SENATE, No. 2016
STATE OF NEW JERSEY
211th LEGISLATURE
INTRODUCED NOVEMBER 8, 2004
Sponsored by:
Senator SHIRLEY K. TURNER
District 15 (Mercer)
Senator RONALD L. RICE
District 28 (Essex)
SYNOPSIS
"Common Interest Community and Homeowners' Association Act."
CURRENT VERSION OF TEXT
As introduced.
(Sponsorship Updated As Of: 2/15/2005)
An Act concerning common interest communities and homeowners' associations, and amending and supplementing P.L.1969, c.257 (C.46:8B-1 et seq.) and amending and repealing various parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 1 of P.L.1969, c.257 (C.46:8B-1) is amended to read as follows:
1. This act shall be known and may be cited as the ["Condominium] "Common Interest Community and Homeowners' Association Act."
(cf: P.L.1969, c.257, s.1)
2. (New section) The Legislature finds and declares:
a. The form of home ownership in which some property in a development is owned in common by all owners in the development, such as condominiums, cooperatives and planned real estate developments, is the fastest growing form of ownership in the country, and widely used throughout New Jersey.
b. New Jersey, having attained the status of the most densely populated State in the country, should encourage the use of this type of property ownership, since it permits a high density of land use.
c. While this form of ownership offers many benefits to the owners living in these communities, such as pooled maintenance and management costs, owners in some of these communities are registering complaints that the governing boards of their homeowners' associations are not following proper business rules, their bylaws or democratic principles in governing the community.
d. Governing boards in many planned developments are requesting the same statutory governmental powers that have been granted by the Legislature to condominium governing boards, in order to reduce costs and more efficiently manage their common interest communities.
e. The very nature of a homeowners' association is to provide governance over and maintenance of the real property of a common interest community that is owned in common by all of the residents. New Jersey statutes require these associations to be formed by the developer, but have not provided the necessary detail to guide these special corporations in carrying out their duties once the control of the community has shifted to the owners. Homeowners' association governing boards have relied on corporation law to fill in many of the gaps that the "Condominium Act," or other statutes, do not address. Corporation law, however, is geared towards businesses or charitable organizations. Homeowners' associations are technically not either; they are, in fact, the functional equivalent of neighborhood governments. Accountability measures are needed to ensure that such quasi-governmental entities are operating democratically and guided by principles of fairness that benefit all of the owner-members of these communities.
f. Accordingly, the Legislature finds it in the public interest that:
(1) common interest community associations be held to standards of due process, open governance, democracy and fundamental fairness, similar to those to which governmental bodies are held;
(2) a uniform, low-cost, fair and efficient system for resolving disputes between owners and associations be implemented;
(3) associations be required to discharge their obligations to protect the health, safety and welfare of homeowners and manage their community property subject to the assistance and oversight of the State;
(4) a new type of corporate entity which embodies these standards, responsibilities and powers be created;
g. It is the purpose of this legislation to provide for specific powers and responsibilities for all types of owner-controlled homeowners' association boards, and to provide for increased State assistance and oversight of these governing boards, in order to protect the rights of all homeowners in these communities to self-govern democratically, but without unduly impairing the ability of such associations to perform their functions.
3. Section 3 of P.L.1969, c.257 (C.46:8B-3) is amended to read as follows:
3. The following words and phrases as used in [this act] P.L.1969, c.257 and supplements thereto shall have the meanings set forth in this section unless the context clearly indicates otherwise:
"Alternative dispute resolution" means the utilization, outside of a court of law, of problem solving methods or techniques to resolve disputes between parties as set forth in section 55 of P.L. , c. (C. )(now before the Legislature as this bill).
"Arbitration" means a particular problem solving technique involving the hearing and determination of a dispute between parties and includes any arbitration, whether or not administered by a permanent arbitral institution.
[a.] "Assigns" means any person to whom rights of a unit owner have been validly transferred by lease, mortgage or otherwise.
[b. "Association"] "Association," "unit owners' association," or "homeowners' association," means the [entity responsible for the administration of a condominium, which entity may be incorporated or unincorporated] association organized for the purpose of management of the common elements and facilities of any condominium, cooperative, retirement community, or other planned real estate development, or a council of co-owners pursuant to the "Horizontal Property Act," P.L.1963, c.168, (C.46:8A-1 et seq.), regardless of when such entity was organized or the planned real estate development was built, and subsequent to the effective date of P.L. , c. (C. ) shall mean a common interest community association. The term shall also include a nonresidential association or a recreational community if an association was formed to manage commonly-owned elements in the community, and owners are obligated to maintain those commonly-owned elements pursuant to covenants in each owners' individual deed and in a deed from which those individual deeds devolved.
"Board" means the governing board of an association.
[c.] "Bylaws" means the governing regulations [adopted under this act for the administration and management of the property] of an association adopted pursuant to P.L.1969, c.257 (C.46:8B-1 et seq.), P.L. , c. (C. )(now before the Legislature as this bill), or any other law concerning the regulation or management of a homeowners' association and the common elements of a common interest community and any properly recorded amendments thereto.
"Certificate of incorporation" means the original certificate of incorporation or any other instrument filed creating an association and or issued under any statute to form a domestic or foreign corporation, as amended, supplemented or restated by certificates of amendment, merger or consolidation or by other certificates or instruments filed or issued under any statute.
[d.] "Commissioner" means the Commissioner of Community Affairs.
"Common elements" means:
[(i) the land described in the master deed;] a. In the case of a condominium or a cooperative, all portions of the common interest community other than the units, including:
[(ii) as to] any improvement[,] consisting of the foundations, structural and bearing parts, supports, main walls, roofs, basements, halls, corridors, lobbies, stairways, elevators, entrances, exits and other means of access, excluding any improvement specifically reserved or limited to a particular unit or group of units;
[(iii)] yards, gardens, walkways, parking areas and driveways, excluding any specifically reserved or limited to a particular unit or group of units;
[(iv)] portions of the land or any improvement or appurtenance reserved exclusively for the management, operation or maintenance of the common elements or of the [condominium] common interest property;
[(v)] installations of all central services and utilities;
[(vi)] all apparatus and installations existing or intended for common use;
[(vii)] all other elements of any improvement necessary or convenient to the existence, management, operation, maintenance and safety of the [condominium] common interest property or normally in common use; and
[(viii)] such other elements and facilities as are designated in the master deed or declaration as common elements;
b. in a planned community, any real estate within a planned community which is owned or leased by an association, other than a unit;
c. in all common interest communities, any other interests in real estate for the benefit of unit owners which are subject to the recorded governing documents, and all other elements of any improvement necessary to the existence, management, operation, maintenance and safety of the common interest community or normally in common use, including any equipment or improvements necessary for fire safety, including, but not limited to, sprinkler and alarm systems , or such other elements and facilities as are designated in the master deed as common elements; and
[d.] In the case of a horizontal property regime, those elements which fulfill the definition of general common elements and limited common elements pursuant to section 2 of P.L.1963, c.168 (C.46.:8A-2).
[e.] "Common expenses" means expenses for which the unit owners are proportionately liable, including but not limited to:
(i) all expenses of administration, maintenance, repair and replacement of the common elements, including allocations to reserve accounts;
(ii) expenses agreed upon as common by all unit owners; and
(iii) expenses declared common by provisions of [this act] P.L.1969, c.257 (C.46:8B-1 et seq.) or P.L. , c. (C. ) (now before the Legislature as this bill) or by the [master deed or by the bylaws] governing documents as authorized by a vote of a majority of the owners.
"Common interest community" and "common interest property" 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" shall not include holding a leasehold interest of less than 20 years in a unit, including renewal options. Such communities shall include horizontal property regimes, condominiums, planned real estate developments, including retirement communities, and cooperatives or mutual housing corporations. If a homeowners' association is formed to manage commonly-owned elements of a recreational community as defined in this section, then that community shall be deemed to be a common interest community.
[f.] "Common receipts" means:
(i) rent and other charges derived from leasing or licensing the use of common elements;
(ii) funds collected from unit owners as common expenses or otherwise; and
(iii) receipts designated as common by the provisions of [this act] P.L.1969, c.257 or by the [master deed or the bylaws] governing documents.
[g.] "Common surplus" or "surplus" means the excess of all common receipts over all common expenses.
[h.] "Condominium" means the form of ownership of real property under a master deed providing for ownership by one or more owners of units of improvements together with an undivided interest in common elements appurtenant to each such unit.
[i.] "Condominium property" means the land covered by the master deed, whether or not contiguous and all improvements thereon, all owned either in fee simple or under lease, and all easements, rights and appurtenances belonging thereto or intended for the benefit thereof.
"CPI" means the average annual increase, expressed as a decimal, in the consumer price index for the New York City and Philadelphia areas during the fiscal year preceding the prebudget year as reported by the United States Department of Labor
"Cooperative" means any system of land ownership and possession in which the fee title to the land and structure is owned by a corporation or other legal entity in which the share-holders or other co owners each also have a long term proprietary lease or other long term arrangement of exclusive possesession for a specific unit of occupancy space located within the same structure.
"Corporation" means a homeowners' or other common interest community association corporation incorporated under P.L. , c. (C. ) (now before the Legislature as this bill), or existing on its date of enactment and organized under any law of this State for the purposes of managing and maintaining common elements.
"Customary association assessment" means an assessment payable in periodic installments to an association by a member for regular and usual operating and common area expenses pursuant to the association's annual budget, but shall not include any late charges, fines or penalties, interest or any fees or costs for the collection or enforcement of the assessment or any lien arising from the assessment, nor shall it include any special assessment.
[j.] "Declarant" or "Developer" means the person or persons who create a [condominium] type of common interest community or lease, sell or offer to lease or sell a [condominium or units of a condominium] unit in a common interest community in the ordinary course of business, but does not include an owner or lessee of a unit who has acquired his unit for his own occupancy.
"Declaration" means any instruments, however denominated, that create a common interest community, including any amendments to those instruments.
"Department" means the Department of Community Affairs
"Governing documents" means the recorded declaration of covenants for a common interest community, and all duly adopted and recorded amendments, supplements, and recorded exhibits thereto, and the articles of incorporation and bylaws of the homeowners' or owners' association, and any duly adopted amendments thereto.
"Governing board" means the board elected by and responsible to the members of the association through which the powers of the association shall be exercised and its functions performed.
[k.] "Limited common elements" means those common elements which are for the use of one or more specified units to the exclusion of other units.
[l.] "Majority" or "majority of the unit owners" means the owners of[ more than 50%] 51% or more of the aggregate in interest of the undivided ownership of the common elements as specified in the master deed. If a different percentage of unit owners is required to be determined under P.L.1969, c.257(C.46:8B-1 et seq.) or under the master deed, declaration, governing documents or bylaws for any purpose, such different percentage of owners shall mean the owners of an equal percentage of the aggregate in interest of the undivided ownership of the common elements as so specified.
[m.] "Master deed" means a type of governing document and the master deed recorded under the terms of section 8 of [this act] P.L.1969, c.257(C.46:8B-1 et seq.), as such master deed may be amended or supplemented from time to time, being the instrument by which the owner in fee simple or lessee of the property submits it to the provisions of this chapter.
"Mediation" means a process in which a neutral party assists and facilitates two or more parties to a controversy in reaching a mutually acceptable resolution of the controversy and includes all contacts between a mediator and any party or agent of a party, until such time as a resolution is agreed to by the parties or the mediation process is terminated.
"Member" means the record owner of legal title to a unit in a common interest community.
"Officer" means a member of a governing board holding a specific title in the corporation such as president, vice president or treasurer.
"Ombudsman" means the Office of the Ombudsman for Homeowners and Associations created in the Department of Community Affairs under section 50 of P.L. , c. (C. )(now before the Legislature as this bill).
"Owner-controlled board" means a homeowner's association governing board on which elected homeowners represent a majority of the board members.
[n.] "Person" means an individual, firm, corporation, partnership, association, trust or other legal entity, or any combination thereof.
"Pre budget year" means the fiscal year preceding the year in which the association budget is implemented.
"Reserves" means the collection of and deposit into a separate bank account of an estimated amount of funds necessary for maintenance or repairs to common elements or for capital improvements properly undertaken in accordance with P.L.1969, c.257 (C.46:8B-1et seq.) or P.L. , c. (C. ) (now before the Legislature as this bill).
"Rules" means the rules for the regulation or management of a common interest community as adopted by an association.
"Special assessment" means an assessment other than a customary association assessment, and shall exclude late fees or fines.
"Trustee" means any member of the governing board of a corporation, whether designated as a trustee, director, manager, or by any other title.
[o.] "Unit" means a [part of the condominium property designed or intended for any type of independent use, having a direct exit to a public street or way or to a common element or common elements leading to a public street or way or to an easement or right of way leading to a public street or way, and includes the proportionate undivided interest in the common elements and in any limited common elements assigned thereto in the master deed] physical portion of the common interest community designated for separate ownership or occupancy, the boundaries of which are described pursuant to the master deed or declaration, or any amendment thereof.
[p.] "Unit deed" means a deed of conveyance of a unit in recordable form.
[q.] "Unit owner" means [the person or persons owning a unit in fee simple] 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, as of the date of the recording of the declaration, the owner of any unit created by the declaration. In a cooperative, the declarant shall be the owner of any unit to which allocated interests have been allocated until that unit has been conveyed to another person, at which time the latter shall be considered the unit owner.
