a unit, the association shall prepare, execute, and record an amendment to the declaration, including in a condominium or planned community the plats and plans, subdividing that unit.

    b. The amendment to the declaration must be executed by the owner of the unit to be subdivided, assign an identifying number to each unit created, and reallocate the allocated interests formerly allocated to the subdivided unit to the new units in any reasonable manner prescribed by the owner of the subdivided unit.

    46:8E-37. Boundaries of units. The existing physical boundaries of a unit or the physical boundaries of a unit reconstructed in substantial accordance with the description contained in the original declaration are its legal boundaries, rather than the boundaries derived from the description contained in the original declaration, regardless of vertical or lateral movement of the building or minor variance between those boundaries and the boundaries derived from the description contained in the original declaration. This section does not relieve a unit owner of liability in case of his willful misconduct or relieve a declarant or any other person of liability for failure to adhere to any plats or plans or, in a cooperative, to any representation in the public offering statement.

    46:8E-38. Use for sales purposes. Unless the declaration provides otherwise, a declarant may maintain sales offices, management offices, and models in units or on common elements in the common interest community. In a cooperative or condominium, any sales office, management office, or model not designated as a unit by the declaration is a common element. If a declarant ceases to be a unit owner, he ceases to have any rights with regard thereto unless it is removed promptly from the common interest community in accordance with a right to remove reserved in the declaration. Subject to any limitations in the declaration, a declarant may maintain signs on the common elements advertising the common interest community.

    46:8E-39. Easement rights.

    a. Subject to the provisions of the declaration, a declarant has an easement through the common elements as may be reasonably necessary for the purpose of discharging the declarant's obligations or exercising special declarant rights, whether arising under this act or reserved in the declaration.

    b. In a planned community, subject to the provisions of paragraph (6) of subsection a. of R.S.46:8E-48 and R.S.46:8E-58, unit owners shall have an easement (l) in the common elements for purposes of access to their units and (2) to use the common elements and all real estate that must become common elements pursuant to paragraph (6) of subsection a. of R.S.46:8E-27 for all other purposes.

    46:8E-40. Amendment of declaration.

    a. Except in cases of amendments that may be executed by a declarant under subsection f. of R.S.46:8E-31 or R.S.46:8E-32, or by the association under R.S.46:8E-6, subsection d. of R.S.46:8E-28, subsection c. of R.S.46:8E-30, subsection a. of R.S.46:8E-34, or R.S.46:8E-35, or by certain unit owners under subsection b. of R.S.46:8E-30, subsection a. of R.S.46:8E-34, subsection b. of R.S.46:8E-35, or subsection b. of R.S.46:8E-40, and except as limited by subsection d. of this section, the declaration, including any plats and plans, may be amended only by vote or agreement of unit owners of units to which at least 67 percent of the votes in the association are allocated, or any larger majority the declaration specifies. The declaration may specify a smaller number only if all of the units are restricted exclusively to non-residential use.

    b. No action to challenge the validity of an amendment adopted by an association pursuant to this section may be brought more than one year after the amendment is recorded.

    c. Every amendment to a declaration shall be recorded in every county in which any portion of the common interest community is located and is effective only upon recordation. An amendment, except an amendment pursuant to subsection a. of R.S.46:8E-34, must be indexed in the grantee's index in the name of the common interest community and the association and in the grantor's index in the name of the parties executing the amendment.

    d. Except to the extent expressly permitted or required by other provisions of this act, no amendment may create or increase special declarant rights, increase the number of units, change the boundaries of any unit or the allocated interests of a unit in the absence of unanimous consent of the unit owners.

    e. Amendments to the declaration required by this act to be recorded by the association shall be prepared, executed, recorded, and certified on behalf of the association by any officer of the association designated for that purpose or, in the absence of designation, by the president of the association.

    f. By vote or agreement of unit owners of units to which at least 80 percent of the votes in the association are allocated, or any larger percentage specified in the declaration, an amendment to the declaration may prohibit or materially restrict the permitted uses of or behavior in a unit or the number or other qualifications of persons who may occupy units. The amendment must provide reasonable protection for a valid use or occupancy existing at the time the amendment was adopted.

    g. The time limits specified in the declaration pursuant to paragraph (8) of subsection a. of R.S.46:8E-27 (Contents of the declaration) within which reserved development rights must be exercised may be extended, and additional development rights may be created, if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by the declarant, agree to that action. The agreement is effective 30 days after an amendment to the declaration reflecting the terms of the agreement is recorded, unless all the persons holding the affected special declarant rights or security interest in those rights: (1) record a written objection within that 30 day period, in which case the amendment is void; or (2) consent in writing at the time the amendment is recorded, in which case the amendment is effective when recorded.

    46:8E-41. Termination of common interest community.

    a. Except in the case of a taking of all the units by eminent domain pursuant to R.S.46:8E-6 or in the case of foreclosure against a cooperative of a security interest that has priority over the declaration of that cooperative, a common interest community may be terminated only by agreement of unit owners of units to which at least 80 percent of the votes in the association are allocated, or any larger percentage the declaration specifies. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to nonresidential uses.

    b. An agreement to terminate must be evidenced by the execution of a termination agreement, or ratifications thereof, in the same manner as a deed, by the requisite number of unit owners. The termination agreement must specify a date after which the agreement will be void unless it is recorded before that date. A termination agreement and all ratifications thereof shall be recorded in each county in which a portion of the common interest community is situated and is effective only upon recordation.

    c. In the case of a condominium or planned community containing only units having horizontal boundaries described in the declaration, a termination agreement may provide that all of the common elements and units of the common interest community must be sold following termination. If, pursuant to the agreement, any real estate in the common interest community is to be sold following termination, the termination agreement must set forth the minimum terms of the sale.

    d. In the case of a condominium or planned community containing any units not having horizontal boundaries described in the declaration, a termination agreement may provide for sale of the common elements, but it may not require that the units be sold following termination, unless the declaration as originally recorded provided otherwise or all the unit owners consent to the sale.

    e. The association, on behalf of the unit owners, may contract for the sale of real estate in a common interest community, but the contract is not binding on the unit owners until approved pursuant to subsections a. and b.. If any real estate is to be sold following termination, title to that real estate, upon termination, vests in the association as trustee for the holders of all interests in the units. Thereafter, the association has all powers necessary and appropriate to effect the sale. Until the sale has been concluded and the proceeds thereof distributed, the association shall continue in existence with all of the powers it had before termination. Proceeds of the sale shall be distributed to unit owners and lien holders as their interests may appear, in accordance with subsections h., i., and j. of this section. Unless otherwise specified in the termination agreement, and as long as the association holds title to the real estate, each unit owner and the unit owner's successors in interest shall have an exclusive right to occupancy of the portion of the real estate that formerly constituted the unit. During the period of that occupancy, each unit owner and the unit owner's successors in interest shall remain liable for all assessments and other obligations imposed on unit owners by this act or the declaration.

    f. In a condominium or planned community, if the real estate constituting the common interest community is not to be sold following termination, title to the common elements and, in a common interest community containing only units having horizontal boundaries described in the declaration, title to all the real estate in the common interest community, shall vest in the unit owners upon termination as tenants in common in proportion to their respective interests as provided in subsection j., and any liens encumbering those units shall survive and be applicable to the property so vested. While the tenancy in common exists, each unit owner and the unit owner's successors in interest have an exclusive right to occupancy of the portion of the real estate that formerly constituted the unit.

    g. Following termination of a common interest community, the proceeds of any sale of real estate, together with the assets of the association, shall be held by the association as trustee for unit owners and holders of liens on the units as their interests may appear.

    h. Following termination of a condominium or planned community, creditors of the association holding liens on the units, which were recorded, filed or otherwise perfected according to law, before termination, may enforce those liens in the same manner as any lien holder. All other creditors of the association are to be treated as if they had perfected liens on the units immediately before termination.

    i. In a cooperative, the declaration may provide that all creditors of the association shall have priority over the interests of unit owners and creditors of unit owners. In that event, following termination, creditors of the association holding liens on the cooperative which were recorded, filed or otherwise perfected according to law, before termination, may enforce their liens in the same manner as any lien holder, and any other creditor of the association is to be treated as if he had perfected a lien against the cooperative immediately before termination. Unless the declaration provides that all creditors of the association have that priority:

    (1) The lien of each creditor of the association which was perfected against the association before termination becomes, upon termination, a lien against each unit owner's interest in the unit as of the date the lien was perfected;

    (2) Any other creditor of the association is to be treated upon termination as if the creditor had perfected a lien against each unit owner's interest immediately before termination;

    (3) The amount of the lien of an association's creditor described in paragraphs (1) and (2) against each of the unit owners' interest must be proportionate to the ratio which each unit's common expense liability bears to the common expense liability of all of the units;

    (4) The lien of each creditor of each unit owner which was perfected before termination continues as a lien against that unit owner's unit as of the date the lien was perfected; and

    (5) The assets of the association shall be distributed to all unit owners and all lien holders as their interests may appear in the order described in this section. Creditors of the association are not entitled to payment from any unit owner in excess of the amount of the creditor's lien against that unit owner's interest.

     (j) The respective interests of unit owners referred to in subsections e., f., g., h., and i. of this section shall be as follows:

    (1) Except as provided in paragraph (2), the respective interests of unit owners shall be the fair market values of their units, allocated interests, and any limited common elements immediately before the termination, as determined by one or more independent appraisers selected by the association. The decision of the independent appraisers must be distributed to the unit owners and becomes final unless disapproved within 30 days after distribution by unit owners of units to which 25 percent of the votes in the association are allocated. The proportion of any unit owner's interest to that of all unit owners is determined by dividing the fair market value of that unit owner's unit and its allocated interests by the total fair market values of all the units and their allocated interests.

