SENATE, No. 575

 

STATE OF NEW JERSEY

 

INTRODUCED JANUARY 29, 1996

 

 

By Senator SINAGRA

 

 

An Act concerning condominium rules and amending and supplementing P.L.1969, c.257.

 

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

 

    1. Section 13 of P.L.1969, c.257 (C.46:8B-13) is amended to read as follows:

    13. The administration and management of the condominium and condominium property and the actions of the association shall be governed by bylaws which shall initially be recorded with the master deed and shall provide, in addition to any other lawful provisions, for the following:

    (a) The form of administration, indicating the titles of the officers and governing board of the association, if any, and specifying the powers, duties and manner of selection, removal and compensation, if any, of officers and board members. If the bylaws provide that any of the powers and duties of the association as set forth in sections 14 and 15 of P.L.1969, c.257 (C.46:8B-14 and 46:8B-15) be exercised through a governing board elected by the membership of the association, or through officers of the association responsible to and under the direction of such a governing board, all meetings of that governing board, except conference or working sessions at which no binding votes are to be taken, shall be open to attendance by all unit owners, and adequate notice of any such meeting shall be given to all unit owners in such manner as the bylaws shall prescribe; except that the governing board may exclude or restrict attendance at those meetings, or portions of meetings, dealing with (1) any matter the disclosure of which would constitute an unwarranted invasion of individual privacy; (2) any pending or anticipated litigation or contract negotiations; (3) any matters falling within the attorney-client privilege, to the extent that confidentiality is required in order for the attorney to exercise his ethical duties as a lawyer, or (4) any matter involving the employment, promotion, discipline or dismissal of a specific officer or employee of the association. At each meeting required under this subsection to be open to all unit owners, minutes of the proceedings shall be taken, and copies of those minutes shall be made available to all unit owners before the next open meeting.

    (b) The method of calling meetings of unit owners, the percentage of unit owners or voting rights required to make decisions and to constitute a quorum, but such bylaws may nevertheless provide that unit owners may waive notice of meetings or may act by written agreement without meetings.

    (c) The manner of collecting from unit owners their respective shares of common expenses and the method of distribution to the unit owners of their respective shares of common surplus or such other application of common surplus as may be duly authorized by the bylaws.

    (d) The method by which the bylaws may be amended, provided that no amendment shall be effective until recorded in the same office as the then existing bylaws. The bylaws may also provide a method for the adoption, amendment and enforcement of reasonable administrative rules and regulations, including the imposition of fines and late fees which may be enforced as a lien pursuant to section 21 of P.L.1969, c.257 (C.46:8B-21) relating to the operation, use, maintenance and enjoyment of the units and of the common elements including limited common elements.

(cf: P.L.1991, c.48, s.1)

 

    2. Section 14 of P.L.1969, c.257 (C.46:8B-14) is amended to read as follows:

    14. The association, acting through its officers or governing board, shall be responsible for the performance of the following duties, the costs of which shall be common expenses:

    (a) The maintenance, repair, replacement, cleaning and sanitation of the common elements.

    (b) The assessment and collection of funds for common expenses and the payment thereof.

    (c) The adoption, distribution, amendment and enforcement of rules governing the use and operation of the condominium and the condominium property and the use of the common elements, including but not limited to the imposition of reasonable fines, assessments and late fees upon unit owners, if authorized by the master deed or bylaws, subject to the right of a majority of unit owners to change any such rules.

    (d) The maintenance of insurance against loss by fire or other casualties normally covered under broad-form fire and extended coverage insurance policies as written in this State, covering all common elements and all structural portions of the condominium property and the application of the proceeds of any such insurance to restoration of such common elements and structural portions if such restoration shall otherwise be required under the provisions of this act or the master deed or bylaws.

    (e) The maintenance of insurance against liability for personal injury and death for accidents occurring within the common elements, whether limited or general, and the defense of any actions brought by reason of injury or death to person, or damage to property, occurring within such common elements and not arising by reason of any act or negligence of any individual unit owner.

    (f) The master deed or by-laws may require the association to protect blanket mortgages, or unit owners and their mortgagees, as their respective interest may appear, under the policies of insurance provided under clauses (d) and (e) of this section, or against such risks with respect to any or all units, and may permit the assessment and collection from a unit owner of specific charges for insurance coverage applicable to his unit.