(cf: P.L.1979, c.157, s.1)
4. Section 8 of P.L.1969, c.257 (C.46:8B-8) is amended to read as follows:
8. a. A condominium [may] shall be created and established by recording in the office of the county recording officer of the county wherein the land is located a master deed executed and acknowledged by all owners or the lessees setting forth the matters required by section 9 of P.L.1969, c.257 (C.46:8B-9) [and], section 3 of P.L.1960, c.141 (C.46:23-9.11) and the "Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.).
b. A cooperative shall be created and established pursuant to the "The Cooperative Recording Act of New Jersey," P.L.1987, c.381 (C.46:8D-1 et seq.) and pursuant to the provisions of the "Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.).
c. A planned real estate development shall be established in accordance with the provisions of the "Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.).
The provisions of the["Condominium] "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B 1 et seq.) shall apply [solely] to real property of interests therein which have been subjected to the terms of P.L.1969, c.257 [as provided in this section], or to P.L.1977, c.419 and shall apply to any other real property interests for which the owners are obligated to maintain commonly-owned elements pursuant to covenants in each owners' individual deed and in a deed from which those individual deeds devolved, including, but not limited to, condominiums, cooperatives or mutual housing corporations or planned real estate developments.
(cf: P.L.1997, c.211, s.3)
5. Section 9 of P.L.1969, c.257 (C.46:8B-9) is amended to read as follows:
9. The master deed or declaration shall set forth, or contain exhibits setting forth the following matters:
(a) A statement submitting the land described in the master deed or declaration to the provisions of the["Condominium] "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B-1 et seq.) and the "Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.).
(b) A name, and if a condominium, including the word "condominium" or followed by the words "a condominium," and if a common interest community, followed by the words "common interest community," by which the property shall thereafter be identified.
(c) A legal description of the land.
(d) A survey of the [condominium] community interest property in sufficient detail to show and identify common elements, each unit and their respective locations and approximate dimensions. The plans shall bear a certification by a land surveyor, professional engineer or architect authorized and qualified to practice in this State setting forth that the plans constitute a correct representation of the improvements described. The survey and plans shall constitute a condominium plan as defined in section 2 of P.L.1960, c.141 (C.46:23-9.10).
(e) An identification of each unit by distinctive letter, name or number so that each unit may be separately described thereafter by such identification.
(f) A description of the common elements and limited common elements, if any.
(g) The proportionate undivided interests in the common elements and limited common elements, if any, appurtenant to each unit. These interests shall in each case be stated as percentages aggregating 100%, or as fractional interests, which in the aggregate shall equal the whole.
(h) The voting rights of unit owners.
(i) By laws.
(j) A method of amending and supplementing the master deed or declaration, which shall require the recording of any amendment or supplement in the same office as the master deed before it shall become effective.
(k) The name and nature of the association [and if the association is not incorporated] which shall be incorporated in accordance with P.L.1969, c.257 (C.46:8B-1 et seq.) and sections 35 through 65 of P.L. , c. (C. )(now before the Legislature as this bill) if organized, or deemed to be incorporated as of the effective date of P.L. , c. (C. ) (now before the Legislature as this bill) if not previously incorporated as a nonprofit or for profit corporation, the name and residence address, within this State of the person designated as agent to receive service of process upon the association.
(l) The proportions or percentages and manner of sharing common expenses and owning common surplus, and if a cooperative, the method of allocation of shares.
(m) Any other provisions, not inconsistent with the "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257(C.46:8B-1 et seq.), as amended and supplemented, as may be desired, including but not limited to restrictions or limitations upon the use, occupancy, transfer, leasing or other disposition of any unit (provided that any restriction or limitation shall be otherwise permitted by law) and limitations upon the use of common elements.
(cf: P.L.1997, c.211, s.4)
6. Section 10 of P.L.1969, c.257 (C.46:8B-10) is amended to read as follows:
10. A deed, mortgage, lease or other instrument pertaining to a unit shall have the same force and effect in regard to such unit as would be given to a like instrument pertaining to other real property which has been similarly made, executed, acknowledged and recorded. A unit deed shall contain the following:
(a) The name of the [condominium] common interest community as set forth in the master deed or declaration, the name of the political subdivision and county in which the [condominium] common interest property is located and a reference to the recording office, the book and page where the master deed or declaration and any amendment thereto are recorded.
(b) The unit designation as set forth in the master deed or declaration.
(c) A reference to the last prior unit deed conveying such unit, if previously conveyed.
(d) A statement of the proportionate undivided interest in the common elements appurtenant to such unit as set forth in the master deed, declaration, or any amendments thereof.
(e) Any other matters, consistent with this act, which the parties may deem appropriate.
(cf: P.L.1969, c.257, s.10)
7. Section 11 of P.L.1969, c.257 (C.46:8B-11) is amended to read as follows:
11. The master deed or declaration may be amended or supplemented in the manner set forth [therein] in sections 35 through 68 of P.L. , c. (C. )(now before the Legislature as this bill), which shall require a vote of a majority of the owners, unless the amendment or supplement is required in order to comply with the provisions of P.L. , c. (C. )(now before the Legislature as this bill) or other law. Unless otherwise provided therein, no amendment shall change a unit unless the owner of record thereof and the holders of record of any liens thereon shall join in the execution of the amendment or execute a consent thereto with the formalities of a deed. Notwithstanding any other provision of this act or the master deed or declaration, the designation of the agent for service of process named in the master deed or declaration may be changed by an instrument executed by the association and recorded in the same office as the master deed or declaration, as well as with the official State recording office for corporations.
(P.L.1969, c.257, s.11)
8. Section 12 of P.L.1969, c.257 (C.46:8B-12) is amended to read as follows:
12. The association provided for by the master deed, declaration or governing documents shall be responsible for the administration and management of the [condominium and condominium property] common elements within the common interest community [, including but not limited to the conduct of all activities of common interest to the unit owners. The association may be any entity recognized by the laws of New Jersey, including but not limited to a business corporation or a nonprofit corporation]. On or after the effective date of P.L. , c. (C. )(now before the Legislature as this bill), a common interest community homeowners' association shall be organized as a nonprofit corporation pursuant to sections 35 through 63 of P.L. , c. (C. ) (now before the Legislature as this bill). An existing homeowners' association incorporated prior to that date as a for profit or a nonprofit corporation shall not be required to re-incorporate, but shall be subject instead to the provisions of sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill) as if incorporated pursuant to those sections, and shall be subject to the registration provisions of section 48 of P.L. , c. (C. )(now before the Legislature as this bill). Any unincorporated homeowners' association in existence on the effective date of P.L. , c. (C. )(now before the Legislature as this bill) shall be required to incorporate in accordance with the provisions of this section.
(cf: P.L.1969, c.257, s.12)
9. Section 2 of P.L.1979, c.157 (C.46:8B-12.1) is amended to read as follows:
2. a. [When unit owners other than the developer own 25% or more of the units in a condominium that will be operated ultimately by an association, the unit owners other than the developer shall be entitled to elect not less than 25% of the members of the governing board or other form of administration of the association. Unit owners other than the developer shall be entitled to elect not less than 40% of the members of the governing board or other form of administration upon the conveyance of 50% of the units in a condominium. Unit owners other than the developer shall be entitled to elect all of the members of the governing board or other form of administration upon the conveyance of 75% of the units in a condominium. However, when some of the units of a condominium have been conveyed to purchasers and none of the others are being constructed or offered for sale by the developer in the ordinary course of business, the unit owners other than the developer shall be entitled to elect all of the members of the governing board or other form of administration.
Notwithstanding any of the provisions of subsection a of this section, the developer shall be entitled to elect at least one member of the governing board or other form of administration of an association as long as the developer holds for sale in the ordinary course of business one or more units in a condominium operated by the association.]
Irrespective of the time set for developer or declarant control of the association provided in the master deed, declaration of covenants and restrictions, or other instruments of creation, control of the association shall be surrendered to the owners in the following manner:
(1) Sixty days after conveyance of 25 percent of the lots, parcels, units or interests, at least 25 percent of the members of the governing board shall be elected by the owners.
(2) Sixty days after conveyance of 50 percent of the lots, parcels, units or interests, at least 40 percent of the members of the governing board shall be elected by the owners.
(3) Sixty days after conveyance of 75 percent of the lots, parcels, units or interests, the developer's control of the governing board shall terminate, at which time the owners shall elect the entire governing board. Notwithstanding this, the developer may retain the selection of one governing board member so long as there are any units remaining unsold in the ordinary course of business, unless the majority of the unsold units have been rented for a period longer than two years, at which point the developer may retain no such selection.
(4) Upon a written request by at least 25 percent of the owners, control of the governing board of a common interest community in which less than 75 percent of the lots, parcels, units or interests have been conveyed may be deemed to be transferred to the owners upon a determination by the Commissioner of Community Affairs. The commissioner shall take into account the circumstances of the development, the investment of the developer, and whether the owners are being deprived unfairly by the developer of the right to govern themselves. The commissioner shall have the authority to order the amendment of the governing documents to allow for a fair representation of all of the parties maintaining an interest in the common interest community.
The percentages specified in subsection a. of this section shall be calculated upon the basis of the whole number of units entitled to membership in the association. The bylaws of the association shall specify the number or proportion of votes of all units conveyed to owners that shall be required for the election of board members. The bylaws shall provide that each unit conveyed to an owner shall be entitled to one vote. An owner of more than one unit shall not have attributed to him or her more than fifty percent of all of the votes in the association. A developer may surrender control of the governing board of the association before the time specified in subsection a. of this section, if the developer so elects and the owners agree by a majority vote to assume control.
b. Within 30 days after the unit owners other than the developer are entitled to elect a member or members of the governing board or other form of administration of an association, the developer-appointed board shall arrange, in the manner required pursuant to section 47 of P.L. , c. (C. )(now before the Legislature as this bill), for an impartial party to act as an election monitor, and the association shall call, and give not less than 20 days' nor more than 30 days' notice of, a meeting of the unit owners to elect the members of the governing board or other form of administration. The meeting may be called and the notice given by any unit owner if the association fails to do so.
c. If a developer holds one or more units for sale in the ordinary course of business, [none of the following actions may be taken without approval in writing by the developer:
(1) Assessment of the developer as a unit owner for capital improvements.
(2) Any action by] the association may not take any action that would be detrimental to the sales of units by the developer unless the developer has approved such action in writing. However, an increase in assessments for common expenses without discrimination against the developer shall not be deemed to be detrimental to the sales of units.
d. Prior to, or not more than 60 days after, the time that unit owners other than the developer elect a majority of the members of the governing board or other form of administration of an association, the developer shall relinquish control of the association, and the unit owners shall accept control. Simultaneously, the developer shall deliver to the association all property of the unit owners and of the association held or controlled by the developer, including, but not limited to, the following items, if applicable, as to each [condominium] common interest community operated by the association:
(1) A photocopy of the master deed or declaration, and all amendments thereto, certified by affidavit of the developer, or an officer or agent of the developer, as being a complete copy of the actual master deed or declaration.
(2) A certified copy of the association's articles of incorporation[, or if not incorporated, then copies of the documents creating the association].
(3) A copy of the current bylaws.
(4) The minute books, including all minutes, and other books and records of the association, if any.
(5) Any house rules and regulations which have been promulgated.
(6) Resignations of officers and members of the governing board or other form of administration who are required to resign because the developer is required to relinquish control of the association.
(7) An accounting for all association funds, including capital accounts and contributions.
(8) Association funds or control thereof.
(9) All tangible personal property that is property of the association, represented by the developer to be part of the common elements or ostensibly part of the common elements, and an inventory of that property.
(10) A copy of the plans and specifications utilized in the construction or remodeling of improvements and the supplying of equipment to the [condominium] common interest community and in the construction and installation of all mechanical components serving the improvements and the site, with a certificate in affidavit form of the developer, his agent, or an architect or engineer authorized to practice in this State that such plans and specifications represent, to the best of their knowledge and belief, the actual plans and specifications utilized in the construction and improvement of the [condominium] common interest community property and for the construction and installation of the mechanical components serving the improvements. If the [condominium] common interest community property has been declared a [condominium] common interest community more than 3 years after the completion of construction or remodeling of the improvements, the requirements of this paragraph shall not apply.
(11) Insurance policies.
(12) Copies of any certificates of occupancy which may have been issued for the [condominium]common interest community property.
(13) Any other permits issued by governmental bodies applicable to the [condominium] common interest community property in force or issued within [1] one year prior to the date the unit owners other than the developer take control of the association.
(14) All written warranties of the contractor, subcontractors, suppliers, and manufacturers, if any, that are still effective.
(15) A roster of unit owners and their addresses and telephone numbers, if known, as shown on the developer's records.
(16) Leases of the common elements and other leases to which the association is a party.
(17) Employment contracts, management contracts, maintenance contracts, contracts for the supply of equipment or materials, and service contracts in which the association is one of the contracting parties and maintenance contracts and service contracts in which the association or the unit owners have an obligation or responsibility, directly or indirectly to pay some or all of the fee or charge of the person or persons performing the service.
(18) All other contracts to which the association is a party.