    (2) If any unit or any limited common element is destroyed to the extent that an appraisal of the fair market value thereof before destruction cannot be made, the interests of all unit owners are: a. in a condominium, their respective common element interests immediately before the termination, b. in a cooperative, their respective ownership interests immediately before the termination, and c. in a planned community their respective common expense liabilities immediately before the termination.

    k. In a condominium or planned community, except as provided in subsection l., foreclosure or enforcement of a lien or encumbrance against the entire common interest community does not terminate, of itself, the common interest community, and foreclosure or enforcement of a lien or encumbrance against a portion of the common interest community, other than withdrawable real estate, does not withdraw that portion from the common interest community. Foreclosure or enforcement of a lien or encumbrance against withdrawable real estate, or against common elements that have been subjected to a security interest by the association under R.S.46:8E-58, does not withdraw, of itself, that real estate from the common interest community, but the person taking title thereto may require from the association, upon request, an amendment excluding the real estate from the common interest community.

    l. In a condominium or planned community, if a lien or encumbrance against a portion of the real estate comprising the common interest community has priority over the declaration and the lien or encumbrance has not been partially released, the parties foreclosing the lien or encumbrance, upon foreclosure, may record an instrument excluding the real estate subject to that lien or encumbrance from the common interest community.

    46:8E-42. Rights of secured lenders.

    a. The declaration may require that all or a specified number or percentage of the lenders who hold security interests encumbering the units or who have extended credit to the association approve specified actions of the unit owners or the association as a condition to the effectiveness of those actions, but no requirement for approval may operate to (1) deny or delegate control over the general administrative affairs of the association by the unit owners or the executive board, or (2) prevent the association or the executive board from commencing, intervening in, or settling any litigation or proceeding, or (3) prevent any insurance trustee or the association from receiving and distributing any insurance proceeds except pursuant to R.S.46:8E-58.

    b. A lender who has extended credit to an association secured by an assignment of income pursuant to paragraph (14) of subsection a. of R.S.46:8E-48 or an encumbrance on the common elements pursuant to R.S.46:8E-58 may enforce its security agreement in accordance with its terms, subject to the requirements of this act and other law. Requirements that the association must (1) deposit its periodic common assessments before default with the lender to which the association's income has been assigned, or (2) increase its common asssessment at the lender's direction by amounts reasonably necessary to amortize the loan in accordance with its terms, will violate the prohibitions on lender approval contained in subsection a. of this section.

    46:8E-42. Master associations.

    a. If the declaration provides that any of the powers described in R.S.46:8E-48 are to be exercised by or may be delegated to a profit or nonprofit corporation that exercises those or other powers on behalf of one or more common interest communities or for the benefit of the unit owners of one or more common interest communities, all provisions of this act applicable to unit owners' associations shall apply to any such corporation, except as modified by this section.

    b. Unless it is acting in the capacity of an association described in R.S.46:8E-47, a master association may exercise the powers set forth in paragraph (2) of subsection a. of R.S.46:8E-48 only to the extent expressly permitted in the declarations of common interest communities which are part of the master association or expressly described in the delegations of power from those common interest communities to the master association.

    c. If the declaration of any common interest community provides that the executive board may delegate certain powers to a master association, the members of the executive board shall have no liability for the acts or omissions of the master association with respect to those powers following delegation.

    d. The rights and responsibilities of unit owners with respect to the unit owners' association as set forth in R.S.46:8E-49, R.S.46:8E-54, R.S.46:8E-55, R.S.46:8E-56 and R.S.46:8E-58 shall apply in the conduct of the affairs of a master association only to persons who elect the board of a master association, whether or not those persons are otherwise unit owners within the meaning of this act.

    e. Regardless of the fact that a master association may also be an association as described in R.S.46:8E-47, the certificate of incorporation or other instrument creating the master association and the declaration of each common interest community, the powers of which are assigned by the declaration or delegated to the master association, may provide that the executive board of the master association shall be elected after the period of declarant control in any of the following ways:

    (1) All of the unit owners of each of the common interest communities subject to the master association may elect all of the members of the master association's executive board.

    (2) All of the members of the executive boards of all common interest communities subject to the master association may elect all members of the master association's executive board.

    (3) All of the unit owners of each common interest community subject to the master association may elect specified members of the master association's executive board.

    (4) All of the members of the executive board of each common interest community subject to the master association may elect specified members of the master association's executive board.

    46:8E-43. Merger or consolidation of common interest communities.

    a. Any two or more common interest communities of the same form of ownership, by agreement of the unit owners as provided in subsection b., may be merged or consolidated into a single common interest community. In the event of a merger or consolidation, unless the agreement otherwise provides, the resultant common interest community is the legal successor, for all purposes, of all of the pre-existing common interest communities, and the operations and activities of all associations of the pre-existing common interest communities shall be merged and consolidated into a single association that shall hold all of the powers, rights, obligations, assets, and liabilities of the pre-existing associations.

    b. An agreement of two or more common interest communities to merge or consolidate pursuant to subsection a. shall be evidenced by an agreement prepared, executed, recorded, and certified by the president of the association of each of the pre-existing common interest communities following approval by the owners of units to which are allocated the percentage of votes in each common interest community required to terminate that common interest community. The agreement must be recorded in each county in which a portion of the common interest community is located and shall not be effective until recorded.

    c. Where a merger of two or more common interest communities involves the merger of two or more nonprofit corporations, the corporations shall comply with all of the requirements of N.J.S.15A:10-1, Procedure of Merger, of the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq.

    d. Every merger or consolidation agreement shall provide for the reallocation of the allocated interests in the pre-existing associations among the units of the resultant common interest community either (1) by stating the reallocations or the formulas upon which they are based or (2) by stating the percentage of overall allocated interests of the new common interest community which are allocated to all of the units comprising each of the pre-existing common interest communities, and providing that the portion of the percentages allocated to each unit formerly comprising a part of the pre-existing common interest community must be equal to the percentages of allocated interests allocated to that unit by the declaration of the pre-existing common interest community.

    46:8E-45. Addition of unspecified real estate. In a planned community, if the right is originally reserved in the declaration, the declarant, in addition to any other development right, may amend the declaration at any time during as many years as are specified in the declaration for adding additional real estate to the planned community without describing the location of that real estate in the original declaration; but, the amount of real estate added to the planned community pursuant to this section may not exceed 10 percent of the real estate described in paragraph (3) of subsection a. of R.S.46:8E-27 and the declarant may not in any event increase the number of units in the planned community beyond the number stated in the original declaration pursuant to paragraph (5) of subsection a. of R.S.46:8E-27, unless by vote of unit owners (other than the declarant) to which at least unit owners of units to which 51 percent of the votes in the association are allocated approve: a. the addition of real estate in excess of 10 percent of the real estate described in paragraph (3) of subsection a. of R.S.46:8E-27 or b. a number of units in excess of the number stated in the original declaration pursuant to paragraph (5) of subsection a. of R.S.46:8E-27.

    46:8E-46. Master planned communities.

    a. The declaration for a common interest community may state that it is a master planned community if the declarant has reserved the development right to create at least 500 units that may be used for residential purposes and has obtained preliminary site plan or subdivision approval permitting declarant to construct at least 500 residential units pursuant to the "Municipal Land Use Law," P.L.1975, c.291 (C.40:55D-1 et seq.).

    b. If the requirements of subsection a. are satisfied, the declaration for the master planned community need not state a maximum number of units and need not contain any of the information required by paragraph (3) through (13) of subsection a. of R.S.46:8E-27 until the declaration is amended under subsection c. of this section.

    c. At the time each unit in a master planned community is conveyed to a purchaser, the declaration must contain (1) a sufficient legal description of the unit and all portions of the master planned community in which any other units have been conveyed to a purchaser; and (2) all of the information required by paragraph (3) through (13) of subsection a. of R.S.46:8E-27 with respect to that real estate.

    d. Notwithstanding any other provision of this act:

    (1) The only real estate in a master planned community which shall be subject to this act is (a) units that have been declared or which are being offered for sale; and (b) any other real estate described pursuant to subsection c. of this section;

    (2) Other real estate that is or may become part of the master planned community shall be subject only to other applicable laws and to any other restrictions and limitations that appear of record; and

    (3) If the public offering statement conspicuously identifies the fact that the community is a master planned community, the disclosure requirements contained in Article 4 apply only with respect to units that have been declared or are being offered for sale in connection with the public offering statement and to the real estate described in subsection c. of this section.

    e. The limitations contained in R.S.46:8E-45 (Addition of unspecified real estate) shall not apply to a master planned community.

    f. Subject to the requirements of good faith (R.S.46:8E-12) and unconscionability (R.S.46:8E-11), the period of declarant control of the association for a master planned community shall terminate in accordance with any conditions specified in the declaration or otherwise at the time the declarant, in a recorded instrument and after filing written notice to all the unit owners, voluntarily surrenders all rights to control the activities of the association.

 

ARTICLE 3

 

MANAGEMENT OF THE COMMON INTEREST COMMUNITY

 

    46:8E-47. Organization of unit owners association

    A unit owners association shall be organized no later than the date the first unit in the common interest community is conveyed or possession is taken. The membership of the association at all times shall consist exclusively of all of the unit owners or, following termination of the common interest community, of all of the former unit owners entitled to distributions of proceeds under R.S.46:8E-41 or their heirs, successors or assigns. The association shall be organized as a for-profit or nonprofit corporation, trust, or partnership.