    (g) The maintenance of accounting records, in accordance with generally accepted accounting principles, open to inspection at reasonable times by unit owners. Such records shall include:

    (i) A record of all receipts and expenditures.

    (ii) An account for each unit setting forth any shares of common expenses or other charges due, the due dates thereof, the present balance due, and any interest in common surplus.

    (h) Nothing herein shall preclude any unit owner or other person having an insurable interest from obtaining insurance at his own expense and for his own benefit against any risk, whether or not covered by insurance maintained by the association.

    (i) Such other duties as may be set forth in the master deed or by-laws.

    (j) An association shall exercise its powers and discharge its functions in a manner that protects and furthers or is not inconsistent with the health, safety and general welfare of the residents of the community.

    (k) An association shall provide a fair and efficient procedure for the resolution of housing-related disputes between individual unit owners and the association, and between unit owners which shall be readily available as an alternative to litigation. A person other than an officer of the association, a member of the governing board or a unit owner involved in the dispute shall be made available to resolve the dispute. A unit owner may notify the Commissioner of Community Affairs if an association does not comply with this subsection. The commissioner shall have the power to order the association to provide a fair and efficient procedure for the resolution of disputes.

(cf: P.L.1995, c.313, s.1)

 

    3. Section 15 of P.L.1969, c.257 (C.46:8B-15) is amended to read as follows:

    15. Subject to the provisions of the master deed, the by-laws, rules and regulations and the provisions of this act or other applicable law, the association shall have the following powers:

    (a) Whether or not incorporated, the association shall be an entity which shall act through its officers and may enter into contracts, bring suit and be sued. If the association is not incorporated, it may be deemed to be an entity existing pursuant to this act and a majority of the members of the governing board or of the association, as the case may be, shall constitute a quorum for the transaction of business. Process may be served upon the association by serving any officer of the association or by serving the agent designated for service of process. Service of process upon the association shall not constitute service of process upon any individual unit owner.

    (b) The association shall have access to each unit from time to time during reasonable hours as may be necessary for the maintenance, repair or replacement of any common elements therein or accessible therefrom or for making emergency repairs necessary to prevent damage to common elements or to any other unit or units. The association may charge the unit owner for the repair of any common element damaged by the unit owner or his tenant.

     (c) The association may purchase units in the condominium and otherwise acquire, hold, lease, mortgage and convey the same. It may also lease or license the use of common elements in a manner not inconsistent with the rights of unit owners.

    (d) The association may acquire or enter into agreements whereby it acquires leaseholds, memberships or other possessory or use interests in lands or facilities including, but not limited to country clubs, golf courses, marinas and other recreational facilities, whether or not contiguous to the condominium property, intended to provide for the enjoyment, recreation or other use or benefit of the unit owners. If fully described in the master deed or by-laws, the fees, costs and expenses of acquiring, maintaining, operating, repairing and replacing any such memberships, interests and facilities shall be common expenses. If not so described in the master deed or by-laws as originally recorded, no such membership interest or facility shall be acquired except pursuant to amendment of or supplement to the master deed or by-laws duly adopted as provided therein and in this act. In the absence of such amendment or supplement, if some but not all unit owners desire any such acquisition and agree to assume among themselves all costs of acquisition, maintenance, operation, repair and replacement thereof, the association may acquire or enter into an agreement to acquire the same as limited common elements appurtenant only to the units of those unit owners who have agreed to bear the costs and expenses thereof. Such costs and expenses shall be assessed against and collected from the agreeing unit owners in the proportions in which they share as among themselves in the common expenses in the absence of some other unanimous agreement among themselves. No other unit owner shall be charged with any such cost or expense; provided, however, that nothing herein shall preclude the extension of the interests in such limited common elements to additional unit owners by subsequent agreement with all those unit owners then having an interest in such limited common elements.

    (e) The association may levy and collect assessments duly made by the association for a share of common expenses or otherwise, including any other monies duly owed the association, upon proper notice to the appropriate unit owner, together with interest thereon, late fees and reasonable attorneys' fees, if authorized by the master deed or by-laws.