(cf: P.L.1979, c.157, s.2)
10. Section 13 of Section 3 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] common interest community property and the actions of the association shall be governed by bylaws which shall initially be recorded with the master deed, declaration or other governing documents and shall provide[, in addition to any other lawful provisions,] in accordance with the provisions of sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill), for the following, and if they do not do so, shall be deemed to include 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 including benefits, if any, of officers and board members, provided that the form and powers enumerated conform with those permitted pursuant to P.L.1969, c.257 (C.46:8B-1 et seq.), as amended and supplemented by P.L. , c. (C. ) (now before the Legislature as this bill). [If the] The bylaws shall 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]. All meetings of [that] the governing board[, except conference or working sessions at which no binding votes are to be taken,] and meetings of the membership 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 sections 35 through 63 of P.L. c. (C. )(now before the Legislature as this bill) and 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] except that the bylaws may provide for notices to be given to the owners beyond what is required by sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill).
At each meeting [required under this subsection to be open to all unit owners,] minutes of the proceedings shall be taken. Copies of those minutes shall be made available to all unit owners [before the next open meeting] in accordance with the provisions of sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill).
(b) The method of calling meetings of unit owners[,] and 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 provided that 80 percent of the owners vote to approve such bylaws.
(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, in accordance with sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill).
(d) The [method by which the] bylaws may be amended in the manner provided in sections 35 through 63 of P.L. , c. (C. ) (now before the Legislature as this bill), 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, provided such methods comply with sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill).
(cf: P.L.1996, c.79, s.1)
11. Section 2 of P.L.1991, c.48 (C.46:8B-13.1) is amended to read as follows:
2. The Commissioner of Community Affairs shall cause to be prepared and distributed[, for the use and guidance of condominium associations and administrators, explanatory materials and guidelines to assist them in achieving proper and timely compliance with the requirements of this act. Such guidelines may include the text of model bylaw provisions suggested or recommended for adoption. Failure or refusal of a condominium association to make proper amendment or supplementation of its bylaws prior to the effective date of section 1 of this act shall not, however, affect its obligation of compliance therewith on and after that effective date] in written form and on the Internet, a booklet, which shall be made available to the general public, to associations and to homeowners in common interest communities and which shall serve as a general guide to community associations. The booklet shall be distributed free of charge by the association to each homeowner and by each developer to prospective purchasers prior to the signing of a sales contract; it shall be the duty of each seller of a unit to provide a copy of the booklet to a purchaser of the unit before the time of signing of the sales contract. The booklet shall include at least the following:
a. An explanation of the nature of home ownership in a common interest community and a glossary of relevant terms, including, but not limited to, "master declaration," "bylaws," "master deed," "covenants and restrictions" and "common elements," "liens," "fines," "rules," "alternative dispute resolution," "fees" and "governing board;"
b. A description of the rights and responsibilities of homeowners, including reference to applicable statutes and rules;
c. A description of the duties and powers of, and restrictions on, governing boards, including reference to any applicable statutes and regulations. The booklet shall include information concerning conflict of interest requirements applicable to governing board members and officers and to professionals hired by associations and shall also include reference to any other sources of information that may be recommended by the commissioner as being of assistance to governing board members and officers in the discharge of their duties;
d. A description of the statutory and regulatory requirements for association bylaws or rules and such other material as the commissioner shall deem useful; and
e. A listing of documents and other information that a potential purchaser of a unit in a common interest community should obtain before entering into a contract to purchase a unit, including, but not limited to: copies of the association's governing documents; a copy of the latest capital reserve study, if any, showing the condition, life expectancy and replacement costs of major mechanical systems and other common elements; any litigation pending against the association; any pending notices or orders issued by the Department of Community Affairs or any other governmental entity; the association's procedures for alternate dispute resolution and an explanation of statutory and regulatory requirements, process of adopting rules, providing access to records, approval of budgets, and review of homeowners' applications to do work on their units; delinquency and foreclosure rates; the association's insurance coverages; governmental and non-governmental remedies available in the event of violation of the rights of unit owners. These documents and this information shall be made available to prospective purchasers upon written request and copies shall be provided, for a charge not exceeding the reasonable cost of copying or printing, to any person who has contracted to purchase a unit within the common interest community.
(cf: P.L.1991, c.48, s.2)
12. 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 at the level a reasonable homeowner would sustain with his own property.
(b) The assessment and collection of funds for common expenses and the payment thereof.
(i) An association shall not collect from its members as part of the customary association assessment or pay from association funds dues or contributions to any private trade or industry organization concerning community associations, or contributions for charitable or political purposes. Any solicitations for dues or charitable or political contributions by an association shall be conducted separately from the billing for customary monthly maintenance charges, and clearly designated as voluntary. A contribution to any private trade or industry organization through a property management company or property manager shall be prohibited.
(ii) An association shall not increase the customary association assessment for its fiscal year by more than an amount equal to the sum of the CPI and three percent.
(c) The adoption, distribution, amendment and enforcement of rules governing the use and operation of the [condominium and the condominium] common interest 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 and authorized pursuant to the provisions of P.L. , c. (C. )(now before the Legislature as this bill), 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] related thereto 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, declaration or bylaws, or is required in accordance with section 24 of P.L.1969, c.257 (C.46:8B-24).
(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, declaration or bylaws 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] all records, financial and otherwise, in accordance with [generally accepted accounting principles,] sections 59 through 61 of P.L. , c. (C. )(now before the Legislature as this bill), which records shall be open to inspection and copying at reasonable times by unit owners. The commissioner shall have the power to order inspection of records upon a request by a unit owner, after an adequate investigation and determination has been made that the disclosure of the records sought would not breach confidentiality of the association. Such records shall include, but not be limited to:
(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, declaration or bylaws.
(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 may order the association to provide a fair and efficient procedure for the resolution of disputes or to order the association to comply with statutory requirements if it is clear from the facts of the dispute that the association is not complying with statutory requirements.
The fulfillment of the requirements of this section shall comply in all respects with section 55 of P.L. , c. (C. )(now before the Legislature as this bill).
(cf: P.L.1996, c.79, s.2)
13. Section 15 of P.L.1967, c.257 (C.46:8-15) is amended to read as follows:
15. [Subject to the] An association shall have, in addition to the provisions of this section, all of the powers and responsibilities as provided under sections 35 through 63 of P.L. , c. (C. ) (now before the Legislature as this bill), provided, however, that if the provisions of the master deed, declaration, governing documents and the bylaws, rules and regulations [and the provisions of this act or other applicable law, the association shall have the following powers:] of a homeowners' association do not specifically provide for the power to assess fines, penalties and attorneys' fees against owners as a common expense, then those powers shall not be implied pursuant to this section or sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill).
(a) [Whether or not incorporated, the] 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] 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 , upon advance written notice as agreed to by the unit owner or tenant, except that advance written notice shall be waived under emergency conditions, 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 shall provide a written notice of any repairs done within the unit and shall be liable for any damages to the unit owner's property. 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] common interest community and otherwise acquire, hold, lease, mortgage and convey the same. [It] The association may also lease or license the use of common elements [in a manner not inconsistent with the rights of unit owners] provided that if such a right to lease or license was not included in the original governing documents, a vote of approval of such action shall be is obtained from a majority of the 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, declaration, governing documents or bylaws, 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, declaration, governing documents or bylaws as originally recorded, no such membership interest or facility shall be acquired except pursuant to amendment of or supplement to the master deed, declaration, governing documents or bylaws duly adopted as provided therein and [in this act] P.L.1969, c.257 (C.46:8B-1 et seq.) or P.L. , c. (C. ) (now before the Legislature as this bill). 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) (i) The association may levy and collect assessments duly made by the association for a share of common expenses or [otherwise, including] for any other moneys duly owed the association, upon proper notice to the appropriate unit owner, together with interest thereon, late fees and reasonable attorneys' fees, in accordance with P.L. , c. (C. ) (now before the Legislature as this bill) and if authorized by the [master deed or] owners through the bylaws.
(ii) Prior to an association imposing a fee upon a unit owner for the late payment of a customary association assessment, the association shall provide written notice to the unit owner, which shall state clearly the date the payment was due and the amount of the late fee being imposed. Penalties and late fees shall not be compounded. For the purposes of the notice, it shall be sufficient if the information concerning the late fee is included and listed separately on the next invoice for the customary association assessment which shall be mailed or delivered to the unit owner. If an owner clearly marks a payment as allocated to the common expenses, the association shall follow that directive in applying the payment. A governing board of an association may consider the waiving of late fees charged to a unit owner upon a demonstration of hardship or unusual circumstances. Any special arrangement for a unit owner for the payment of a customary association assessment shall be noted in the official records of the association.
(f) If authorized by the [master deed or] bylaws, the association may impose reasonable fines upon unit owners for failure to comply with provisions of the master deed, declaration, governing documents, bylaws or rules and regulations, subject to the following provisions:
A fine for a violation or a continuing violation of the master deed, declaration, governing documents, bylaws or rules and regulations shall not exceed [the maximum monetary penalty permitted to be imposed for a violation or a continuing violation under section 19 of the "Hotel and Multiple Dwelling Law," P.L.1967, c.76 (C.55:13A 19)] the amounts set forth in subparagraph 11 of subsection b. of section 52 of P.L. , c. (C. ) (now before the Legislature as this bill).
On roads or streets with respect to which Title 39 of the Revised Statutes is in effect under section 1 of P.L.1945, c.284 (C.39:5A 1), an association may not impose fines for moving automobile violations.
A fine shall not be imposed and no interest thereon shall accrue 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 and afforded the opportunity 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) and section 55 of P.L. , c. (C. )(now before the Legislature as this bill).
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. No lien shall be recorded by an association for a fine imposed after the effective date of P.L. , c. (C. )(now before the Legislature as this bill) without judicial or administrative review as provided under P.L. , c. (C. )(now before the Legislature as this bill).
(g) [Such other powers as may be set forth in the master deed or bylaws, if not prohibited by P.L.1969, c.257 (C.46:8B 1 et seq.) or any other law of this State.] (Deleted by amendment, P.L. , c. (C. ) (now before the Legislature as this bill)).
(cf: P.L.1996, c.79, s.3)
14. Section 16 of P.L.1969, c.257 (C.46:8B-16) is amended to read as follows:
16. (a) No unit owner or owners, except as [an officer] officers of the association, shall have any authority to act for or bind the association. No individual officer shall have the sole power to act for or to 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 bylaws and the rules and regulations governing the details of the use and operation of the [condominium] common interest community by the governing board or by an owner. [, 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, or for an action for the recovery of damages, for injunctive relief, or 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.]
Unit owners may be subject to reasonable fines or other sanctions imposed by the governing board for failure to comply with the bylaws or rules adopted by the common interest community, which fines or sanctions may be imposed only pursuant to sections 54 and 55 of P.L. , c. (C. )(now before the Legislature as this bill). Provided that the provisions of section 55 of P.L. , c. (C. ) (now before the Legislature as this bill) are complied with, an owner individually, a group of owners, or the association may maintain an action for the recovery of damages, or for injunctive relief, or a combination thereof, for the failure to comply with the rules or bylaws, or the failure to uphold the rules or bylaws in the case of an association. The prevailing party on the majority of issues litigated in an action for recovery of damages or injunctive relief, whether a unit owner or owners, or the association, shall be entitled to reasonable expenses, including attorneys fees, that may be incurred by it in connection with such action.
(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] the requirements of P.L.1969, c.257 (C.46:8B-1 et seq.) or the requirements of P.L. , c. (C. )(now before the Legislature as this bill).
(e) In the event a repair is needed to a common element or limited common element such that the habitability of a unit is affected, and the association fails to undertake such repair within three business days after a written request by the owner or owners of units affected, then such owner or owners shall be entitled to make those repairs to the affected limited common elements or common elements in order to make the unit or units habitable and thereafter deduct the costs of the repairs from the customary common monthly maintenance fees. This right of "repair and deduct" shall be subject to an alternative dispute resolution proceeding if requested by the association. The Office of the Ombudsman for Homeowners and Associations shall be utilized to oversee the progress of "repair and deduct" claims in the event alternative dispute resolution does not satisfactorily address the concerns of all parties. For the purposes of this subsection "habitable" shall apply as those items are necessary for living, such as a vital facility like water or heat, or dangerous conditions, and shall include water leaks through a common or limited common element. Any other conditions which do not threaten the safety of a resident or do not concern vital facilities shall not be considered necessary for living or habitability; such conditions and requests for repair thereof may be submitted for alternative dispute resolution, but shall not be included in the "repair and deduct" provisions of this subparagraph. A contractor hired by a unit owner or an owner who is authorized to make a repair pursuant to this subparagraph to a common element shall not be held liable for any incidental damages to a common element, unless such damage was caused by the willful or wanton act of the owner or contractor.
(cf: P.L.1996, c.79, s.4)
15. Section 17 of P.L.1969, c.257 (C.46:8B-17) is amended to read as follows:
17. The common expenses shall be charged to unit owners according to the percentage of their respective undivided interests in the common elements as set forth in the master deed, declaration, or governing documents and amendments thereto, or in such other proportions as may be provided in the master deed, declaration, governing documents or by laws. The amount of common expenses charged to each unit shall be a lien against such unit subject to the provisions of section 21 of [this act] P.L.1969, c.257 (C.46:8B-1 et seq.). The amount of a lien, and the remaining balance due on a lien, if disputed by an owner, shall be matters subject to alternative dispute resolution pursuant to section 55 of P.L. , c. (C. )(now before the Legislature as this bill). A unit owner shall, by acceptance of title, be conclusively presumed to have agreed to pay his proportionate share of common expenses accruing while he is the owner of a unit. However, the liability of a unit owner for common expenses shall be limited to amounts duly assessed in accordance with this act, the master deed, declaration, governing documents and by laws. No unit owner may exempt himself from liability for his share of common expenses by waiver of the enjoyment of the right to use any of the common elements or by abandonment of his unit or otherwise. The common expenses charged to any unit shall bear interest from the due date set by the association at such rate not [exceeding the legal interest rate as may be established by the association or if no rate is so established at the legal rate] to exceed the prime rate plus five percent annually.