    46:8E-48. Powers of unit owners' association.

    a. Except as provided in subsection b., and subject to the provisions of the declaration, the bylaws, or other statute of this State, an association may:

    (1) Adopt and amend bylaws and rules and regulations;

    (2) Adopt and amend budgets for revenues; expenditures, and reserves and collect assessments for common expenses from unit owners;

    (3) Hire and discharge managing agents and other employees, agents, and independent contractors;

    (4) Institute, defend, or intervene in litigation or administrative proceedings in its own name on matters affecting the common interest community;

    (5) Make contracts and incur liabilities;

    (6) Regulate the use, maintenance, repair, replacement, and modification of common elements;

    (7) Cause additional improvements to be made as a part of the common elements;

    (8) Acquire, hold, encumber, and convey in its own name any right, title, or interest to real estate or personal property, but (a) common elements in a condominium or planned community may be conveyed or subjected to a security interest only pursuant to R.S.46:8E-58 and (b) part of a cooperative may be conveyed, or all or part of a cooperative may be subjected to a security interest, only pursuant to R.S.46:8E-58;

    (9) Grant easements, leases, licenses, and concessions through or over the common elements;

    (10) Impose and receive any payments, fees, or charges for the use, rental, or operation of the common elements, other than limited common elements described in subsections b. or f. of R.S.46:8E-24, and for services provided to unit owners;

    (11) Impose charges for late payment of assessments and, after notice and an opportunity to be heard, levy reasonable fines for violations of the declaration, bylaws, rules and regulations of the association;

    (12) Impose reasonable charges for the preparation and recordation of amendments to the declaration, resale certificates required by R.S.46:8E-72, or statements of unpaid assessments;

    (13) Provide for the indemnification of its officers and executive board and maintain directors' and officers' liability insurance;

    (14) Assign its right to future income, including the right to receive common expense assessments, but only to the extent the declaration expressly so provides;

    (15) Exercise any other powers conferred by the declaration or bylaws in accorandance with this act;

    (16) Exercise all other powers that may be exercised in this State by legal entities of the same type as the association;

    (17) Exercise any other powers necessary and proper for the governance and operation of the association; and

    (18) By regulation, require that disputes between the executive board and unit owners or between two or more unit owners regarding the common interest community must be submitted to nonbinding alternative dispute resolution in the manner described in the regulation as a prerequisite to instituting a judicial proceeding.

    b. The declaration may not impose limitations on the power of the association to deal with the declarant which are more restrictive than the limitations imposed on the power of the association to deal with other persons.

    c. The association may adopt rules with respect to units that may be used for residential purposes to:

    (1) Prevent any use of or behavior in residential units which violates the declaration or adversely affects the use and enjoyment of other units or the common elements by other unit owners; or

    (2) Reasonably restrict the leasing of residential units so long as the rules are designed to meet the then-current underwriting requirements adopted by institutional lenders who regularly lend money secured by first mortgages on units in common interest communities, or regularly purchase those mortgages. Otherwise, the association may not regulate any use of or behavior in units unless empowered to do so by the declaration or this act.

    d. If a tenant of a unit owner violates the declaration, bylaws, or rules or regulations of the association, in addition to exercising any of its powers against the unit owner, the association may:

    (1) Exercise directly against the tenant the powers described in paragraph (11) of subsection a. of this section;

    (2) After giving notice to the tenant and the unit owner and an opportunity to be heard, levy reasonable fines against the tenant for the violation; and

    (3) Enforce any rights against the tenant for the violation which the unit owner as landlord might have exercised under the lease in accordance with state law, or which the association might have exercised directly against the unit owner or both.

    e. The rights granted under paragraph (3) of subsection d. may be exercised only if the tenant or unit owner fails to cure the violation within 10 days after the association notifies the tenant and unit owner of that violation.

    f. Unless a lease otherwise provides, this section does not:

    (1) Affect rights that the unit owner may have to enforce its lease or that the association has under other law; or

    (2) Permit the association to enforce a lease to which it is not a party in the absence of a violation of the declaration or bylaws or the association's rules or regulations.

    46:8E-49. Executive board members and officers.

    a. Except as provided in the declaration, the bylaws, subsection b. of this section, or other provisions of this act, the executive board may act in all instances on behalf of the association. In the performance of their duties, officers and members of the executive board shall act in good faith and exercise honest judgment in lawful and legitimate furtherance of the association's purposes.

    b. The executive board may not act on behalf of the association to amend the declaration (R.S.46:8E-40), to terminate the common interest community (R.S.46:8E-41), or to elect members of the executive board or determine the qualifications, powers and duties, or terms of office of executive board members pursuant to subsection f. of this section, but the executive board may fill vacancies in its membership for the unexpired portion of any term.

    c. Within 30 days after the adoption of a budget for a common interest community, the executive board shall provide a copy of the budget to all of the unit owners.

    d. Subject to subsection e., the declaration may provide for a period of declarant control of the association, during which a declarant, or persons designated by him, may appoint and remove the officers and members of the executive board. Regardless of the period provided in the declaration, and except as provided in subsection f. of R.S.46:8E-45, a period of declarant control of the executive board shall terminate no later than the earlier of: (1) 60 days after conveyance of 75 percent of the lot, parcels, units or interests that may be created to unit owners other than a declarant; (2) two years after all declarants have ceased to offer units for sale in the ordinary course of business; (3) two years after any right to add new units was last exercised; or (4) the date the declarant, after giving written notice to unit owners, records an instrument voluntarily surrendering all rights to control activities of the association. A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of that period, but in that event the declarant may require, for the duration of the period of declarant control, that specified actions of the association or executive board, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective.

    e. Not later than 60 days after conveyance of 25 percent of the lot, parcels, units or interests that may be created to unit owners other than a declarant, at least one member and not less than 25 percent of the members of the executive board shall be elected by unit owners other than a declarant. Not later than 60 days after conveyance of 50 percent of the units that may be created to lot, parcels, units or interest owners other than the declarant, not less than 40 percent of the members of the executive board must be elected by unit owners other than the declarant.

    f. Except as otherwise provided in subsection e. of R.S.46:8E-43, not later than the termination of any period of declarant control, the unit owners shall elect an executive board of at least three members, a majority of whom shall be unit owners. The executive board shall elect the officers. The executive board members and officers shall take office upon election.

    g. Notwithstanding any provision of a declaration or bylaws to the contrary, the unit owners, by a two-thirds vote of all persons present and entitled to vote at any meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant.

    46:8E-50. Transfer of special declarant rights.

    a. A special declarant right created or reserved under this act may be transferred only by an instrument evidencing the transfer and recorded in each county in which any portion of the common interest community is located. The instrument is not effective unless executed by the transferee.

    b. Upon transfer of any special declarant right, the liability of a transferor declarant is as follows:

    (1) A transferor is not relieved of any obligation or liability arising before the transfer and remains liable for warranty obligations imposed upon him by this act. Lack of privity shall not deprive any unit owner of standing to maintain an action to enforce any obligation of the transferor.

    (2) If a successor to any special declarant right is an affiliate of a declarant (R.S.46:8E-2), the transferor is jointly and severally liable with the successor for any obligations or liabilities of the successor relating to the common interest community.

    (3) If a transferor retains any special declarant rights, but transfers other special declarant rights to a successor who is not an affiliate of the declarant, the transferor shall be liable for any obligations or liabilities imposed on a declarant by this act or by the declaration relating to the retained special declarant rights and arising after the transfer.

     (4) A transferor has no liability for any act or omission or any breach of a contractual or warranty obligation arising from the exercise of a special declarant right by a successor declarant who is not an affiliate of the transferor.

    c. Unless otherwise provided in a mortgage instrument, deed of trust, or other agreement creating a security interest, in the case of a foreclosure of a security interest, sale by a trustee under an agreement creating a security interest, tax sale, judicial sale, or sale under federal Bankruptcy Code or receivership proceedings, of any units owned by a declarant or real estate in a common interest community subject to development rights, a person acquiring title to all of the property being foreclosed or sold, upon his request, succeeds to all special declarant rights related to that property held by that declarant; otherwise such a person shall succeed only to those or to any rights reserved in the declaration pursuant to R.S.46:8E-38 and held by that declarant to maintain models, sales offices, and signs. The judgment or instrument conveying title shall provide for transfer of only those special declarant rights requested.

    d. Upon foreclosure of a security interest, sale by a trustee under an agreement creating a security interest, tax sale, judicial sale, or sale under federal Bankruptcy Code or receivership proceedings, of all interests in a common interest community owned by a declarant:

    (1) The declarant shall cease to have any special declarant rights, and

    (2) The period of declarant control shall terminate unless the judgment or instrument conveying title provides for the transfer of all special declarant rights held by that declarant to a successor declarant.

    e. The liabilities and obligations of a person who succeeds to special declarant rights are as follows:

    (1). A successor to any special declarant right who is an affiliate of a declarant is subject to all obligations and liabilities imposed on the transferor by this act or by the declaration.

    (2) A successor to only a right reserved in the declaration to maintain models, sales offices, and signs (R.S.46:8E-38) may not exercise any other special declarant right, and is not subject to any liability or obligation as a declarant, except the obligation to provide a public offering statement and any liability arising as a result thereof.

    (3) A successor to all special declarant rights held by a transferor who succeeded to those rights pursuant to a deed or other instrument of conveyance in lieu of foreclosure or a judgment or instrument conveying title under subsection c. of this section, may declare in a recorded instrument the intention to hold those rights solely for transfer to another person. Thereafter, until transferring all special declarant rights to any person acquiring title to any unit or real estate subject to development rights owned by the successor, or until recording an instrument permitting exercise of all those rights, that successor may not exercise any of those rights other than any right held by his transferor to control the executive board in accordance with subsection d. of R.S.46:8E-49 for the duration of any period of declarant control, and any attempted exercise of those rights is void. So long as a successor declarant may not exercise special declarant rights under this subsection, the successor declarant is not subject to any liability or obligation as a declarant other than liability for his acts and omissions under subsection d. of R.S.46:8E-49.

    (4) A successor to any special declarant right, other than a successor described in paragraphs (1), (2) or (3) of this subsection shall be subject to the obligations and liabilities imposed by this act or the declaration:

    (a) On a declarant which relate to the successor's exercise or nonexercise of special declarant rights; or

    (b) On his transferor, other than:

    (i) misrepresentations by any previous declarant;

    (ii) warranty obligations on improvements made by any previous declarant, or made before the common interest community was created;

    (iii) breach of any fiduciary obligation by any previous declarant or his appointees to the executive board; or

    (iv) any liability or obligation imposed on the transferor as a result of the transferor's acts or omissions after the transfer.

    f. Nothing in this section shall subject any successor to a special declarant right to any claims against or other obligations of a transferor declarant, other than claims and obligations arising under this act or the declaration.