    (f) If authorized by the master deed or by-laws, the association may impose reasonable fines upon unit owners for failure to comply with provisions of the master deed, by-laws or rules and regulations, subject to the following provisions:

    A fine shall not be imposed unless the unit owner is given written notice of the action taken and of the alleged basis for the action, and is advised of the right to participate in a dispute resolution procedure in accordance with subsection (k) of section 14 of P.L.1969, c.257 (C.46:8B-14). A unit owner who does not believe that the dispute resolution procedure has satisfactorily resolved the matter shall not be prevented from seeking a judicial remedy in a court of competent jurisdiction.

    (g) Such other powers as may be set forth in the master deed or by-laws, if not prohibited by P.L.1969, c.257 (C.46:8B-1 et seq.) or any other law of this State.

(cf: P.L.1969, c.257, s.15)

 

    4. Section 16 of P.L.1969, c.257 (C.46:8B-16) is amended to read as follows:

    16. (a) No unit owner, except as an officer of the association, shall have any authority to act for or bind the association. An association, however, may assert tort claims concerning the common elements and facilities of the development as if the claims were asserted directly by the unit owners individually.

    (b) Failure to comply with the by-laws and the rules and regulations governing the details of the use and operation of the condominium, the condominium property and the common elements, and the quality of life therein, in effect from time to time, and with the covenants, conditions and restrictions set forth in the master deed or in deeds of units, shall be grounds for reasonable fines and assessments upon unit owners maintainable by the association, or for an action for the recovery of damages [or], for injunctive relief, or [both] for a combination thereof, maintainable by the association or by any other unit owner or by any person who holds a blanket mortgage or a mortgage lien upon a unit and is aggrieved by any such noncompliance.

    (c) A unit owner shall have no personal liability for any damages caused by the association or in connection with the use of the common elements. A unit owner shall be liable for injuries or damages resulting from an accident in his own unit in the same manner and to the same extent as the owner of any other real estate.

    (d) A unit owner may notify the Commissioner of Community Affairs upon the failure of an association to comply with requests made under subsection (g) of section 14 of P.L.1969, c.257 (C.46:8B-14) by unit owners to inspect at reasonable times the accounting records of the association. Upon investigation, the commissioner shall have the power to order the compliance of the association with such a request.

(cf: P.L.1995, c.313, s.2)

 

    5. Section 21 of P.L.1969, c.257 (C.46:8B-21) is amended to read as follows:

    21. The association shall have a lien on each unit for any unpaid assessment duly made by the association for a share of common expenses or otherwise, including any other moneys duly owed the association, upon proper notice to the appropriate unit owner, together with interest thereon and, if authorized by the master deed or by-laws, late fees, fines and reasonable attorney's fees ; provided however that an association shall not record a lien in which the unpaid assessment consists solely of late fees. Such lien shall be effective from and after the time of recording in the public records of the county in which the unit is located of a claim of lien stating the description of the unit, the name of the record owner, the amount due and the date when due. Such claim of lien shall include only sums which are due and payable when the claim of lien is recorded and shall be signed and verified by an officer or agent of the association. Upon full payment of all sums secured by the lien, the party making payment shall be entitled to a recordable satisfaction of lien. All such liens shall be subordinate to any lien for past due and unpaid taxes, the lien of any mortgage to which the unit is subject and to any other lien recorded prior to the time of recording of the claim of lien.

    Upon any voluntary conveyance of a unit, the grantor and grantee of such unit shall be jointly and severally liable for all unpaid assessments pertaining to such unit duly made by the association or accrued up to the date of such conveyance without prejudice to the right of the grantee to recover from the grantor any amounts paid by the grantee, but the grantee shall be exclusively liable for those accruing while he is the unit owner.

    Any unit owner or any purchaser of a unit prior to completion of a voluntary sale may require from the association a certificate showing the amount of unpaid assessments pertaining to such unit and the association shall provide such certificate within 10 days after request therefor. The holder of a mortgage or other lien on any unit may request a similar certificate with respect to such unit. Any person other than the unit owner at the time of issuance of any such certificate who relies upon such certificate shall be entitled to rely thereon and his liability shall be limited to the amounts set forth in such certificate.