(cf: P.L.1969, c.257, s.17)
16. Section 18 of P.L.1969, c.257 (C.46:8B-18) is amended to read as follows:
18. There shall be no material alteration of or substantial addition to the common elements except as authorized by the master deed or declaration or as authorized by the provisions of P.L. , c. (C ) (now before the Legislature as this bill). No unit owner shall contract for or perform any maintenance, repair, replacement, removal, alteration or modification of the common elements or any additions thereto, except through the association and its officers, except as provided for "repair and deduct" type of repairs pursuant to section 16 of P.L.1969, c.257 (C.46:8B-16).
Notwithstanding any bylaws or governing documents to the contrary, no special assessment for an improvement, which shall be defined as an improvement with an estimated cost greater than $250,000, or more than 10 percent of the annual budgeted expenditures, whichever is less, shall be undertaken to the common or limited common elements unless there is obtained a prior 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, approving any action to make such an improvement. For the purposes of this subsection, "improvement" shall mean any construction, reconstruction or improvement within the common interest community which is not listed in the declaration, and does not involve repair or replacement using substantially the same materials as the original construction to existing common or limited common elements, and does not mean any repair undertaken pursuant to a governmental or court order. No unit owner shall take or cause to be taken any action within his unit which would jeopardize the soundness or safety of any part of the [condominium] common interest community property or impair any easement or right appurtenant thereto or affect the common elements without the unanimous consent of all unit owners who might be affected thereby.
(cf: P.L.1969, c.257, s.18)
17. Section 19 of P.L.1969, c.257 (C.46:8B-19) is amended to read as follows:
19. [All property taxes, special assessments and other charges imposed by any taxing authority shall be separately assessed against and collected on each unit as a single parcel, and not on the condominium property as a whole. Such taxes, assessments and charges shall constitute a lien only upon the unit and upon no other portion of the condominium property. All laws authorizing exemptions from taxation or deductions from tax bills shall be applicable to each individual unit to the same extent they are applicable to other separate property.]
a. In a cooperative, a unit owner's interest in a unit and its allocated interests shall be deemed to be personal property. The documents creating the ownership rights of a cooperative unit owner shall, in connection with the ownership rights of the unit owner, be construed as integrated documents incapable of being separated or distinguished from each other. The transfer of any interest in a cooperative shall be by means of a written instrument recorded in the county in which the cooperative is located. The provisions of P.L.1979, c.406 (C.46:16A-1 et seq.), commonly referred to as the "Real Property Notice of Settlement Act," shall be applicable. The transfer instrument shall 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 transferor and transferee of the unit;
(5) An executed and acknowledged consent of the cooperative governing 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 P.L. , c. (C. )(now before the Legislature as this bill), which the parties may deem appropriate.
That interest, as personal property, shall be subject to the provisions of the "2004 Homestead Property Tax Rebate Act," P.L.1990, c.61 (C.54:4-8.57 et al) 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. 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.
d. 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.
(cf: P.L.1975, c.2, s.1)
18. (New section) Termination of common interest community.
a. Except in the case of a taking of all the units by eminent domain 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. Whenever an agreement to terminate is reached by the owners, the governing board shall file a copy of the proposed plan with the Commissioner of Community Affairs and with the municipality in which the common interest community is located, on such forms and in such a manner as shall be specified by the commissioner. The commissioner shall have 90 days to review the termination plan, and to assist in the making of provisions for the safety of residents who may be displaced by the termination of the community. The commissioner shall thereafter ratify the plan, or provide for an extension of ratification.
b. An agreement to terminate shall 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 shall 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 shall be effective only upon recordation. No termination plan shall be recorded unless ratified by the commissioner.
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 shall 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 shall 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 shall 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 shall not be binding on the unit owners until approved pursuant to subsections a. and b. of this section. If any real estate is to be sold following termination, title to that real estate, upon termination, shall vest in the association as trustee for the holders of all interests in the units. Thereafter, the association shall have 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 P.L. , c. (C. )(now before the Legislature as this bill) 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. of this section, 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 shall 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 shall 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 shall be treated as if the creditor 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 shall become, 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 shall 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) of this subsection against each of the unit owners' interest shall be proportionate to the ratio which each unit's common expense liability bears to the common expense liability of all of the units;
(4) A lien of each creditor of each unit owner which was perfected before termination shall continue 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 shall not be 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) of this subsection, 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 shall be distributed to the unit owners and shall become 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 shall be 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 shall be: (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. of this section, foreclosure or enforcement of a lien or encumbrance against the entire common interest community shall not, of itself, terminate 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, shall 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, shall not, of itself, withdraw 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.
m. In all agreements or governmental actions to be taken which will result in the termination of a common interest community, if common elements will remain after such termination, there shall be provision made for the maintenance of those common elements.
19. Section 20 of P.L.1969, c.257 (C.46:8B-20) is amended to read as follows:
20. (a) Except as otherwise provided in section 23 of P.L.1969, c.257(C.46:8B-23), subsequent to recording the master deed or declaration as provided in this act, and while the property remains subject to this act, no lien shall arise or be effective against the [condominium property] common interest community as a whole. [During such period,] Except for property the title to which is held in the name of the association, liens or encumbrances shall arise or be created only against each unit (including the undivided interest in the common elements appurtenant to such unit) in the same manner and under the same conditions in every respect as liens or encumbrances may arise or be created upon or against any other separate parcel of real property subject to individual ownership; provided that no labor performed or materials furnished with the consent or at the request of a unit owner or his agent or his contractor or subcontractor, shall be the basis for the filing of a lien pursuant to article 10 of chapter 44 of Title 2A of the New Jersey Statutes against the unit or any other property of any other unit owner not expressly consenting to or requesting the same, except that such express consent shall be deemed to be given by the owner of any unit in the case of emergency repairs thereto. Labor performed or materials furnished for the common elements, if duly authorized by the association in accordance with this act, the master deed or by laws, shall be deemed to be performed or furnished with the express consent of each unit owner and shall be the basis for the filing of a lien pursuant to article 10 of chapter 44 of Title 2A of the New Jersey Statutes against each of the units and shall be subject to the provisions of subparagraph (b) hereunder.
(b) In the event a lien against 2 or more units becomes effective, the owner of each separate unit may remove his unit (including the undivided interest in the common elements appurtenant to such unit) from the lien and obtain a discharge and satisfaction by payment of the proportion thereof attributable to such unit. The proportion so attributable to each unit subject to the lien shall be the proportion in which all units subject to the lien share among themselves in liability for common expenses. Subsequent to any such payment, the lien on such unit shall be discharged or otherwise satisfied of record and the unit (including the undivided interest in the common elements appurtenant thereto) shall thereafter be free and clear of such lien. Such partial payment, discharge and satisfaction shall not prevent the lienor from proceeding to enforce his rights against any other unit (including the undivided interest in the common elements appurtenant thereto) not so paid, satisfied or discharged.
(cf: P.L.1969, c.257, s.20)
20. Section 21 of P.L.1969, c.257 (C.46:8B-21) is amended to read as follows:
21. a. The association shall have a lien on [each] a unit for any unpaid customary association assessment [duly] properly made against that unit by the association for a share of common expenses [or otherwise including any other moneys duly owed the association,] or for unpaid special assessments imposed in accordance with the provisions of section 18 of P.L.1969, c.257 (C.46:8B-18) once the unpaid assessment has remained unpaid for 30 days, upon proper notice to the appropriate unit owner which proper notice shall include a five day time period in which an owner shall be afforded an opportunity, pursuant to section 55 of P.L. , c. (C. )(now before the Legislature as this bill), to dispute a miscalculation of the owner's share of the common expenses, provide proof of payment, or proof that an assessment was made improperly, prior to the recording of the lien, together with interest thereon and, if authorized by the master deed, declaration, governing documents or bylaws, 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]. No lien shall be recorded for fines imposed unless authorized pursuant to an order of a court of competent jurisdiction. No lien shall be authorized or recorded concerning a special assessment not authorized pursuant to section 18 of P.L.1969, c.257 (C.46:8B-18) unless: (1) the right to the lien has been established by a court of competent jurisdiction or (2) other substantial safeguards in accordance with section 55 of P.L. ,c. (C ) (now before the Legislature as this bill) have been put in place to prevent the unauthorized deprivation of property of a unit owner. 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 which shall be provided and promptly recorded by an association. Any charges by an association for discharge of a lien shall not exceed the actual cost to the association. Except as set forth in subsection b. of this section, all such liens shall be subordinate to any lien for past due and unpaid property 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.
b. A lien recorded pursuant to subsection a. of this section, to the extent it is the result of a customary association assessment that became due for the six-month period prior to the recording of the lien, and does not include any acceleration of common expense fees, shall have a [limited] priority over prior recorded mortgages and other liens, except for municipal property tax liens or liens for federal taxes, [to the extent provided in this subsection. This priority shall be limited] as follows:
(1) [To a lien which is the result of customary condominium assessments as defined herein, the amount of which shall not exceed the aggregate customary condominium assessment against the unit owner for the six month period prior to the recording of the lien.] Such a lien shall be subordinate to any liens or encumbrances recorded before the declaration, and in a cooperative, shall be subordinate to any liens and encumbrances that the association creates, assumes, or takes title to the cooperative property subject to those liens;
(2) Such a lien shall be subordinate to a first mortgage recorded against a condominium unit prior to April 1, 1996, or a first mortgage against another type of common interest community unit, other than a cooperative, recorded prior to the effective date of P.L. , c. (C. ) (now before the Legislature as this bill). With respect to a particular mortgage, in order to have the priority set forth in this subsection, the lien of the association shall have been [to a lien] recorded prior to: (a) the receipt by the association of a summons and complaint in an action to foreclose a mortgage on that unit; or (b) the filing with the proper county recording office of a lis pendens giving notice of an action to foreclose a mortgage on that unit.
(3) In the case of more than one association lien being filed, either because an association files more than one lien or multiple associations have filed liens, the total amount of the liens granted priority shall not be greater than the assessment for the six month period specified in paragraph (1) of this subsection. Priority among multiple filings shall be determined by their date of recording with the earlier recorded liens having first use of the priority given herein.
(4) The priority granted to a lien pursuant to this subsection shall expire on the first day of the 60th month following the date of recording of an association's lien provided that subsequent lien filings shall have the priority otherwise set forth in this subsection upon the expiration of any prior lien filing subject to the expiration period set forth in this subsection. Nothing in this section shall prevent the establishment of a more favorable association assessment lien priority with respect to any lienholder other than a first mortgage granted by a bank, savings and loan association or similar institutional lender.
(5) [A lien of an association shall not be granted priority over a prior recorded mortgage or mortgages under this subsection if a prior recorded lien of the association for unpaid assessments has obtained priority over the same recorded mortgage or mortgages as provided in this subsection, for a period of 60 months from the date of recording of the lien granted priority.] (Deleted by amendment, P.L. , c. (C. ) (now before the Legislature as this bill)
(6) When recording a lien which may be granted priority pursuant to this act, an association shall notify, in writing, any holder of a first mortgage lien on the property of the filing of the association lien. An association which exercises a good faith effort but is unable to ascertain the identity of a holder of a prior recorded mortgage on the property will be deemed to be in substantial compliance with this paragraph. The notice required herein shall be deemed to have been properly made if sent, by certified mail, with proper postage prepaid, to the address set forth on the recorded mortgage or, when the mortgage has been assigned, to the address indicated on the assignment of mortgage, unless the first mortgage holder or assignee has, in writing, specified a different address to the association, whereupon notice shall be deemed adequately made if mailed, postage prepaid, to such address.
For the purpose of this section, a "customary [condominium] association assessment" shall mean an assessment for periodic payments, due the association for regular and usual operating and common area expenses pursuant to the association's annual budget and shall not include amounts for reserves for contingencies, nor shall it include any late charges, penalties, interest or any fees or costs for the collection or enforcement of the assessment or any lien arising from the assessment. The periodic payments due must be due monthly, or no less frequently than quarter yearly, as may be acceptable to the Federal National Mortgage Association so as not to disqualify an otherwise superior mortgage on the [condominium] unit from purchase by the Federal National Mortgage Association as a first mortgage.
c. 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. The grantor shall give an association at least 30 days notice prior to settlement, and the association shall provide the grantee with notice of any unpaid assessments. Any violations of the bylaws or rules by the grantor shall be disclosed to the grantee by the association.
d. 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.
e. 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. 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.
f. 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, declaration, governing documents or bylaws to bid 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. Nothing herein shall alter the status or priority of municipal liens under R.S.54:5-1 et seq.
(cf: P.L.1997, c.190, s.2)
21. (New section) 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, 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 the owner's 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 shall 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.
22. (New section) Master associations.
a. If the declaration provides that any of the powers described in P.L.1969, c.257 (C.46:8B-1 et seq.) are to be exercised by or may be delegated to a 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 P.L. , c. (C. )(now before the Legislature as this bill) 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 for one common interest community, a master association may exercise only those powers 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 governing board may delegate certain powers to a master association, the members of the governing board shall have no liability for the acts or omissions of the master association with respect to those powers following delegation.
d. Regardless of the fact that a master association may also be an association for a particular common interest community, 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, shall provide that the governing 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 governing board.