    46:8E-51. Termination of contracts and leases of declarant.

    Except as provided in R.S.46:8E-21, the following contracts, if entered into before the executive board elected by the unit owners pursuant to subsection f. of R.S.46:8E-49 takes office, shall not be maintained for a period in excess of two years and may be terminated without penalty by the executive board at the end of any two-year period:

    a. any management contract, employment contract, or lease of recreational or parking areas or facilities;

    b. any other contract or lease between the association and a declarant or an affiliate of a declarant; or

    c. any contract or lease that is not bona fide or was unconscionable to the unit owners at the time entered into under the circumstances then prevailing.

    This section shall not apply to:

    Any lease the termination of which would terminate the common interest community or reduce its size, unless the real estate subject to that lease was included in the common interest community for the purpose of avoiding the right of the association to terminate a lease under this section, or a proprietary lease.

    46:8E-52. Bylaws.

    a. The bylaws of the association must provide:

    (1) The number of members of the executive board and the titles of the officers of the association;

    (2) Election by the executive board of a president, treasurer, secretary, and any other officers of the association the bylaws may specify;

    (3) The qualifications, powers and duties, terms of office, and manner of electing and removing executive board members and officers and filling vacancies;

    (4) Which, if any, of its powers the executive board or officers may delegate to other persons or to a managing agent;

    (5) Which of its officers may prepare, execute, certify, and record amendments to the declaration on behalf of the association; and

    (6) A method for amending the bylaws.

    b. Subject to the provisions of the declaration, the bylaws may provide for any other matters the association deems necessary and appropriate.

    46:8E-53. Upkeep of common interest community.

    a. Except to the extent provided by the declaration, subsection b. of this section, or subsection h. of R.S.46:8E-59, an association shall be responsible for the maintenance, repair, and replacement of the common elements, and each unit owner shall be responsible for maintenance, repair, and replacement of his unit. Each unit owner shall afford to the association and the other unit owners, and to their agents or employees, such access through his unit as reasonably necessary for those purposes. If damage is inflicted on the common elements or on any unit through which access is taken, the entity responsible for the damage shall be liable for the prompt repair thereof.

    b. In addition to the liability that a declarant as a unit owner has under this act, the declarant alone is liable for all expenses in connection with real estate subject to development rights. A unit owner or other portion of the common interest community shall not be subject to a claim for payment of development rights expenses. Unless the declaration provides otherwise, any income or proceeds from real estate subject to development rights shall inure to the declarant.

    c. In a planned community, if all development rights have expired with respect to any real estate, the declarant shall remain liable for all expenses of that real estate unless, upon expiration, the declaration provides that the real estate becomes common elements or units.

    46:8E-54. Meetings.

    A meeting of an association shall be held at least once each year. Special meetings of an association may be called by the president, a majority of the executive board, or by unit owners having 20 percent, or any lower percentage specified in the bylaws, of the votes in the association. Not less than 10 nor more than 60 days in advance of any meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or placed in the United States mail in a postpaid envelope to the proper mailing address of each unit or to any other mailing address designated in writing by the unit owner. The notice of any meeting must state the time and place of the meeting and the items on the agenda, including the general nature of any proposed amendment to the declaration or bylaws, any budget changes, and any proposal to remove an officer or member of the executive board.

    46:8E-55. Quorums.

    a. Unless the bylaws provide otherwise, a quorum is present throughout any meeting of the association if persons entitled to cast 20 percent of the votes that may be cast for election of the executive board are present in person or by proxy at the beginning of the meeting.

    b. Unless the bylaws specify a larger percentage, a quorum is deemed present throughout any meeting of the executive board if persons entitled to cast 50 percent of the votes on that board are present at the beginning of the meeting.

    46:8E-56. Voting; Proxies.

    a. If only one of several owners of a unit is present at a meeting of the association, that owner is entitled to cast all the votes allocated to that unit. If more than one of the owners are present, the votes allocated to that unit may be cast only in accordance with the agreement of a majority in interest of the owners, unless the declaration expressly provides otherwise. There is majority agreement if any one of the owners casts the votes allocated to that unit without protest being made promptly to the person presiding over the meeting by any of the other owners of the unit.

    b. Votes allocated to a unit may be cast pursuant to a proxy duly executed by a unit owner. If a unit is owned by more than one person, each owner of the unit may vote, unless the additional vote would violate the terms of the declaration, or register protest to the casting of votes by the other owners of the unit through a duly executed proxy. A unit owner may revoke a proxy given pursuant to this section only by actual notice of revocation to the person presiding over a meeting of the association. A proxy is void if it is not dated or purports to be revocable without notice. A proxy terminates one year after its date, unless it specifies a shorter term.

    c. Votes allocated to a unit may be cast by ballot duly executed by a unit owner. If a unit is owned by more than one person, each owner of the unit may vote through a duly executed ballot, unless the additional ballot would violate the terms of the declaration. A unit owner may revoke a ballot executed pursuant to this section only by actual notice of revocation to the person presiding over a meeting of the association.

    d. If the declaration requires that votes on specified matters affecting the common interest community be cast by lessees rather than unit owners of leased units: (1) the provisions of subsections a. and b. of this section apply to lessees as if they were unit owners; (2) unit owners who have leased their units to other persons may not cast votes on those specified matters; and (3) lessees are entitled to notice of meetings, access to records, and other rights respecting those matters as if they were unit owners. Unit owners must also be given notice, in the manner provided in R.S.46:8E-53, of all meetings at which lessees are entitled to vote.

    e. No votes allocated to a unit owned by the association may be cast.

    46:8E-57. Tort and contract liability.

    a. A unit owner shall not be liable for an injury or damage arising out of the condition or use of the common elements. The association or a unit owner other than the declarant shall not be liable for that declarant's torts in connection with any part of the common interest community which that declarant has the responsibility to maintain.

    b. An action alleging a wrongful act by the association, including an action arising out of the condition or use of the common elements, may be maintained against the association but not against any unit owner. If the wrongful act occurred during any period of declarant control and the association has given the declarant reasonable notice of and an opportunity to defend against the action, the declarant who then controlled the association shall be liable to the association or to any unit owner for: (1) all losses arising from that wrongful act not covered by insurance suffered by the association or that unit owner, and (2) all costs that the association would not have incurred but for the wrongful act, including any breach of contract remedies. Whenever a declarant is liable to the association under this section, the declarant shall also be liable for all expenses of litigation, including reasonable attorney's fees, incurred by the association.

    c. Any statute of limitations affecting an association's right of action against a declarant under this act shall be tolled until the period of declarant control terminates. A unit owner is not precluded from maintaining an action contemplated by this section because he is a unit owner or a member or officer of the association. Liens resulting from judgments against the association shall be governed by R.S.46:8E-62.

    d. Where the bylaws provide, an association shall not be liable in any civil action brought by or on behalf of a unit owner to respond in damages as a result of bodily injury to the unit owner occurring on the common elements of the association. This subsection shall not grant immunity to any association causing bodily injury to a unit owner on the association's common elements by its willful, wanton or grossly negligent act of commission or omission.

    46:8E-58. Conveyance or encumbrance of common elements.

    a. In a condominium or planned community, portions of the common elements may be conveyed or subjected to a security interest by the association if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by a declarant, or any larger percentage the declaration specifies, agree to that action; but all owners of units to which any limited common element is allocated must agree in order to convey that limited common element or subject it to a security interest. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to non-residential uses. Proceeds of the sale shall be an asset of the association, but the proceeds of a sale of limited common elements must be distributed equitably among the owners of units to which the limited common elements were allocated.

    b. Part of a cooperative may be conveyed and all or part of a cooperative may be subjected to a security interest by the association if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by a declarant, or any larger percentage the declaration specifies, agree to that action; but, if fewer than all of the units or limited common elements are to be conveyed or subjected to a security interest, then all unit owners of those units, or the units to which those limited common elements are allocated, must agree in order to convey those units or limited common elements or subject them to a security interest. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to nonresidential uses. Proceeds of the sale shall be an asset of the association. Any purported conveyance or other voluntary transfer of an entire cooperative, unless made pursuant to R.S.46:8E-41, is void.

    c. An agreement to convey common elements in a condominium or planned community, or to subject them to a security interest, or in a cooperative, an agreement to convey any part of a cooperative or subject it to a security interest, must be evidenced by the execution of an agreement, or ratifications thereof, in the same manner as a deed, by the requisite number of unit owners. The agreement must specify a date after which the agreement will be void unless recorded. The agreement and all ratifications thereof must be recorded in each county in which a portion of the common interest community is situated, and is effective only upon recordation.

    d. An association, on behalf of the unit owners, may contract to convey an interest in a common interest community pursuant to subsection a., but the contract shall not be enforceable against the association until approved pursuant to subsections a., b., and c. of this section. Thereafter, the association shall have all of the powers necessary and appropriate to effect the conveyance or encumbrance, including the power to execute deeds or other instruments.

    e. Unless made pursuant to this section, any purported conveyance, encumbrance, judicial sale, or other voluntary transfer of common elements or of any other part of a cooperative is void.

    f. A conveyance or encumbrance of common elements or of a cooperative pursuant to this section does not deprive any unit of its rights of access and support.

    g. Unless the declaration otherwise provides, if the holders of a first security interest on 80 percent of the units which are subject to security interests on the day the unit owners' agreement under subsection c. is recorded, consent in writing:

    (1) A conveyance of common elements pursuant to this section terminates both the undivided interests in those common elements allocated to the units and the security interests in those undivided interests held by all persons holding security interests in the units; and

    (2) An encumbrance of common elements pursuant to this section has priority over all preexisting encumbrances on the undivided interest in those common elements held by all persons holding security interests in the units.

    h. The consent by holders of first security interests on units described in subsection g. of this section, or a certificate of the secretary affirming that those consents have been received by the association, may be recorded at any time before the date on which the agreement under subsection c. becomes void. Consents or certificates so recorded are valid from the date they are recorded for purposes of calculating the percentage of consenting first security interest holders, regardless of late sales orencumbrances on those units. Regardless of the consent of the required percentage of first security interest holders, a conveyance or encumbrance of common elements does not affect interests having priority over the declaration, or created by the association after the declaration was recorded.

    i. In a cooperative, the association may acquire, hold, encumber, or convey a proprietary lease without complying with this section.

    j. The effects of foreclosure of security interests granted pursuant to this section shall be governed by R.S.46:8E-41.