    If a mortgagee of a first mortgage of record or other purchaser of a unit obtains title to such unit as a result of foreclosure of the first mortgage, such acquirer of title, his successors and assigns shall not be liable for the share of common expenses or other assessments by the association pertaining to such unit or chargeable to the former unit owner which became due prior to acquisition of title as a result of the foreclosure. [Such] Any remaining unpaid share of common expenses and other assessments, except assessments derived from late fees or fines, shall be deemed to be common expenses collectible from all of the remaining unit owners including such acquirer, his successors and assigns.

    Liens for unpaid assessments may be foreclosed by suit brought in the name of the association in the same manner as a foreclosure of a mortgage on real property. The association shall have the power, unless prohibited by the master deed or by-laws to bid [in] on the unit at foreclosure sale, and to acquire, hold, lease, mortgage and convey the same. Suit to recover a money judgment for unpaid assessments may be maintained without waiving the lien securing the same.

(cf: P.L.1969, c.257, s.21)

 

     6. (New section) Any bylaws provision providing for the imposition of reasonable fines and late fees that was adopted prior to the effective date of and is not inconsistent with the provisions of P.L., c. (C. )(pending before the Legislature as this bill) and any fine levied by a condominium association against a unit owner in accordance with its bylaws prior to the effective date of P.L. , c. (C. )(pending before the Legislature as this bill) is hereby validated.

 

    7. This act shall take effect immediately.

 

 

STATEMENT

 

    This bill would provide statutory authority for provisions found in condominium association master deeds and by-laws that allow for the imposition of reasonable fines on unit owners who fail to comply with the master deed, by-laws, or rules and regulations of the condominium. The bill also specifically indicates that condominium associations may include provisions in their master deeds or by-laws for the imposition of late fees upon unit owners who fail to pay monies duly owed the association after proper notice. Furthermore, the bill provides that by-laws may provide for rules including the imposition of fines and late fees which may be enforced as a lien pursuant to section 21 of P.L.1969, c.257 (C.46:8B-21), except that an unpaid assessment consisting solely of late fees shall not be the basis for recordation of a lien. Section 6 of the bill would specifically validate by-law provisions that provided for the imposition of reasonable fines and late fees that were adopted prior to the bill's effective date so long as those provisions are not inconsistent with the provisions of the bill and would also validate fines levied pursuant to such by-law provisions.

    This bill is a response to the decision rendered in Walker v. Briarwood Condo Ass'n., 274 N.J.Super. 422 (App. Div. 1994) which held that the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.) does not empower condominium associations to enforce their rules and regulations by imposing fines or enforcing fines imposed on unit owners by the placement of liens on units. In Holbert v. Great Gorge Village, 281 N.J.Super. 222 (Ch. Div. 1994), the court followed the decision in Walker by finding that a condominium association exceeded statutory authority by charging a unit owner late fees.

    The bill would circumscribe the discretion of condominium associations that wish to provide for the imposition of fines in their governing documents, except that a fine shall not be imposed unless the unit owner is given written notice of the action taken and of the alleged basis for the action, and is advised of the right to participate in a dispute resolution procedure in accordance with subsection (k) of section 14 of P.L.1969, c.257 (C.46:8B-14). A unit owner who does not believe that the dispute resolution procedure has satisfactorily resolved the matter shall not be prevented from seeking a judicial remedy in a court of competent jurisdiction.

    In order to forestall future court decisions from holding that actions of condominium associations exceed statutory authority, the bill would provide associations with such other powers as may be set forth in the master deed or by-laws, if not prohibited by the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.), or any other law of this State.

    The bill would also amend the "Condominium Act" to specify it to be a duty of condominium associations to exercise their powers and discharge their functions in a manner that protects and furthers and is not inconsistent with the health, safety and general welfare of the residents of the community.

    Finally, the bill would provide that if a mortgagee of a first mortgage of record or other purchaser of a unit obtains title to the unit as a result of foreclosure of the first mortgage, the acquirer of the title, his successors and assigns shall not be liable for the share of common expenses or other assessments by the association pertaining to the unit or chargeable to the former unit owner which became due prior to acquisition of title as a result of the foreclosure.

 

 

                             

Clarifies methods for condominium associations to enforce rules and collect assessments.