(2) All of the members of the governing boards of all common interest communities subject to the master association may elect all members of the master association's governing 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 governing board.
(4) All of the members of the governing board of each common interest community subject to the master association may elect specified members of the master association's governing board.
(5) In the case of a planned development containing at least one multiple dwelling, each multiple dwelling, regardless of the number of units within the building, shall count as one unit for the purposes of the master association for the entire planned development. If such a multiple dwelling shall be converted into a condominium, then each unit of the resulting condominium owned by a person other than the developer shall be entitled to one vote.
23. Section 22 of P.L.1969, c.257 (C.46:8B-22) is amended to read as follows:
22. (a) A unit may be sold by the sheriff on execution, free of any claim, not a lien of record, for common expenses or other assessments by the association, but any funds derived from such sale remaining after satisfaction of prior liens and charges but before distribution to the previous unit owner, shall be applied to payment of such unpaid common expenses or other assessments if written notice thereof shall have been given to the sheriff before distribution. Any such unpaid common expenses which shall remain uncollectible from the former unit owner for a period of more than 60 days after such sheriff's sale may be reassessed by the association as common expenses to be collected from all unit owners including the purchaser who acquired title at the sheriff's sale, his successors and assigns. Unless prohibited by the master deed, declaration, governing documents or bylaws, the association may bid in and purchase the unit at a sheriff's sale, and acquire, hold, lease, mortgage and convey the same. In a cooperative, only the association may bid on and purchase the unit at a sheriff's sale, and acquire, hold, lease, mortgage and convey the same.
(b) Notwithstanding any foreclosure, tax sale, or other forced sale of a unit, all applicable provisions of the master deed, declaration, governing documents and bylaws, shall be binding upon any purchaser at such sale to the same extent as they would bind a voluntary grantee except that such purchaser 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 owner which became due prior to such sale except as otherwise provided in subsection (a) of this section or section 21 of P.L.1969, c.257 (C.46:8B 21).
(cf: P.L.1995, c.354, s.5)
24. Section 23 of P.L.1969, c.257 (C.46:8B-23) is amended to read as follows:
23. Notwithstanding any other provision of [this act] P.L.1969, c.257 (C.46:8B-1 et seq.), if the master deed, declaration, governing documents or by laws so permit, the entire [condominium] common interest community property, or some or all of the units included therein (together with the undivided interests in common elements and limited common elements appurtenant to such units) may be subject to a single or blanket mortgage constituting a first lien thereon created by recordable instrument by all of the owners of the property or units covered thereby; and any unit included under the lien of such mortgage may be sold or otherwise conveyed or transferred subject thereto. The instrument creating any such mortgage shall provide a method whereby any unit owner may obtain a release of his unit (together with the undivided interest in common elements and limited common elements if any, appurtenant thereto) from the lien of such mortgage and a satisfaction and discharge in recordable form, upon payment to the holder of the mortgage of a sum equal to the proportionate share attributable to his unit of the then outstanding balance of unpaid principal and accrued interest and any other charges then due and unpaid. Such proportionate share attributable to each unit shall be the proportion in which all units then subject to the lien of the mortgage share among themselves in liability for common expenses as provided in the master deed, declaration or governing documents or such other reasonable proportion as shall be specifically provided in the mortgage instrument.
(cf: P.L.1969, c.257, s.23)
25. Section 24 of P.L.1969, c.257 (C.46:8B-24) is amended to read as follows:
24. [(a) Damage to or destruction of any improvements on the condominium property or any part thereof or to a common element or elements or any part thereof covered by insurance required to be maintained by the association shall be repaired and restored by the association using the proceeds of any such insurance. The unit owners directly affected shall be assessed on an equitable basis for any deficiency and shall share in any excess.
(b) If the proceeds of such insurance shall be inadequate by a substantial amount to cover the estimated cost of restoration of an essential improvement or common element or if such damage shall constitute substantially total destruction of the condominium property or of one or more of the buildings comprising the condominium property or if 75% of the unit owners directly affected by such damage or destruction voting in accordance with the procedures established by the by laws shall determine not to repair or restore, the association shall proceed to realize upon the salvage value of that portion of the condominium property so damaged or destroyed either by sale or such other means as the association may deem advisable and shall collect the proceeds of any insurance. Thereupon the net proceeds of such sale, together with the net proceeds of such insurance shall be considered as one fund to be divided among the unit owners directly affected by such damage or destruction in proportion to their respective undivided ownership of the common elements. Any liens or encumbrances on any affected unit shall be relegated to the interest in the fund of the unit owners.
(c) The master deed or the by laws may make other and different provision covering the eventualities set forth in paragraphs (a) and (b) of this section or covering other results of damage or destruction to any part or all of the condominium property, notwithstanding the provisions of paragraphs (a) and (b). If the master deed or by laws shall require insurance against fire and other casualty with respect to individual units, it shall also provide for the application of the proceeds and the rights and obligations of unit owners in case of damage or destruction.]
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, including property loss of a unit owner caused by the failure of the association to properly maintain the common elements, 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 governing 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 or failure to maintain 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, shall 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 shall provide that:
(1) Each unit owner is an insured person under the policy with respect to liability arising out of the owner's 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 the owner's 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, if in excess of $50,000, 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 holders of a security interest or any 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 holders of a security interest or any 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 shall not cancel or refuse to renew the policy 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 shall be repaired or replaced promptly by the association unless (1) the common interest community is terminated, in which case the provisions of section 18 of P.L. , c. (C. ) (now pending before the Legislature as this bill) shall apply, (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. (4) If the entire common interest community is not repaired or replaced, the insurance proceeds attributable to the damaged common elements shall 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 proceeds will be distributed under the provisions of the declaration, (a) the insurance proceeds attributable to units and limited common elements that are not rebuilt shall be distributed first to the holders of a security interest as their interests may appear unless the mortgage instrument provides otherwise and unit owners whose units are not encumbered by security interests, and then, if any surplus remains, first to owners of those units and the owners of the units to which those limited common elements were allocated as their interests may appear, and (b) the remainder of the proceeds shall be distributed to all other 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 by 80 percent of the votes eligible to be cast not to rebuild any unit, that unit's allocated interests shall be automatically reallocated upon the vote as if the unit had been condemned, 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.
(cf: P.L.1969, c.257, s.24)
26. Section 29 of P.L.1969, c.257 (C.46:8B-29) is amended to read as follows:
29. All laws, ordinances and regulations concerning planning, subdivision or zoning, shall be construed and applied with reference to the nature and use of the [condominium] common interest community without regard to the form of ownership. No law, ordinance or regulation shall establish any requirement concerning the use, location, placement or construction of buildings or other improvements which are, or may thereafter be subjected to this act unless such requirement shall be equally applicable to all buildings and improvements which are, or may thereafter be subjected to this act unless such requirement shall be equally applicable to all buildings and improvements of the same kind not then or thereafter to be subjected to this act. No subdivision or planning approval shall be required as a condition precedent to the recording of a master deed or declaration or the sale of any unit unless such approval shall also be required for the use or development of the lands described in the master deed or declaration in the same manner as therein set forth had such lands not been submitted to this act.
(cf: P.L.1969, c.257, s.29)
27. Section 1 of P.L.1979, c.297 (C.46:8B-31) is amended to read as follows:
1. The Legislature finds and declares that many leases involving use of parking, recreational or other common facilities or areas by residents of [condominiums] common interest communities were entered into by parties wholly representative of the interests of a [condominium] common interest community developer at a time when the [condominium] unit owners not only did not control the administration of their [condominium] common interest community but also had little or no voice in such administration. Such leases often contain numerous obligations on the part of either or both [a condominium] an association and [condominium] unit owners with relatively few obligations on the part of the lessor. Such leases may or may not be unconscionable in any given case. Nevertheless, the Legislature finds that certain onerous obligations and circumstances warrant the establishment of a rebuttable presumption of unconscionability of certain leases, as specified in this act.
The Legislature also finds and declares that many contracts for sale of [condominium] units, master deeds and association bylaws contain provisions affording the developer or the association a right of first refusal to purchase in the event of resale, gift or devise of condominium units by the purchaser, provisions which are in the financial interest of the developer or the association and are designed to limit the freedom of the purchaser to resell the property as he sees fit. The Legislature finds that the relative balance between the consideration given the financial interests of the developer or the association and the limitations placed upon the property rights of the purchaser contained in such provisions is such as to warrant the establishment of a rebuttable presumption of unconscionability with respect to those master deeds, declarations, governing documents and bylaws, and amendments thereof, adopted prior to the effective date of this amendatory and supplementary act P.L.1980, c.103, and to warrant the prohibition of such provisions in contracts for the sale of [condominium] units executed, and in master deeds, declarations, governing documents and bylaws or amendments of master deeds or bylaws adopted, on or after that date.
(cf: P.L.1980, c.103, s.1)
28. Section 2 of P.L.1979, c.297 (C.46:8B-32) is amended to read as follows:
2. There is hereby established a rebuttable presumption of unconscionability with respect to leases involving [condominium] common interest community property, including, but not limited to, leases concerning the use by [condominium] unit owners of parking, recreational or other common facilities or areas. Such presumption may be rebutted by a lessor by the presentation of evidence of the existence of facts and circumstances sufficient to justify and validate a lease which would otherwise appear to be unconscionable under the provisions of this section. A rebuttable presumption of unconscionability shall arise if one or more of the following elements exist, but the failure of a lease to contain any of the following elements shall neither preclude a determination of its unconscionability nor raise a presumption of its conscionability:
a. The lease was executed by persons none of whom at the time of the execution of the lease were elected by [condominium] unit owners other than the developer, to represent their interests;
b. The lease requires either the [condominium] association or the [condominium] unit owners to pay real estate taxes on the subject real property;
c. The lease requires either the [condominium] association or the [condominium] unit owners to insure buildings or other facilities on the subject real property against fire or any other hazard;
d. The lease requires either the [condominium] association or the [condominium] unit owners to perform some or all maintenance obligations pertaining to the subject real property or facilities located upon the subject real property;
e. The lease requires either the [condominium] association or the [condominium] unit owners to pay rents to the lessor for a period of 10 years or more;
f. The lease provides that failure of the lessee to make payments of rents due under the lease either creates, establishes, or permits establishment of, a lien upon individual [condominium] units of the [condominium] common interest community to secure claims for rent;
g. The lease requires an annual rental which exceeds 20% of the appraised value of the leased property as improved; provided that for purposes of this subsection "annual rental" means the amount due during the first 12 months of the lease for all units regardless of whether such units were in fact occupied or sold during that period and "appraised value" means the appraised value placed upon the leased property the first tax year after the sale of a unit in the [condominium] common interest community;
h. The lease provides for a periodic rental increase based upon reference to a price index;
i. The lease or other [condominium] governing documents require that every transferee of a [condominium] unit must assume obligations under the lease.
(cf: P.L.1979, c.297, s.2)
29. Section 4 of P.L.1979, c.297 (C.46:8B-34) is amended to read as follows:
4. The developer shall separately state in the selling price of a unit in a [condominium] common interest community the full membership fee in the [condominium] common interest community homeowners' association which shall be deemed an entrance fee and shall not exceed amounts permitted for entrance fees pursuant to P.L.1969, c.257 (C.46:8B-1 et seq.), and all recreational membership fees.
(cf: P.L.1979, c.297, s.4)
30. Section 5 of P.L.1979, c.297 (C.46:8B-35) is amended to read as follows:
5. When any parking, recreational or other common facility or area has been leased for the use of the unit owners of a [condominium] common interest community for 20 years or more, the [condominium] association or the [condominium] unit owners shall have the option of renewing the lease on the parking, recreational or other common facility or area or of buying such facility or area and subject real property at a conscionable price.
(cf: P.L.1979, c.297, s.5).
31. Section 6 of P.L.1979, c.297 (C.46:8B-36) is amended to read as follows:
6. There is hereby established a rebuttable presumption of unconscionability with respect to provisions of master deeds, declarations, governing documents or association bylaws recorded prior to the effective date of [this act] P.L.1980, c.103 which shall arise whenever such a master deed, declaration, governing documents or by laws shall contain any provision or clause affording the developer or the association a right of first refusal to buy a [condominium] unit upon resale, gift or devise by the [condominium] unit owner. Such presumption may be rebutted by the developer or the association by the presentation of evidence of the existence of facts and circumstances sufficient to justify and validate a provision of the master deed, declaration, governing documents or the bylaws which would otherwise appear to be unconscionable under the provisions of this section.
(cf: P.L.1980, c.103, s.2)
32. Section 5 of P.L.1987, c.381 (C.46:8D-5) is amended to read as follows:
5. A plan of cooperative ownership is created [by recording] whenever recorded in the office of the county recording officer of the county wherein the land is located a master declaration and master register of all cooperative units allocated for separate occupancy, each of which documents shall be executed and acknowledged by all owners of the land and shall set forth the matters required by sections 6 and 7 of [this act] P.L.1987, c.381 (C.46:8D-6 and 7). A cooperative shall also be formed pursuant to the provisions of the "Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.). A homeowners' association formed to manage a cooperative shall be subject to the provisions of the "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B-1 et seq.) and sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill).