    46:8E-59. Insurance.

    a. Commencing not later than the date of the first conveyance of a unit to a person other than a declarant, the association shall maintain, to the extent reasonably available:

    (1) Property insurance on the common elements and, in a planned community, also on property that must become common elements and all structural portions of the common interest community, insuring against all risks of direct physical loss commonly insured against or, in the case of a conversion building, against fire and extended coverage perils. Unless the association's declaration provides otherwise, the coverages under the property insurance shall be based upon replacement cost. If the declaration or bylaws do not provide for replacement cost insurance, the total amount of insurance after application of any deductibles shall not be less than 80 percent of the actual cash value of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations, and other items normally excluded from property policies;

    (2) Liability insurance, including medical payments insurance, in an amount determined by the executive board but not less than any amount specified in the declaration, covering all occurrences commonly insured against for death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements and, in cooperatives, also of all units; and

    (3) Any other insurance required by the declaration, association's bylaws, or applicable law.

    b. In the case of a building that is part of a cooperative or that contains units having horizontal boundaries described in the declaration, the insurance maintained under paragraph (1) of subsection a., to the extent reasonably available, must include coverage of the units, but need not include improvements and betterments installed by unit owners.

    c. If the insurance described in subsections a. and b. of this section is not reasonably available, the association promptly shall cause notice of that fact to be hand-delivered or placed in the United States mail in a postpaid envelope to all unit owners. The declaration may require the association to carry any other insurance, and the association in any event may carry any other insurance it considers appropriate to protect the association or the unit owners.

    d. Insurance policies carried pursuant to subsections a. and b. of this section must provide that:

    (1) Each unit owner is an insured person under the policy with respect to liability arising out of his interest in the common elements or membership in the association;

    (2) The insurer waives its right to subrogation under the policy against any unit owner or member of his household;

    (3) No act or omission by any unit owner, unless acting within the scope of his authority on behalf of the association, will void the policy or be a condition to recovery under the policy;

    (4) There is other insurance in the name of a unit owner covering the same risk covered by the policy; and,

    (5) The association's policy provides primary insurance.

    e. Any loss covered by the property policy under paragraph (1) of subsection a. and subsection b. of this section shall be adjusted with the association, but the insurance proceeds for that loss shall be payable to any insurance trustee designated for that purpose, or otherwise to the association, and not to any holder of a security interest. The insurance trustee or the association shall hold any insurance proceeds in trust for the association, unit owners, and lien holders as their interests may appear. Subject to the provisions of subsection h. of this section, the proceeds shall be disbursed first for the repair or restoration of the damaged property, and the association, unit owners, and lien holders shall not be entitled to receive payment of any portion of the proceeds unless there is a surplus of proceeds after the property has been completely repaired or restored, or the common interest community is terminated.

    f. An insurance policy issued to the association shall not prevent a unit owner from obtaining insurance for his own benefit.

    g. An insurer that has issued an insurance policy under this section shall issue certificates or memoranda of insurance to the association and, upon written request, to any unit owner or holder of a security interest. The insurer issuing the policy may not cancel or refuse to renew it until 30 days after notice of the proposed cancellation or non-renewal has been mailed to the association, and to each unit owner and each holder of a security interest to whom a certificate or memorandum of insurance has been issued at their respective last known addresses.

    h. Any portion of the common interest community for which insurance is required under this section which is damaged or destroyed must be repaired or replaced promptly by the association unless (1) the common interest community is terminated, in which case R.S.46:8E-41 applies, (2) repair or replacement would be illegal under any State or local statute or ordinance governing health or safety, or (3) 80 percent of the unit owners, including any owner of a unit or assigned limited common element that will not be rebuilt, vote not to rebuild. The cost of repair or replacement in excess of insurance proceeds and reserves shall be a common expense. If the entire common interest community is not repaired or replaced, (4) the insurance proceeds attributable to the damaged common elements must be used to restore the damaged area to a condition compatible with the remainder of the common interest community, and (5) except to the extent that other persons will be distributees (Subparagraph b. of paragraph 11 of subsection a. of R.S.46:8E-27), (i) the insurance proceeds attributable to units and limited common elements that are not rebuilt must be distributed to the owners of those units and the owners of the units to which those limited common elements were allocated, or to lien holders, as their interests may appear, and (ii) the remainder of the proceeds must be distributed to all the unit owners or lien holders, as their interests may appear, as follows: In a condominium, in proportion to the common element interests of all the units and, in a cooperative or planned community, in proportion to the common expense liabilities of all the units. If the unit owners vote not to rebuild any unit, that unit's allocated interests are automatically reallocated upon the vote as if the unit had been condemned under subsection a. of R.S.46:8E-6, and the association promptly shall prepare, execute, and record an amendment to the declaration reflecting the reallocations.

    i. The provisions of this section may be varied or waived in the case of a common interest community in which all units are restricted to non-residential use.

    46:8E-60. Surplus funds.

    Unless otherwise provided in the declaration, any surplus funds of the association remaining after payment of or provision for common expenses and any prepayment of reserves must be paid to the unit owners in proportion to their common expense liabilities or credited to them to reduce their future common expense assessments.

    46:8E-61. Assessments for common expenses.

    a. Until the association makes a common expense assessment, the declarant shall pay all common expenses. After an assessment has been made by the association, assessments must be made at least annually, based on a budget which shall be adopted at least annually by the association.

    b. Except for assessments under subsections c., d., and e. of this section, all common expenses must be assessed against all the units in accordance with the allocations set forth in the declaration pursuant to subsections a. and b. of R.S.46:8E-29. Any past due common expense assessment or installment thereof shall bear interest at the rate established by the association not exceeding 18 percent per year.

    c. Unless the declaration provides otherwise:

    (1) Any common expense associated with the maintenance, repair, or replacement of a limited common element must be assessed against the units to which that limited common element is assigned, equally, or in any other proportion the declaration provides;

    (2) Any common expense or portion thereof benefiting fewer than all of the units must be assessed exclusively against the units benefited; and

    (3) The costs of insurance must be assessed in proportion to risk and, if separately metered, the costs of utilities must be assessed in proportion to usage.

    d. Assessments to pay a judgment against the association pursuant to R.S.46:8E-63 may be made only against the units in the common interest community conveyed to unit owners other than the declarant at the time the judgment was entered, in proportion to their common expense liabilities.

    e. If any common expense is caused by the misconduct of any unit owner, the association may assess that expense exclusively against his unit.

    f. If common expense liabilities are reallocated, common expense assessments and any installment thereof not yet due must be recalculated in accordance with the reallocated common expense liabilities.

    46:8E-62. Lien for assessments.

    a. The association shall have a statutory lien on a unit for any assessment levied against that unit or fines imposed against its unit owner. Unless the declaration otherwise provides, fees, charges, late charges, fines, and interest charged pursuant to paragraphs (10) through (12) of section a. of R.S.46:8E-47 are enforceable as assessments under this section. If an assessment is payable in installments, the full amount of the assessment is a lien from the time the first installment thereof becomes due.

    b. A lien under this section shall be prior to all other liens and encumbrances on a unit except (1) liens and encumbrances recorded before the recordation of the declaration and, in a cooperative, liens and encumbrances which the association creates, assumes, or takes subject to, (2) a first security interest on the unit recorded before the date on which the assessment sought to be enforced became delinquent, or, in a cooperative, the first security interest encumbering only the unit owner's interest and perfected before the date on which the assessment sought to be enforced became delinquent, and (3) liens for real estate taxes and other governmental assessments or charges against the unit or cooperative. Such a lien shall also be prior to all security interests described in paragraph (2) above to the extent of the common expense assessments based on the periodic budget adopted by the association pursuant to subsection a. of R.S.46:8E-61 which would have become due in the absence of acceleration during the six months immediately preceding institution of an action to enforce the lien. This subsection does not affect the priority of mechanics' or materialmen's liens, or the priority of liens for other assessments made by the association.

    c. Unless the declaration otherwise provides, if two or more associations have liens for assessments created at any time on the same property, those liens have equal priority.

    d. Recording of the declaration constitutes record notice and perfection of the lien. No further recordation of any claim of lien for assessment under this section shall be required.

    e. This section does not prohibit actions to recover sums for which subsection a. of this section creates a lien or prohibit an association from taking a deed in lieu of foreclosure.

    f. A judgment or decree in any action brought under this section shall include costs and reasonable attorney's fees for the prevailing party.

    g. The association, upon written request, shall furnish to a unit owner a statement setting forth the amount of unpaid assessments against the unit. If the unit owner's interest is real estate, the statement shall be in recordable form. The statement must be furnished within 10 business days after receipt of the request and is binding on the association, the executive board, and every unit owner.

    h. In a cooperative, upon nonpayment of an assessment on a unit, the unit owner may be evicted in the same manner as provided by law in the case of an unlawful holdover by a commercial tenant, and the lien may be foreclosed as provided by this section.

    i. The association's lien may be foreclosed as provided in this subsection:

    (1) In a condominium or planned community, an association's lien must be foreclosed in like manner as a mortgage on real estate.

    (2) In a cooperative whose unit owners' interests in the units are real estate (R.S.46:8E-4), an association's lien shall be foreclosed in a like manner as a mortgage on real estate; or

    (3) In a cooperative, an association's lien must be foreclosed in a like manner as a security interest under N.J.S.12A:9-501.

    j. In an action by an association to collect assessments or to foreclose a lien for unpaid assessments, the court may appoint a receiver of the unit owner to collect all sums alleged to be due and owing to that unit owner before or during the pendency of the action. Such a receivership shall be governed by N.J.S. 15A:14-1 et seq. The court may order the receiver to pay any sums held by the receiver to the association during the pendency of the action to the extent of the association's common expense assessments adopted by the association pursuant to R.S.46:8E-61.

    46:8E-63. Other liens.

    a. In a condominium or planned community:

    (1) Except as provided in paragraph (2) of this subsection, a judgment for money against the association if docketed shall not be a lien on the common elements, but shall be a lien in favor of the judgment lien holder against all of the units in the common interest community at the time the judgment was entered. No other property of a unit owner shall be subject to the claims of creditors of the association.

    (2) If the association has granted a security interest in the common elements to a creditor of the association pursuant to R.S.46:8E-58, the holder of that security interest shall exercise its right against the common elements before its judgment lien on any unit may be enforced.

    (3) Whether perfected before or after the creation of the common interest community, if a lien, other than a deed of trust or mortgage (including a judgment lien or lien attributable to work performed or materials supplied before creation of the common interest community), becomes effective against two or more units, the unit owner of an affected unit may pay to the lien holder the amount of the lien attributable to his unit, and the lien holder, upon receipt of payment, promptly shall deliver a release of the lien covering that unit. The amount of the payment must be proportionate to the ratio which that unit owner's common expense liability bears to the common expense liabilities of all unit owners whose units are subject to the lien. After payment, the association may not assess or have a lien against that unit owner's unit for any portion of the common expenses incurred in connection with the released lien.

    (4) A judgment against an association shall be indexed in the name of the common interest community and the association and, when so indexed, is notice of the lien against the units.

    b. In a cooperative:

    (1) If an association receives notice of an impending foreclosure on all or any portion of the association's real estate, the association shall promptly transmit a copy of that notice to each unit owner of a unit located within the real estate to be foreclosed. Failure of the association to transmit the notice shall not affect the validity of the foreclosure.

    (2) Whether or not a unit owner's unit is subject to the claims of the association's creditors, no other property of a unit owner shall be subject to those claims.

    46:8E-64. Association records.

    The association shall keep financial records sufficiently detailed to enable the association to comply with R.S.46:8E-72. All financial and other records must be made reasonably available for examination by any unit owner and his authorized agents except any records:

    a. Disclosure of which would constitute an unwarranted invasion of individual privacy;

    b. Concerning pending or anticipated litigation or contract negotiations;

    c. Falling within the attorney-client privilege, to the extent that confidentiality is required in order for the attorney to exercise his or her ethical duties as a lawyer; or

    d. Involving the employment, promotion, discipline or dismissal of a specific officer or employee of the association.

    46:8E-63. Association as trustee.

    With respect to a third person dealing with the association in the association's capacity as a trustee, the existence of trust powers and their proper exercise by the association may be assumed without inquiry. A third person shall not be bound to inquire whether the association has power to act as trustee or is properly exercising trust powers. A third person, without actual knowledge that the association is exceeding or improperly exercising its powers, shall be fully protected in dealing with the association as if it possessed and properly exercised the powers it purports to exercise. A third person shall not be bound to assure the proper application of trust assets paid or delivered to the association in its capacity as trustee.

    46:8E-66. Assignment of rents.

    a. Subject to the rights of holders of first security interests, an association may collect, from rent due from a tenant to a delinquent unit owner, an amount not more than any unpaid common expenses, late fees, interest, and costs of collection, including reasonable attorneys fees. "Delinquent unit owner" means a unit owner who owes common expense fees which are 30 or more days past due.

    b. Prior to taking any action permitted by this section, an association shall give written notice to the delinquent unit owner at the unit owner's last known address of its intent to collect the rent by certified mail, return receipt requested. The notice shall set forth the exact amount the association claims is due and shall indicate the intent of the association to collect the amount due from rent, along with any other amounts which become due in the future and which remain unpaid for 30 days after becoming due, including any common expense fees lawfully accelerated pursuant to the declaration or bylaws. A copy of the notice shall be sent to the holder of the unit's first security interest of record. Any cost incurred by the association to ascertain the identity of the holder of the first security interest, including the cost of the preparation of a title search, shall constitute additional common expense fees due with respect to the unit.

    c. A delinquent unit owner shall have 10 days from receipt of the notice required to be sent pursuant to subsection b. of this section to provide proof of payment or a statement of the grounds upon which the assessment is disputed. Upon the failure of the unit owner to respond within 10 days after receipt of the notice, or within 15 days of mailing if no receipt is obtained, and provided that no notice is received from the holder of the first security interest that it is exercising its right of assignment of rental proceeds, the association shall be entitled to notify and direct each tenant renting a unit from the delinquent unit owner to pay to the association all or a portion of the rent otherwise due the delinquent unit owner. The amount to be applied from the rent shall be limited to the lesser of: (1) the amount as stated in the notice to the delinquent unit owner or, (2) an amount adjusted to reflect any calculation errors sought to be corrected by the unit owner, as stated in the response to the association, if timely sent. No offset shall be allowed for amounts which are unrelated to claims of calculation errors. The association shall have a continuing right to collect the rent from the tenant or tenants until the delinquent sum is satisfied in full.

    d. Nothing in this section shall prevent a unit owner or association from seeking a judicial remedy in a court of competent jurisdiction. If a court determines that a unit owner intentionally misrepresented or misstated a material fact, then the association shall be entitled to recover from that unit owner an amount equal to three times the unpaid assessment, in addition to any association fees accruing and remaining unpaid after the date of filing of the action, and reasonable attorney's fees.

    e. A holder of a first security interest which is entitled to an assignment of rents and which has exercised its rights by written notice recorded at the county recording office in the county in which the property is located, and by written notice sent by certified mail to the association from which it received notice pursuant to subsection b. of this section, may collect such rents in accordance with an assignment of rents under which it is an assignee.

 

ARTICLE IV

 

PROTECTION OF PURCHASERS

 

    46:8E-67. Applicability; Waiver.

    a. This Article applies to all units subject to this act, except as provided in subsection b. of this section.

    b. A resale certificate need not be prepared or delivered in the case of:

    (1) A gratuitous disposition of a unit;

    (2) A disposition pursuant to court order;

    (3) A disposition by a government or governmental agency;

    (4) A disposition by foreclosure or deed in lieu of foreclosure;

    (5) A disposition to a dealer;

    (6) A disposition that may be canceled at any time and for any reason by the purchaser without penalty; or

    (7) A disposition of a unit restricted to nonresidential use, unless a majority of the voting interests in a common interest community devoted to nonresidential use determines that this Article shall apply, in full or part.

    46:8E-68. Liability for public offering statement requirements.

    a. Except as provided in subsection b. of this section, a declarant, before offering any interest in a unit to the public, shall prepare a public offering statement conforming to the requirements of section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28).

    b. A declarant may transfer responsibility for preparation of all or a part of the public offering statement to a successor declarant (R.S.46:8E-50) or to a dealer who intends to offer units in the common interest community. In the event of any such transfer, the transferor shall provide the transferee with any information necessary to enable the transferee to fulfill the requirements of subsection a. of this section.

    c. Any declarant or dealer who offers a unit to a purchaser shall deliver a public offering statement in the manner prescribed by subsection a. of this section. The person who prepared all or a part of the public offering statement is liable under "The Planned Real Estate Development Full Disclosure Act" for any false or misleading statement set forth therein or for any omission of a material fact therefrom with respect to that portion of the public offering statement which he prepared. If a declarant did not prepare any part of a public offering statement that he delivers, he is not liable for any false of misleading statement set forth therein or for any omission of a material fact therefrom unless he had actual knowledge of the statement or omission or, on the exercise of reasonable care, should have known of the statement or omission.

    d. If a unit is part of a common interest community and is part of any other real estate regime in connection with the sale of which the delivery of a public offering statement is required under the laws of this State, a single public offering statement conforming to the requirements of "The Planned Real Estate Development Full Disclosure Act" as those requirements relate to each regime in which the unit is located, and to any other requirements imposed under the laws of this State, may be prepared and delivered in lieu of providing two or more public offering statements.

    46:8E-69. Public offering statement - The Planned Real Estate Development Full Disclosure Act.

    Except as expressly set forth in R.S.46:8E-68, R.S.46:8E-70 and R.S.46:8E-71, this act shall not affect or amend the terms or applicability of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.).

    46:8E-70. Common interest communities subject to development rights.

    If the declaration provides that a common interest community is subject to any development rights, the public offering statement shall disclose, subject to the limitations set forth in R.S.46:8E-46 (Master Planned Communities), and, in addition to the information required by section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28) the following:

    a. The maximum number of units, and the maximum number of units per acre, that may be created;

    b. A statement of how many or what percentage of the units that may be created will be restricted exclusively to residential use, or a statement that no representations are made regarding use restrictions;

    c. If any of the units that may be built within real estate subject to development rights are not to be restricted exclusively to residential use, a statement, with respect to each portion of that real estate, of the maximum percentage of the real estate areas, and the maximum percentage of the floor areas of all units that may be created therein, that are not restricted exclusively to residential use;

    d. A brief narrative description of any development rights reserved by a declarant and of any conditions relating to or limitations upon the exercise of development rights;

    e. A statement of the maximum extent to which each unit's allocated interests may be changed by the exercise of any development right described in subsection c. of this section;

    f. A statement of the extent to which any buildings or other improvements that may be erected pursuant to any development right in any part of the common interest community will be compatible with existing buildings and improvements in the common interest community in terms of architectural style, quality of construction, and size, or a statement that no assurances are made in those regards;

    g. General descriptions of all other improvements that may be made and limited common elements that may be created within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;

    h. A statement of any limitations as to the locations of any building or other improvement that may be made within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;

    i. A statement that any limited common elements created pursuant to any development right reserved by the declarant will be of the same general types and sizes as the limited common elements within other parts of the common interest community, or a statement of the types and sizes planned, or a statement that no assurances are made in that regard;

    j. A statement that the proportion of limited common elements to units created pursuant to any development right reserved by the declarant will be approximately equal to the proportion existing within other parts of the common interest community, or a statement of any other assurances in that regard, or a statement that no assurances are made in that regard;

    k. A statement that all restrictions in the declaration affecting use, occupancy, and alienation of units will apply to units created pursuant to any development right reserved by the declarant, or a statement of any differentiations that may be made as to those units, or statement that no assurances are made in that regard; and

    l. A statement of the extent to which any assurances made pursuant to this section apply or do not apply in the event that any development right is not exercised by the declarant.