(cf: P.L.1987, c.381, s.5)
33. Section 1 of P.L.1993, c.30 (C.45:22A-43) is amended to read as follows:
1. A developer [subject to the registration requirements of section 6 of P.L.1977, c.419 (C.45:22A 26)] of a common interest community as defined in P.L.1969, c.257 (C.46:8B-1 et seq.) shall organize or cause to be organized an association, in the manner provided under P.L.1969, c.257, whose obligation it shall be to manage the common elements and facilities, except as such association may be exempted from being created pursuant to subsection c. of this section. The association shall be formed on or before the filing of the master deed or declaration of covenants and restrictions, and [may] shall be formed as a [for profit or] nonprofit corporation[, unincorporated association, or any other form permitted by law] pursuant to the provisions of sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill).
b. In any development in which transition to unit owner control of the governing board of an association has not occurred, a developer shall make provision in the development for a meeting room for the use of the homeowners' association required to be formed pursuant to this section, or, at the discretion of the commissioner, if the planned development will only contain de minimis common elements, an enclosed or encased notice board, sized in proportion to the number of units, which may be displayed at a prominent location in the development.
c. The requirement to form a homeowners' association shall not apply to any common interest community in which the common elements or limited common elements consist only of open space, including walking trails thereon, and sewerage and drainage basins, at the option of the developer and the municipality. For such communities, the developer shall establish a trust fund for the use of the municipality to cover the expenses of the maintenance of these de minimis common elements. Each unit owner will be required through a deed covenant to deposit such funds as may be calculated annually by the municipality in which the development is located for the maintenance of these common elements. A municipality may assess such costs as an ad valorem tax. A homeowners' association of a common interest community meeting the description of this section and which was formed prior to the effective date of P.L. , c. (C. )(now before the Legislature as this bill) may enter into an agreement for maintenance as described herein with the municipality. Any homeowner's association for which maintenance of the common elements is performed by a municipality pursuant to this subsection shall be exempt from the provisions of sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill), as well as any registration fees pursuant to section 7 of P.L.1977, c.419 (C.45:22A 21 et seq.).
(cf: P.L.1993, c.30, s.1)
34. (New section) In addition to the registration fees required of developers pursuant to section 7 of P.L.1977, c.419 (C.45:22A-27 et seq.) and the regulations promulgated pursuant thereto, an additional fee of $3.00 per lot, parcel, unit or interest shall be paid, which fee shall be deposited into the Common Interest Community Homeowners' Association Trust Fund created pursuant to section 48 of P.L. , c. (C. )(now before the Legislature as this bill) for the purposes of defraying costs of alternative dispute resolution services, which a developer may utilize pursuant to section 55 of P.L. , c. (C. ) (now before the Legislature as this bill).
35. (New section) a. Underlying purposes and policies of P.L. , c. (C. ) (now before the Legislature as this bill) are:
(1) to simplify and clarify the law governing common interest community association corporations, while recognizing the "quasi-governmental" nature of such corporations;
(2) to provide for principles of democracy and fairness in the dealings of homeowners' and common interest community association corporations, so that these corporations are held to standards which provide adequate due process, open governance, democracy and fundamental fairness, similar to those to which governmental bodies are held;
(3) to ensure that a uniform, low-cost, fair and efficient system for resolving disputes between owners and associations is implemented; and
(4) to ensure that associations discharge their obligation to protect the health, safety and welfare of homeowners and manage their community property subject to certain standards and the oversight of the State.
b. Except as specifically provided, the provisions of P.L. , c. (C. ) (now before the Legislature as this bill) shall not be varied by provisions in the certificate of incorporation or the bylaws of a corporation formed pursuant to this act, or deemed to be formed pursuant to sections 35 through 63 of P.L. , c. (C. )(now before the Legislature as this bill). The presence in certain provisions of this title of the words "unless otherwise provided in the certificate of incorporation" or "unless otherwise provided in the certificate of incorporation or bylaws," shall permit a variation from the provisions of this act.
36. (New section) a. P.L. , c. (C. ) (now before the Legislature as this bill) shall apply to:
(1) Every corporation which is required, pursuant to the "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B-1 et seq.), to be organized under this act;
(2) A cooperative housing corporation which may have been organized with capital stock, and which was organized under or became subject to any heretofore enacted law of this State with respect to which power to amend or repeal was reserved to the Legislature; and
(3) every corporation which reincorporates under this act pursuant to section 38 of P.L. , c. (C. )(now before the Legislature as this bill).
37. (New section) a. Any homeowners' and common interest community association corporation, including a cooperative corporation having capital stock, shall be deemed to be a corporation formed under this act upon the effective date of P.L. , c. (C. ) (now before the Legislature as this bill) and shall not operate for profit. Appreciation in the value of corporation or association assets shall not be deemed to be profit. No re-incorporation shall be required for any such association which was organized as a different type of New Jersey corporation prior to the effective date of P.L. , c. (C. ) (now before the Legislature as this bill), but re-incorporation may be accomplished by amendment of the certificate of incorporation, or re-recording of the bylaws and governing documents.
b. Corporations deemed to be formed or formed under this act shall be subject to the local government jurisdiction in which the common interest community is located, and as such may not adopt or maintain any rule or bylaw provision in conflict with an applicable municipal ordinances or resolutions, except where specifically permitted by State statute or by the municipality or county.
c. Corporations deemed to be formed or formed pursuant to this act are without authority, by contract or otherwise, to impinge on the inherent or specific rights protected under the New Jersey Constitution or the United States Constitution of any citizen residing in the State. Residents residing in common interest communities must also recognize that homeowners' association rules governing the use of property owned in common by all of the residents are necessary for the orderly conduct of affairs within such communities, and that it will be necessary for residents in these communities to abide by rules which give the individual less control over certain portions of the common property than if the property were owned entirely by the individual. All such rules shall be properly adopted by the membership of the community through a democratic method in accordance with P.L. , c. (C. ) (now before the Legislature as this bill) or other relevant law.
38. (New section) a. Upon request of any person, the designated State office for corporate filings shall furnish certified copies of documents concerning incorporation as a common interest community association which have been filed in the office in accordance with the provisions of P.L. , c. (C. )(now before the Legislature as this bill) and P.L.1969, c.257 (C.46:8B-1 et seq.).
b. Upon the request of any person, the designated State office for corporate filings shall certify to the existence or non-existence of any facts on record in the office pertaining to corporations formed pursuant to P.L. , c. (C. ) (now before the Legislature as this bill).
c. Within 90 days of the effective date of this act, the designated State office for corporate filings shall certify to the Department of Community Affairs to the existence or non existence of any facts on record in the office pertaining to corporations formed or deemed to be formed pursuant to P.L. , c. (C. ) (now before the Legislature as this bill) or P.L.1969, c.257 (C.46:8B-1 et seq.).
39. (New section). a. No dividend shall be paid and no part of the income or profit of a corporation organized under this act shall be distributed to its members, trustees or officers, but a corporation may pay compensation in a reasonable amount to its members, trustees and officers, for services rendered, and, upon dissolution, may make distributions to its members as permitted by this act, unless otherwise provided in the certificate of incorporation or bylaws; except the payment, benefit, or distribution shall not be deemed to be a dividend or distribution of income or profit.
b. No benefit obtained on behalf of the association shall inure to the benefit of a member, and no member shall use association assets, professional services contracted for the association or employees of the association for personal use. A member who violates the provisions of this subsection at a minimum shall be required to reimburse the association the value of the benefit conferred or services used, and may be subject to sanctions by the Commissioner of Community Affairs as established in accordance with P.L. , c. (C. ) (now before the Legislature as this bill).
40. (New section) The corporate name of a corporation formed pursuant to this act shall be the same as the name or reflect the name of the development and location, or the name as registered as a planned development with the Department of Community Affairs pursuant to P.L.1977, c. 419 (C. 45:22A 21 et seq.) and P.L. , c. (C. )(now before the Legislature as this bill.).
41. (New section) One or more individuals may act as incorporators of a corporation by signing and filing in the designated State office for corporate filings a certificate of incorporation for the corporation. Individuals acting as incorporators shall be at least 18 years of age. Incorporators need not be United States citizens or residents of this State, and need not utilize an attorney to act for the corporation for the purposes of this title.
42. (New section) The filing requirements and fees applicable to nonprofit corporations incorporated pursuant to N.J.S.15A:1-1 et seq. shall apply to corporations formed under P.L. , c. (C. ) (now before the Legislature as this bill), except where specifically provided otherwise.
43. (New section) a. The certificate of incorporation shall set forth:
(1) The name of the corporation;
(2) A statement that the corporation is organized for the purposes of maintaining and managing the common elements of a common interest community;
(3) A statement that the members of the corporation are the unit owners as that term is defined in section 3 of P.L.1969, c.257 (C.46:8B-3);
(4) If the members are to be divided into classes, the relative right and limitations of the different classes of members to the extent those rights and limitations have been determined or that the rights and limitations shall be as set forth in the bylaws of the corporation;
(5) The method of electing officers or that the method shall be as set forth in the bylaws of the corporation, provided that the officers be owners and residents of the common interest community; this provision may be varied if no resident owners are available to serve in that capacity;
(6) Any provision not inconsistent with the "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B-1 et seq.), which the incorporators elect to set forth for the management and conduct of the affairs of the corporation, or creating, defining, limiting or regulating the powers of the corporation, its officers, trustees and members or any class of members, including any provision which under this act is required or permitted to be set forth in the bylaws;
(7) The address, including actual location as well as postal designation, if different, of the corporation's initial registered office, and the name of the corporation's initial registered agent at that address;
(8) The number of officers, not less than one, constituting the first board and the names and addresses of the persons who aim to serve as officers, which addresses shall be either the residence address of the person or other address where the person regularly receives mail and which is not the address of the corporation;
(9) The names and addresses of the incorporators, which addresses shall be either the residence address of the person or other address where the person regularly receives mail and which is not the address of the corporation;
(10) If, pursuant to subsection b. of this section, the certificate of incorporation is to be effective on a date subsequent to the date of filing, the effective date of the certificate;
b. An original and one copy of the certificate of incorporation shall be filed in the designated State office for corporate filings. The corporate existence shall begin upon the effective date of the certificate, which shall be the date of the filing, or such later time, not to exceed 30 days from the date of filing, as may be set forth in the certificate. The filing shall be conclusive evidence that all conditions precedent required to be performed by the incorporators have been complied with and, after the corporate existence has begun, that the corporation has been incorporated under this act, except as against this State in a proceeding to cancel or revoke the certificate of incorporation or for voluntary dissolution of the corporation. The designated State office for corporate filings shall forward the copy of the certificate of incorporation to the Attorney General and to the Department of Community Affairs. The corporation shall thereafter update its corporate information annually, through the Department of Community Affairs and in accordance with section 48 of P.L. , c. (C. )(now before the Legislature as this bill). The department shall forward updated information for all common interest community association corporations to the designated State office for corporate filings.
c. The certificate of incorporation may provide that a governing board member shall not be personally liable, or shall be liable only to the extent therein provided, to the corporation or its members for damages for breach of any duty owed to the corporation or its members, except that such provision shall not relieve a governing board member from liability for any breach of duty based upon an act or omission (1) in breach of such person's duty of loyalty to the corporation or its unit owners, (2) not in good faith or involving a knowing violation of law or (3) resulting in receipt by such person of an improper personal benefit.
44. (New section) On or after the effective date of the certificate of incorporation, an organization meeting of the board named in the certificate of incorporation shall be held, at the call of a majority of the board named, to adopt bylaws, elect officers, provide for initial members, and transact all other business as may come before the meeting. The board members calling the meeting shall give at least five days' notice thereof by mail to each trustee or officer named in the certificate of incorporation, which notice shall state the time and place of the meeting.
45. (New section) a. The initial bylaws of a corporation shall be prescribed by the developer-controlled board at its organization meeting. After control of the board has transitioned to the owners in the common interest community pursuant to section 12 of P.L.1969, c.257 (C.46:8B-12), the power to make, alter and repeal bylaws shall be reserved to the owners and shall be in accordance with this section. On or after the effective date of P.L. , c. (C. ) (now before the Legislature as this bill), an association which has bylaws which are not in conformance with this act shall amend them accordingly, and need not obtain owner approval for those amendments which are made solely to comply with the provisions of P.L. , c. (C. ) (now before the Legislature as this bill). The owners shall prescribe in the bylaws that any bylaw made by them shall not be altered or repealed by the board acting alone.
The developer shall provide to each owner a separate listing of the bylaws or rules adopted by the developer-controlled board, organized by the following categories:
(1) appearance, use or maintenance of the common elements, other than limited common elements, including land or buildings;
(2) pets;
(3) garbage and recycling of materials
(4) payment of common maintenance expenses, including penalties imposed for failure to make payments or for late payments,
(5) parking, garages, or vehicles;
(6) rules for units or limited common elements, including, but not limited to, items such as indoor decorating or outdoor decorations and use of clotheslines.
b. For purposes of P.L. , c. (C. ) (now before the Legislature as this bill), the initial bylaws of a corporation adopted by the developer-controlled board at its organization meeting shall be deemed to have been adopted by the members.
c. Any provision which this act or P.L.1969, c.257 (C.46:8B-1 et seq.) requires or permits to be set forth in the bylaws may be set forth in the certificate of incorporation.
d. The powers to adopt emergency bylaws under N.J.S.15A:2-11 shall apply to corporations formed or deemed to be formed pursuant to this act.
e. The following provision shall apply to every association subject to the provisions of P.L.1969, c.257 (C.46:8B-1 et seq.) and to the provisions of P.L. , c. (C. )(now before the Legislature as this bill), in which the governing board is controlled by the unit owners, regardless of when the corporation or association was formed.