    46:8E-71. Time shares subject to development rights.

    If the declaration provides that ownership or occupancy of any units, is or may be in time shares, the public offering statement shall disclose, in addition to the information required by section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28):

    a. The number and identity of units in which time shares may be created;

    b. The total number of time shares that may be created;

    c. The minimum duration of any time shares that may be created; and

    d. The extent to which the creation of time shares will or may affect the enforceability of the association's lien for assessments provided in R.S.46:8E-62.

    46:8E-72. Resales of units.

    a. Except in the case of a sale in which delivery of a public offering statement is required pursuant to section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28) or unless exempt under subsection b. of R.S.46:8E-67, a unit owner shall furnish to a purchaser before the earlier of the date of conveyance or transfer of the right to possession of a unit, a copy of the declaration (other than any plats and plans), the bylaws, the rules or regulations of the association, and a certificate containing:

    (1) A statement disclosing the effect on the proposed disposition of any right of first refusal or other restraint on the free alienability of the unit held by the association;

    (2) A statement setting forth the amount of the periodic common expense assessment currently due and payable from the selling unit owner;

     (3) A statement of any other fees payable by the owner of the unit being sold;

    (4) A statement of any capital expenditures approved by the association for the current and two next succeeding fiscal years;

    (5) A statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects;

    (6) The most recent recently prepared balance sheet and income and expense statement, if any, of the association;

    (7) The current operating budget of the association;

    (8) A statement of any unsatisfied judgments against the association and the status of any pending suits in which the association is a defendant;

    (9) A statement describing any insurance coverage provided for the benefit of unit owners;

    (10) A statement as to whether the executive board has given or received written notice that any existing uses, occupancies, alterations or improvements in or to the unit or to the limited common elements assigned thereto violate any provision of the declaration;

    (11) A statement as to whether the executive board has received written notice from a governmental agency of any violation of environmental, health, or building code with respect to the unit, the limited common elements assigned thereto, or any other portion of the common interest community which have not been cured;

    (12) A statement of the remaining term of any leasehold estate affecting the common interest community and the provisions governing any extension or renewal thereof;

    (13) A statement of any restrictions in the declaration affecting the amount that may be received by a unit owner upon sale, condemnation, casualty loss to the unit or the common interest community, or termination of the common interest community;

    (14) In a cooperative, an accountant's statement, if any was prepared, as to the deductibility for federal income tax purposes by the unit owner of real estate taxes and interest paid by the association;

    (15) A statement describing any pending sale or encumbrance of common elements; and

    (16) A statement disclosing the effect on the unit to be conveyed of any restrictions on the owner's right to use or occupy the unit or to lease the unit to another person.

    b. The association, within 10 days after a request by a unit owner, shall furnish a certificate containing the information necessary to enable the unit owner to comply with this section. A unit owner providing a certificate pursuant to subsection a. of this section, and any real estate broker or sales agent who provides brokerage services to the unit owner or purchaser shall not be liable to the purchaser for: (1) any erroneous information provided by the association and included in the certificate, or (2) any matter related to the common interest community except, with respect to liability between the unit owner and a purchaser, as may otherwise be agreed in writing.

     c. A purchaser is not liable for any unpaid assessment or fee greater than the amount set forth in the certificate prepared by the association. A unit owner is not liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner, but the purchase contract is voidable by the purchaser until the certificate has been provided and for five days thereafter or until conveyance, whichever first occurs.

    46:8E-73. Release of liens.

    a. In the case of a sale of a unit where delivery of a public offering statement is required pursuant to "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), a seller:

    (1) Before conveying a unit, shall record or furnish to the purchaser releases of all liens, except: (a) liens on real estate that a declarant has the right to withdraw from the common interest community, or (b) that the purchaser expressly agrees to take subject to or assume and that encumber:

    (i) in a condominium, that unit and its common element interest, and

    (ii) in a cooperative or planned community, that unit and any limited common elements assigned thereto.

    (2) Shall provide a surety bond or substitute collateral for or insurance against the lien as provided for liens on real estate in the "Construction Lien Law," P.L.1993, c.318 (C.2A:44A-1 et seq.).

    b. Before conveying real estate to the association, the declarant shall have that real estate released from: (1) all liens the foreclosure of which would deprive unit owners of any right of access to or easement of support of their units, and (2) all other liens on that real estate unless the public offering statement describes certain real estate that may be conveyed subject to liens in specified amounts.

    46:8E-74. Express warranties of quality.

    a. Express warranties made by any seller to a purchaser of a unit, if relied upon by the purchaser, shall be created as follows:

    (1) Any affirmation of fact or promise which relates to the unit, its use, or rights appurtenant thereto, area improvements to the common interest community that would directly benefit the unit, or the right to use or have the benefit of facilities not located in the common interest community, shall create an express warranty that the unit and related rights and uses will conform to the affirmation or promise;

    (2) Any model or description of the physical characteristics of the common interest community, including plans and specifications of or for improvements, shall create an express warranty that the common interest community will conform to the model or description, unless express disclaimers in language in common understanding calling the purchaser's attention to the exclusion of this warranty are displayed on the plans and specifications or in the model and are explicitly referenced in the sales contract;

    (3) Any description of the quantity or extent of the real estate comprising the common interest community, including plats or surveys, shall create an express warranty that the common interest community will conform to the description, subject to customary tolerances; and

    (4) A provision that a purchaser may put a unit only to a specified use is an express warranty that the specified use is lawful.

    b. Neither formal words, such as "warranty" or "guarantee," nor a specific intention to make a warranty, shall be necessary to create an express warranty of quality, but a statement purporting to be merely an opinion or commendation of the real estate or its value shall not create a warranty.

    c. Any conveyance of a unit transfers to the purchaser all express warranties of quality made by previous sellers.

    46:8E-75. Statute of limitations for warranties.

    a. Unless the limitation period is tolled under R.S.46:8E-57 or affected by subsection d. of this section, a judicial proceeding for breach of any obligation arising under R.S.46:8E-71, or the warranties provided under "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.) must be commenced within six years after the cause of action accrues, but the parties may agree to reduce the period of limitation to not less than two years. With respect to a unit that may be occupied for residential use, an agreement to reduce the period of limitation must be evidenced by a separate instrument executed by the purchaser.

    b. Subject to subsection c. of this section, a cause of action for breach of warranty of quality, regardless of the purchaser's lack of knowledge of the breach, shall accrue:

    (1) As to a unit, at the time the purchaser to whom the warranty is first made enters into possession if a possessory interest was conveyed or at the time of acceptance of the instrument of conveyance if a nonpossessory interest was conveyed; and

    (2) As to each common element, at the time the common element is completed or, if later, as to (a) a common element that is added to the common interest community by exercise of development rights, at the time the first unit which was added to the condominium by the same exercise of development rights is conveyed to a bona fide purchaser, or (b) a common element within any other portion of the common interest community, at a time the first unit is conveyed to a bona fide purchaser.

    c. If a warranty of quality explicitly extends to future performance or duration of any improvement or component of the common interest community, the cause of action shall accrue at the time the breach is discovered or at the end of the period for which the warranty explicitly extends, whichever is earlier.

    d. During the period of declarant control, the association may, pursuant to R.S.46:8E-81, authorize an independent committee of the executive board to evaluate and enforce by any lawful means warranty claims involving the common elements, and to compromise those claims. If the committee is so created, the limitation period for claims for these warranties shall begin to run from the date of the first meeting of the committee, regardless of when the period of declarant control terminates.

    46:8E-76. Effect of violations on rights of action; Attorney's fees.

     a. If a declarant or any other person subject to this act fails to comply with any of its provisions or any provision of the declaration or bylaws, any person or class of persons adversely affected by the failure to comply shall have a claim for appropriate relief. Punitive damages may be awarded for a willful failure to comply with this act. The court, as appropriate, may award court costs and reasonable attorney's fees.

    b. Parties to a dispute arising under this act, the declaration, or the bylaws may agree to resolve the dispute by any form of binding or nonbinding alternative dispute resolution, but;

    (1) A declarant may agree with the association to do so only after the period of declarant control passes, unless the agreement is made with an independent committee of the executive board elected pursuant to R.S.46:8E-81; and

    (2) An agreement to submit to binding arbitration shall be in a writing signed by the parties.

    46:8E-77. Labeling of promotional material.

    No promotional material may be displayed or delivered to a prospective purchaser which describes or portrays an improvement that is not in existence unless the description or portrayal of the improvement in the promotional material is conspicuously labeled or identified either as "MUST BE BUILT" or as "NEED NOT BE BUILT."

    46:8E-78. Declarant's obligation to complete and restore.

    a. Except for improvements labeled "NEED NOT BE BUILT" the declarant shall complete all recreational and parking facilities or amenities depicted on any site plan or other graphic representation, including any plats or plans prepared pursuant to R.S.46:8E-31, whether or not that site plan or other graphic representation is contained in the public offering statement or in any promotional material distributed by or for the declarant.

    b. The declarant is subject to liability for the prompt repair and restoration, to a condition compatible with the remainder of the common interest community affected by the exercise of rights reserved pursuant to or created by R.S.46:8E-32 to R.S.8E-36, R.S.46:8E-38 and R.S.8E-39.