No later than the 91st day after the effective date of the regulations promulgated to effectuate P.L. , c. (C. )(now before the Legislature as this bill), or the date of transition of control to the owners, whichever is later, and notwithstanding the respective governing documents, each governing board shall solicit a vote to retain any bylaw or rule adopted by an association which was established by the declarant or developer-controlled board. The ballot to retain the bylaws and rules shall be organized by category as set forth in subsection a. of this section. Unless a vote to affirmatively readopt or modify each bylaw or rule is obtained from 66 2/3 percent of the owners voting at a special meeting called for such purpose, the bylaw or rule shall expire. The governing board shall thereafter amend the rules or bylaws accordingly with the results of this vote. This subsection shall not apply to any rule or bylaw which is necessary for the maintenance, repair, replacement, or cleaning and sanitation of the common elements, or any rule the expiration of which would interfere with an unexpired contract. Failure of a board to comply with the provisions of this section shall subject it to sanctions by the department.
46. (New section) In recognition of the governmental nature of homeowners' associations, and in order to lessen any conflicts of interest with developers, the Department of Community Affairs shall exercise the powers granted under this section through an organizational unit in the Division of Local Government Services, which shall be separate from the division of the department that regulates developers pursuant to the "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.) or inspects multiple dwellings for compliance with the "Hotel and Multiple Dwelling Law," P.L.1967, c.76 (C.55:13A-1 et seq.).
The Department of Community Affairs shall have the following powers with regard to corporations formed or deemed to be formed under P.L. , c. (C. ) (now before the Legislature as this bill) and in which the majority voting power of the governing board is held or deemed to be held by the unit owners:
a. To initiate, receive, hear and review complaints, adopt rules, hold hearings, make findings and impose sanctions with regard to any of the following matters:
(1) The maintaining and granting access to records required to be maintained by the association and to be made available to homeowners pursuant to section 59 of P.L. , c. (C. ) (now pending before the Legislature as this bill);
(2) Through the Office of the Ombudsman for Homeowners and Associations, the comportment of fair elections for association governing board members and officers and the establishment of voting procedures and forms as the commissioner finds necessary, including, but not limited to, ballots, absentee ballots and proxy ballots;
(3) The establishment and implementation of a fair and efficient procedure for the resolution of disputes between associations and homeowners;
(4) The holding of meetings that are open to homeowners and the conducting of association business in such open meetings, except as otherwise expressly permitted by this act; and
(5) The determination of whether a conflict of interest on the part of association trustees, officers and employees existed and whether a sanction should be imposed.
b. To issue subpoenas for the production of documents and the attendance of witnesses with respect to the investigation of any complaint.
c. To forward to the appropriate governmental officials any information that may indicate violation of any statute, criminal or otherwise, or any rules of court or professional conduct.
d. To render advisory opinions as to whether a given state of facts or circumstances would constitute a violation of any statute or rule applicable to associations.
e. To enforce all statutes and regulations imposing any duty upon associations.
f. (1) If the department determines, after notice, that an officer, governing board member, or property manager of an association has:
(a) violated any provision of P.L. , c. (C. )(now before the Legislature as this bill), the "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B-1 et seq.), "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A 21 et seq.), or any other statute or regulation governing homeowners' associations hereinafter enacted;
(b) directly or through an agent or employee knowingly engaged in any violation of the governing documents of the association; or
(c) violated any lawful order or rule of the department;
the department may issue an order requiring the person to cease and desist from the unlawful practice or to take such other affirmative action as in the judgment of the department will carry out the purposes of this act.
If the department makes a finding of fact in writing that the public interest will be irreparably harmed by delay in issuing an order, it may issue a temporary cease and desist order. Every temporary cease and desist order shall include in its terms a provision that upon request a hearing shall be held within 10 days of such request to determine whether or not it becomes permanent. Such temporary cease and desist order shall be forwarded by certified mail.
(2) The department shall provide an opportunity for a hearing for any association prior to the imposition of any sanction, including monetary fines. Associations shall be subject to fines only after they have failed or refused to comply with an order of the department. The maximum fine that may be levied against an association for failure to comply with an order to cease and desist from continuing to violate an order of the department shall be the greater of $2,500.00 or one percent of the total annual expenditures as listed on the most recently adopted budget, per order. The department may impose a monetary fine on a board member or members, not to exceed $5,000, if it is determined that the board member or members are solely responsible for the continued failure of the board to comply with an order or orders issued pursuant to this section, and the assessment of a fine against the association would be unfair under the circumstances. In such a case, the offending board member may not use the association attorney, but may obtain private counsel at his or her own expense. Appeal from a department determination pursuant to this section may be made to the Office of Administrative Law.
The penalties pursuant to this section may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). Jurisdiction to enforce such penalties is hereby conferred upon the courts specified by section 2 of P.L.1999, c.274 (C.2A:58-11). Suit may be brought by the State of New Jersey; payment of a money judgment pursuant hereto shall be remitted to the State Treasurer, for deposit into the "Homeowners' Association Trust Fund" established pursuant to section 48 of P.L. , c. (C. ) (now before the Legislature as this bill).
g. To remove from office, after notice and the opportunity for a hearing, any governing board member or officer who shall fail to comply with any order issued by the commissioner to cease and desist from violating any statute, rule, court order or proper vote of the owners. Following any such removal, the department shall provide such assistance as may be required by an association in scheduling and holding elections or in managing the association until such time as the governing board is able to function properly. Notice, which shall include the underlying basis therefore, of any fine imposed upon the association or a board member, or removal of an governing board member or officer by the department shall be given to all homeowners by the governing board within 30 days of the action and shall be entered upon the minutes of the next meeting of the governing board or of the association.
h. To set standards and procedures for dispute resolution at the association level in accordance with section 55 of P.L. , c. (C. ) (now before the Legislature as this bill);
i. To select, assign and provide trained and impartial volunteer mediators for the purpose of resolving disputes in conjunction with the Office of Dispute Resolution in the Department of Treasury in accordance with section 55 of P.L. , c. (C. ) (now before the Legislature as this bill).
j. To employ or contract, in conjunction with the Office of Dispute Resolution, with persons who are professionally trained in dispute resolution, either as mediators or as arbitrators, and to establish ethical and professional standards for such persons in accordance with section 55 of P.L. , c. (C. ) (now before the Legislature as this bill).
k. To promulgate all rules and regulations necessary to effectuate P.L. , c. (C. ) (now before the Legislature as this bill) in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
47. (New section) An association, upon the first election of a unit owner representative to the board, shall conduct elections under the auspices of a committee of homeowners, none of whom shall be current board members, candidates for the board, or their immediate family members, and which shall function independently of the governing board and shall be fairly representative of the membership of the association, or by using the services of a recognized entity that regularly conducts elections for membership organizations, such as the New Jersey League of Women Voters. Elections, including the obtaining of proxy votes, shall not be conducted by a property manager or other employee hired by the association. No person shall be disqualified from voting in an election for any reason other than not being an owner. Homeowners shall be allowed to cast ballots anonymously or otherwise by mail or by proxy or in person, but proxies authorizing an agent to vote for persons not specified by the homeowner shall not be recognized as valid, but nonetheless may be counted for the purposes of determining a quorum. Ballots, signed envelopes, registration records, eligibility lists, proofs of mailing and other voting materials shall be subject to inspection by all homeowners at the time of the election and for three hours afterwards; after such time they shall be sealed and kept unopened, in the custody of the chairperson of the election committee or the organization that conducted the election, until the next election. Voting materials and procedures shall at all times be subject to inspection and review by the department.
Upon the written request of any candidate, and upon a determination by the Ombudsman for Homeowners and Associations that a reasonable basis exists, the Ombudsman may appoint one or more persons to monitor an election to ensure fairness and accuracy. A candidate may also request, within a thirty day period following an election, the Ombudsman to investigate any allegations of fraud or abuse in election proceedings. The Ombudsman shall have the power to invalidate any election in which the Ombudsman finds there to have been fraud or any other abuse of the electoral process, including, but not limited to, denial of equal access to all eligible voters for all candidates. In the event that any association fails or refuses to conduct a fair and open election at such time as elections are required for such association, the Ombudsman shall order that the election be conducted at such time and under such supervision as the Ombudsman shall direct, or the Ombudsman shall conduct the election directly.
48. (New section) a. Within 90 days of the effective date of P.L. , c. (C. ) (now before the Legislature as this bill), and annually on the same date thereafter, all homeowners associations shall register with the Commissioner of Community Affairs, on such form as the commissioner shall prescribe, and shall pay an annual registration fee, which the commissioner shall establish by rule, which fee shall not exceed the sum of six dollars for each unit within the common interest community, except as the fee may be adjusted annually by the commissioner, but in no event may the adjustment exceed five percent of the amount of the fee chargeable in the prior year. A fee shall not be charged on a unit which is reserved for occupancy by low or moderate income households in accordance with the "Fair Housing Act," P.L.1985, c.222 (C.52:27D-301 et al.). Associations shall collect the fee on a per unit basis and report the fee paid in their financial documents separate from any other assessment or association charges. An association may file a lien on a unit if the owner thereof refuses to pay the registration fee as required by this section, and may also impose fines therefor and avail itself of the procedure outlined in section 54 of P.L. , c. (C. ) (now before the Legislature as this bill) for garnishment. Associations formed subsequent to the effective date of P.L. , c. (C. ) (now before the Legislature as this bill) shall register within 30 days of the formation of the association; provided, however, that any association required to be registered with the department and planned real estate development shall be registered not later than the date of registration of the planned real estate development. Any association registration fee not paid in full by the date due shall be subject to penalty charges in the amount of one and one half percent per month or portion thereof on the unpaid balance. An association that has not paid in full all outstanding fees, together with any penalty thereon, shall not have the authority, notwithstanding any other law to the contrary, to impose fines, record liens or restrict privileges until the balance is paid in full, or, in flagrant cases, and upon proper notice and due process allowing for a hearing, may have its officers removed from office or its corporation status voided, pursuant to an order of the commissioner. A common interest community containing low and moderate income and market rate units may be totally or partially exempted from the registration fee at the discretion of the commissioner.
b. All registration fees and penalty moneys received by the Department of Community Affairs pursuant to this section shall be deposited as specified in the paragraphs below in an interest bearing, non lapsing revolving fund, entitled the "Common Interest Community Homeowners' Association Trust Fund," to be held by the State Treasurer. Moneys held in this non lapsing revolving fund shall be continuously appropriated to the Department of Community Affairs for the following purposes and in the proportions specified:
(1) Ten percent of the amount collected for the Center for Government Services, Rutgers University; for the purposes of providing educational training or training materials for board members;
(2) Ten percent of the amount collected for the Center for Negotiation and Conflict Resolution, Rutgers University for the purposes of providing conflict resolution training for board members, property managers and owners;
(3) Twenty five percent of the amount collected for the Department of Treasury, Office of the Public Defender, Office of Dispute Settlement for the purpose of providing arbitration services and for training of volunteer mediators;
(4) Twenty five percent of the amount collected to the Council on Affordable Housing for purposes of making grants to associations comprised, in part or in whole, of low and moderate income households for assistance to those households in the payment of the common maintenance expenses; and
(5) The remaining monies collected shall be utilized by the Department of Community Affairs to defray administrative costs in the enforcement and effectuation of P.L. , c. (C. ) (now before the Legislature as this bill and P.L.1969, c.257, which shall include funding for the booklet and Advisory Council expenses, if any, as required by P.L. , c. (C. ) (now before the Legislature as this bill).
c. All funds collected shall be dedicated and expended solely for these purposes. At the discretion of the commissioner, funds may be utilized in percentages which differ from those set forth above, provided that the provisions of this section are met. In the event funds are appropriated or transferred from this fund for any other purpose in contradiction of this section, then the obligation of associations to pay the annual registration fee pursuant to this section shall be suspended until such time as the full amount of the funds transferred or appropriated is reinstated to the fund, and all costs which cannot be paid from the fund due to insufficiencies thereafter shall be paid from the General Fund of the State. Any claims that transfers have been made outside of the purposes of this section may be submitted to the Joint Budget Oversight Committee of the State Legislature, or its successor committee for its review. The commissioner shall review collections made pursuant to this section from time to time, but in no event less than once every two years, and determine if the amount collected is sufficient, or more than sufficient, to meet the costs as outline in this section. If the commissioner determines that insufficient funds are being collected for the purposes of this act, then the fees may be increased, subject to the limitation of subsection a. of this section. If the commissioner determines that excess fees are being collected beyond a reasonable amount necessary for reserves, which in no case shall exceed 10 percent of the amount expended in the previous year, then the commissioner shall reduce the fees accordingly. The Office of the State Auditor shall review the commissioners' audit of the fund to determine if it is sufficient to meet the Legislative intent of this section.
d. All associations which register shall also file annually thereafter an annual report, which shall include:
(1) The names of the current officers or trustees of the governing board, employees names, and salaries and bonuses paid, if any;
(2) A copy of the most recent bylaws and rules, if any were changed since the previous report;
(3) A copy of the most recent budget adopted and financial statement;
(4) the number and nature of complaints and ADR proceedings entered into by the board as a result of the complaints;
(5) the amounts and nature of fines imposed; and
(6) any information deemed to be pertinent by the commissioner.
No additional report by a corporation incorporated or deemed to be incorporated pursuant to this act shall be required to be filed with the designated State office for corporate recording in order to maintain corporate status.