    46:8E-79. Substantial completion of units.

    In the case of a sale of a unit in which delivery of a public offering statement is required, a contract of sale may be executed, but no interest in that unit may be conveyed, until the declaration is recorded and the unit is substantially completed, as evidenced by an independent licensed architect, surveyor or engineer, or by issuance of a certificate of occupancy authorized by law.

    46:8E-80. Alternative dispute resolution.

    a. An association shall provide for a method of alternative dispute resolution prior to the commencement of any suit in the courts of this State with respect to a matter concerning the enforcement of any term of a declaration recorded pursuant to this act, or under the powers of the executive board.

    b. The requirement to provide for alternative dispute resolution shall not apply to:

    (1) Any suit by the association to enforce the obligation to pay any common expense assessment;

     (2) Any suit by an association to obtain a temporary restraining order (or equivalent emergency equitable relief) and such other ancillary relief as the court may deem necessary in order to maintain the status quo and preserve the association's ability to enforce the provisions of the declaration; or

    (3) Any suit between unit owners seeking redress on the basis of a claim which would constitute a cause of action under the laws of this State in the absence of a claim based on the declaration or bylaws, if the amount in controversy exceeds $5,000.

    The holding of a hearing by the executive board or a committee designated to hear such matters, in accordance with procedures intended to provide for a fair and efficient procedure as set forth in the declaration, bylaws or a resolution validly adopted by the executive board, shall constitute a method of alternative dispute resolution which satisfies the requirements of this section.

    46:4E-81. Phased resolution of claims involving common elements and other improvements to be maintained by association.

    a. During the period of declarant control after the initial election of unit owner board members other than the declarant, the executive board of the association may authorize an independent committee of at least five unit owners other than the declarant to evaluate, compromise and enforce by any lawful means as provided in this section any claims involving the common elements or any other improvements in the common interest community which the association is obligated to maintain. Only members of the executive board elected by the unit owners other than the declarant and other unit owners appointed by those independent members may serve on the committee, and the committee's decisions shall be free of any control by the declarant or any member of the executive board or officer appointed by the declarant. Any vacancies on the committee shall be filled by the independent board members within 30 days, and in the case of any tie votes by such board members, by the vote of the unit owners other than the declarant within 60 days after the vacancy occurs.

    b. If the committee is established and there has been substantial completion of the common elements and public improvements in any phase of the common interest community which are not covered by the performance or maintenance guarantees posted with any governmental agencies having jurisdiction, the committee shall, at the declarant's request, cause such common elements and improvements to be inspected and evaluated for compliance with the declarant's warranty and construction obligations with the assistance of qualified independent engineering and legal consultants selected by the committee. The fees for such consultants shall be paid from funds contributed at closing for such purposes by unit owners other than the declarant or by regular or special common expense assessments or by both; provided, however, that the declarant shall have the option to supplement such funds to the extent that it deems appropriate.

    c. Public improvements to be dedicated to any governmental entity shall be exempt from any direct warranty or construction defect claims by the association or the unit owners other than the declarant, provided that (1) each member of the committee is given at least 14 days prior written notice of any application by the declarant for the release or reduction of any performance or maintenance guarantees and (2) notice of any such application is published in a newspaper having general circulation in the municipality in which the common interest community is located at least 14 days prior to any public hearing or meeting with respect to such application. Acceptance of any such public improvements by the governmental entity to which they are to be dedicated shall be deemed conclusive evidence that such improvements have been satisfactorily completed and the declarant shall have no further obligation with respect to same to the association, any unit owners other than the declarant, or to any governmental agency having jurisdiction.

    d. Within 120 days after the association's receipt of any request for inspection of any phase of the completed common elements or other improvements, the committee shall cause its engineering consultant to inspect the particular completed improvements and render a written evaluation of same to the committee. A copy of the final report, following the committee's review of the initial evaluation, shall be furnished to the declarant within 30 days after the committee's receipt of same. Thereafter, the committee or its designated representatives and the declarant shall conduct one or more joint inspections of the common elements and other improvements covered by the declarant's request and pursue good faith negotiations to resolve any warranty or construction defect claims against the declarant. All fees and related expenses incurred by the committee for engineering and legal consultants shall be paid promptly by the association from available designated funds upon receipt of the committee's written authorization to make such payments.

    e. If a settlement agreement is finalized between the committee and the declarant, the declarant controlled executive board shall have the authority to execute such an agreement and to release the declarant from all liability with respect to the completed common elements and improvements, subject to such terms and conditions as may be acceptable to the committee. Any such settlement agreement and release shall be legally binding upon the association and the unit owners, provided that its form is approved by the independent legal counsel retained by the committee on behalf of the association.

    f. If no settlement agreement is approved by the committee within 180 days after the committee's receipt of the declarant's request for inspection, the parties shall be obligated to proceed to mediation within 30 days thereafter in accordance with the rules of the American Arbitration Association. If no settlement is reached through mediation within 15 days after commencement of same, then the parties shall promptly proceed to non-binding arbitration of any remaining issues in accordance with the rules of the American Arbitration Association and such mediation and non-binding arbitration shall be conditions precedent to any litigation of the warranty and construction defect claims against the developer, which shall also require the approval of a majority of the unit owners other than the declarant. All professional fees and expenses reasonably incurred by the association with regard to the mediation or arbitration or both shall be borne by the non-declarant unit owners and paid by the association promptly upon the receipt of written authorization of the committee.

    g. In the event that no settlement agreement and releases are executed with respect to any phase of completed common elements or improvements during the period of declarant control of the executive board of the association, any statutes of limitation or repose applicable to such phase shall be extended for a period of one year after the assumption of control of the executive board by unit owners other than the declarant. In addition, the declarant controlled board shall not be obligated to commence suit for any such claims during its period of control.

    h. The procedures set forth in this section shall also apply to and be binding upon the declarant and the association after the unit owners other than the declarant assume control of the executive board of the association; provided, however, that the independent unit owner controlled executive board of the association shall not be bound by the recommendations of the committee.

 

    2. This act shall take effect on the first day of the thirteenth month after enactment.

 

 

STATEMENT

 

    This bill is the product of a statewide drafting committee consisting of community association attorneys, developer attorneys, property managers and homeowners. It is a New Jersey version of the Uniform Common Interest Ownership Act (UCIOA) which has been adopted, in full or substantial part, by 12 states. The UCIOA itself is an act of the National Conference of Commissioners on Uniform State Laws. It is a comprehensive, state-of-the-art statute that would provide uniform guidelines for all forms of residential community associations and is generally applicable to condominiums, fee simple multifamily projects, home owner associations and cooperatives.

    Due to the great demand upon available land and its resultant high cost, New Jersey contains a significantly disproportionate number of common interest communities in relation to its population base. Hence, the proliferation of all types of common interest communities calls for the adoption of the most modern, comprehensive law available.

    Originally drafted in 1982, the UCIOA was most recently amended by the Uniform Commissioners in August of 1994 with changes to reflect a small number of modifications recommended by community law practitioners who were knowledgeable of experience under the act. Currently, the only substantive enabling legislation in the state, the "Condominium Act," representing some concepts almost a generation old, deals exclusively with the condominium form of ownership, leaving all other forms without a statutory basis. Without a single "home" for other forms of ownership, some community law issues, for example, find themselves inappropriately a part of the Planned Real Estate Development Full Disclosure Act, a statute often unrelated to such issues.

    The term "common interest community" is used as an inclusive term to encompass any real estate with respect to which a person, by virtue of his ownership in a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance, or improvement of other real estate described in a declaration. Where necessary, specific provisions are included for special needs. For instance, if time shares, leasehold estates, or cooperative projects require specific treatment, the act makes allowance for those forms of ownership. A description of some of the more salient issues that are addressed by the act follow.

    The act addresses the problems inherent in phased developments by allowing developers more flexibility in the planning process to meet changed conditions in the marketplace. At the same time, unit purchasers in phased developments must be specifically informed of the potential risks and consequences if there is modification of the development plan.

    The act encourages and enables developers and unit owners to address and remedy construction defect and warranty claims for construction that has been completed during the period of developer control of an association. The legislation helps to insulate foreclosing construction mortgage lenders from liability for acts of the developer or borrower or both and permits the withdrawal and sale of the undeveloped portions of a distressed or foreclosed project.

    Its uniform provisions should benefit lenders by helping to ensure the adequacy of the legal documents. This is preferred to leaving such documents to the legal skills of the attorneys involved in the project. Further, the act requires associations to furnish purchasers of resale units with disclosure certificates setting forth essential information concerning such matters as association finances, insurance, and code violations. If the association provides the certificate, neither the seller or the real estate broker or sales personnel involved in the transaction will have any liability for any erroneous information in the certificate or for any other matter related to the community, unless the buyer and seller agree otherwise.

    In addition, the act makes clear that associations also have the authority to impose fines and late charges against delinquent unit owners. That will resolve the problems created by the holdings in Walker v. Briarwood Condo Association, 274 N.J. Super 422 (App. Div. 1994) and in Holbert v. Great Gorge Village, 281 N.J. Super 222 (Ch. Div. 1994). The act further makes clear that associations have, among other powers, the power to grant easements over common property, pledge assessment income in connection with loans, and require non-binding alternative dispute resolution as a prerequisite to litigation.

    In conclusion, the UCIOA contains numerous benefits over existing law. Its many "default" provisions will ensure against substantially inadequate governing documents. Its specific terms identifying the powers of the associations should eliminate unanticipated judicial holdings resulting from enabling legislation that has failed to address basic issues. And, finally, it will provide a statutory basis for all associations, not just condominiums.

 

 

 

The "Uniform Common Interest Ownership Act.