The report, other than the bylaws, required by this section shall be distributed annually to all of the members of the association by the association.
49. (New section) a. There is established in, but not of, the Department of Community Affairs, the Advisory Council on Common Interest Communities. The council shall consist of nine members appointed by the Governor, and shall include two representatives of the New Jersey Common-Interest Homeowners' Coalition, one representative from the New Jersey League of Women Voters, and one representative of the Center for Government Studies, Rutgers University. The other five members shall be persons who own units in common interest communities, not more than two of whom serve, or have served within the immediately preceding 48 months, on the governing boards of their respective associations. The Ombudsman created pursuant to section 50 of P.L. , c. (C. )(now before the Legislature as this bill); shall serve as an ex officio, nonvoting member of the council.
Within 60 days of the effective date of P.L. , c. (C. )(now before the Legislature as this bill), and at least one month prior to the expiration of the term of a member nominated by an organization listed above, that organization shall submit to the Governor three nominees for consideration, from which the Governor may choose. If any organization does not submit three nominees for consideration at any time required, the Governor may appoint a member of the Governor's choice.
For the purpose of complying with the provisions of Article V, Section IV, paragraph 1 of the New Jersey Constitution, the Advisory Council is hereby allocated within the Department of Community Affairs, but, notwithstanding that allocation, the office shall be independent of any supervision or control by the department or by any board or officer thereof.
Members shall be appointed to two-year terms; however, of the five unit owner members appointed, four shall be appointed initially to a one year term.
b. Members of the council shall serve without compensation, but shall be entitled to receive reasonable per diem and travel expenses
while on official business.
c. The functions of the advisory council shall be to:
(1) Receive, from the public and self-initiated, input regarding issues of concern with respect to common interest communities and recommendations for changes in the law concerning common interest communities. The issues that the council shall consider include, but are not limited to, the rights and responsibilities of the unit owners in relation to the rights and responsibilities of the association.
(2) Review, evaluate, and advise the department concerning revisions and adoption of rules affecting common interest communities.
(3) Recommend improvements, if needed, in the education or other programs required to be established pursuant to P.L. , c. (C. ) (now before the Legislature as this bill).
d. The council may elect a chair and vice chair and such other officers as it may deem advisable. The council shall meet at the call of its chair, at the request of a majority of its membership, at the request of the Ombudsman or the commissioner, or at such times as it may prescribe. A majority of the members of the council shall constitute a quorum. Council action may be taken by vote of a majority of the voting members who are present at a meeting where there is a quorum.
50. (New section) a. There is hereby established in the Department of Community Affairs the Office of the Ombudsman for Homeowners and Associations, which, for purposes of separation from activities related to enforcement powers granted to the commissioner over developers, and over owner-controlled governing boards, shall be separate and apart from any other division within the department.
b. The office shall be headed by the Ombudsman, who shall be appointed by the commissioner and shall not function in the department in any other capacity other than to carry out the purposes of this section. The Ombudsman shall be an attorney in good standing admitted to the bar of New Jersey and qualified by experience in the areas of planned real estate developments and alternative dispute resolution procedures. No person who shall have been a unit owner or an employee of, or provider of professional or business services to, any homeowners' association or organization representing homeowners' associations within the preceding 36 month period shall be eligible for appointment as Ombudsman. An officer or full-time employee of the Ombudsman's office may not actively engage in any other business or profession; serve as the representative of any political party, executive committee, or other governing body of a political party; serve as an executive, officer, or employee of a political party; receive remuneration for activities on behalf of any candidate for public office; or engage in soliciting votes or other activities on behalf of a candidate for public office. The Ombudsman or any employee of his or her office may not become a candidate for election to public office unless he or she first resigns from his or her office or employment. The Office shall be funded from the "Common Interest Community Homeowners' Association Trust Fund. The Office of the Ombudsman for Homeowners and Associations shall have the powers that are necessary to carry out the duties of the office, including the following specific powers:
(1) To have access to and use of all files and records of the department;
(2) To employ professional and clerical staff as necessary for the efficient operation of the office;
(3) To prepare and issue reports and recommendations to the department, its divisions, the Advisory Council on Common Interest Communities and the Community Association Manager Certification Standards Board. The Ombudsman shall make such recommendations as deemed appropriate for legislation relative to departmental rules, jurisdiction, personnel, and functions.
(4) To act as liaison between the department, unit owners, governing board members, community association property managers, and other affected parties. The Ombudsman shall develop policies and procedures to assist unit owners, governing board members, community association property managers, and other affected parties to understand their rights and responsibilities as set forth in the statutes and the governing documents governing their respective association.
(5) To coordinate and assist in the preparation and adoption of educational and reference material, and endeavor to coordinate with private or volunteer providers of these services, so that the availability of these resources is made known to the largest possible audience.
(6) To monitor and review procedures and disputes concerning common interest community elections or meetings, including, but not limited to, recommending that the division pursue enforcement action in any manner where there is reasonable cause to believe that election misconduct has occurred.
(7) To monitor and mediate claims for "repair and deduct" made pursuant to section 16 of P.L.1969, c.257 (C.46:8B-16).
(8) To make recommendations to the division for changes in rules and procedures for the filing, investigation, and resolution of complaints filed by unit owners, associations, and managers.
(9) To provide resources to assist members of governing boards and officers of associations to carry out their powers and duties consistent with the statutes, department rules, and the common interest community governing documents; this activity shall be coordinated with the Center for Government Services, Rutgers University and shall include listings of appropriate reference and educational materials and general budgetary and financial guidance. The Ombudsman and the Center may make contractual arrangements to provide authorized training and materials with recognized trade organizations currently providing such services to board members;
(10) (i) To encourage and facilitate voluntary meetings with and between unit owners, governing boards, community association property managers, and other affected parties when the meetings may assist in resolving a dispute within a community association before a person submits a dispute for a formal or administrative remedy. It is the intent of the Legislature that the ombudsman act as a neutral resource for both the rights and responsibilities of unit owners, associations, and board members.
(ii) To develop and maintain, in consultation with the Office of Dispute Resolution and section 28 of P.L.1994, c.58 (C.52:27E-73), a pool and list of volunteers throughout the State who have been trained in dispute resolution and to establish procedures and a system of training for such volunteers;
(iii) To obtain and compile information concerning alternative dispute resolution proceedings throughout the State that may serve as a resource on the methods used to resolve disputes, for the benefit of associations, homeowners and volunteer dispute resolvers;
(iv) To conduct dispute resolution workshops for governing board members and homeowners in conjunction with the Center for Negotiation and Conflict Resolution, Rutgers, University;
(11) To assist associations in their dealings with municipalities and with other State and local regulatory agencies;
(12) To assist owners of low and moderate income units in inclusionary common interest communities and their governing boards in developing methods to ensure the continued affordability of those units, including grants or loans through the Council on Affordable Housing; and
(13) To assist homeowners in common interest communities in which there are shared utility bills to pay those bills when the association has fallen into arrears and the continued habitability of the units is at stake. The commissioner may issue an order to a governing board to enter into a payment agreement in such an instance, and may remove a governing board member who fails to comply with such an order.
51. (New section) Powers and duties of unit owners' association.
In any of the following provisions in which a vote of the owners is required, a vote of the owners shall not be required when the governing board is still under the control of the declarant.
a. An association, acting through its governing board, and in addition to any specific requirements contained in the "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B-1 et seq.), shall be responsible for the performance of the following duties:
(1) The maintenance, repair, replacement, cleaning and sanitation of the common elements at the level a reasonable homeowner would take with his own property.
(2) The adoption, distribution, amendment and enforcement of rules governing the use and operation of the common interest community.
(3) The adoption of alternative dispute resolution procedures in accordance with the provisions of section 55 of P.L. , c. (C. ) (now before the Legislature as this bill).
b. Except as provided in subsection c. of this section, and subject to the provisions of the declaration, the bylaws, or other statute of this State, an association:
(1) Shall adopt and amend bylaws and rules and regulations, subject to approval of the owners as provided in this act, and provided that any rules or regulations adopted by resolution of an association shall be recorded in the same place as the bylaws;
(2) Shall adopt and amend budgets for revenues, expenditures, and reserves and collect assessments for common expenses from unit owners, provided, that with respect to the adoption of budgets for revenues, expenditures and reserves in common interest communities of 100 or more units, a copy of any proposed budget shall be available at a meeting of the governing board at least one month prior to the meeting at which the governing board is scheduled to vote on the budget and the unit owners shall be given the opportunity to comment on any of the budgets or their component parts. If any budget is amended after the opportunity for unit-owner comment, the budget need not be presented to the unit owners for additional comment before the governing board votes on the budget, unless the governing documents require unit owner approval of the budget.
(i) The proposed annual budget of common expenses shall be detailed and shall show the amounts budgeted by accounts and expense classifications, including, but not limited to, those expenses related to the maintenance of improvements listed on the master deed or declaration. A master association shall adopt a separate budget of common expenses for each community or condominium the association operates and shall adopt a separate budget of common expenses for the master association. In addition, if the association maintains limited common elements with the cost to be shared only by those entitled to use the limited common elements as provided for in the governing documents, the budget or a schedule attached thereto shall show amounts budgeted therefor. If, after turnover of control of the association to the unit owners, any of the expenses listed in the master deed or declaration are not applicable, they need not be listed.
(ii) In addition to annual operating expenses, the budget shall include reserve accounts for capital expenditures and deferred maintenance. These accounts shall include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and for any other item for which the deferred maintenance expense or replacement cost exceeds $10,000. The amount to be reserved shall be computed by means of a formula which is based upon estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance. This subsection does not apply to an adopted budget in which the members of an association have determined, by a majority vote at a duly called meeting of the association, to provide no reserves or less reserves than required by this subsection.
(iii) Reserve funds and any interest accruing thereon shall remain in the reserve account or accounts, and shall be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote of all of the members.
(iv) In a multi-association community, only the voting interests of the units subject to assessment to fund the reserves in question shall be eligible to vote on questions that involve waiving or reducing the funding of reserves, or using existing reserve funds for purposes other than purposes for which the reserves were intended.
(3) May hire and discharge managing agents and other employees, agents, and independent contractors, including legal counsel, provided that a contract for legal services which requires the payment of an attorney for attending association meetings, including alternative dispute resolution proceedings, and which shall be charged only as a common expense, shall require the approval of a majority of the owners prior to the contract signing;
(4) May institute, defend, or intervene in litigation or administrative proceedings in its own name on matters affecting the common interest community; provided that if an association desires to initiate or participate in litigation, other than in defense of the association or collection of customary association assessments, no action shall be taken except upon a prior vote of approval of a majority of the owners of the association.
(5) May make contracts and incur liabilities in accordance with the bidding procedures set forth in section 63 of this act;
(6) Shall regulate the use, maintenance, repair, replacement, cleaning and modification of common elements, including, if authorized under the by-laws, the right to suspend the use of the common elements, including, without limitation, parking spaces or recreational facilities, whenever a unit owner is delinquent in the payment of common expenses;
(7) May cause additional improvements to be made as a part of the common elements, provided that an 80 percent vote of approval of the owners is obtained;
(8) May acquire, hold, encumber, and convey in its own name any right, title, or interest to real estate or personal property, provided that common elements in a condominium or planned community, and part or all of a cooperative shall only be conveyed or subjected to a security interest as permitted pursuant to P.L. , c. (C. ) (now before the Legislature as this bill).
(9) May grant easements, leases, licenses, and concessions through or over the common elements;
(10) May impose and receive any payments, fees, or charges for the use, rental, or operation of the common elements, other than limited common elements, and for services provided to unit owners;
(11) If authorized by the master deed or bylaws, may impose reasonable fines upon unit owners for failure to comply with provisions of the master deed, bylaws or rules and regulations, subject to the following provisions:
A fine for a violation or a continuing violation of the master deed, bylaws or rules and regulations shall not exceed $100 per day for each separate violation, up to an aggregate maximum of $1,000.
On roads or streets with respect to which Title 39 of the Revised Statutes is in effect under section 1 of P.L.1945, c.284 (C.39:5A-1), an association may not impose fines for automobile violations.
A fine shall not be imposed unless the unit owner is given written notice of the proposed action and of the alleged basis for the action, and is advised of the right and afforded the opportunity to participate in a dispute resolution procedure in accordance with section 55 of P.L. , c. (C. )(now before the Legislature as this bill). Unless binding arbitration was agreed upon, 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. No lien shall be authorized or recorded by an association without judicial or administrative review for a fine imposed after the effective date of P.L. , c. (C. ) (now before the Legislature as this bill).
(12) May impose reasonable charges for the preparation and recordation of amendments to the declaration, resale certificates, or statements of unpaid assessments;
(13) May provide for the indemnification of its officers and governing board and maintain directors' and officers' liability insurance;
(14) May 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) Except as otherwise provided in the declaration or by-laws, and notwithstanding the provisions of the "Prudent Investor Act," P.L.1997, c.26 (C.3B:2-11.1 et seq.), or any other law to the contrary, may invest the assets of the association and the proceeds thereof, separately or together with other assets of the association, in such investments as the board, in the exercise of reasonable judgment, deems advisable, subject to a vote of 80 percent of the owners upon transition to maintain such a power.
(16) May exercise any other powers conferred by the declaration or bylaws in accordance with P.L. , c. (C. )(now before the Legislature as this bill); and
(17) May exercise any other powers necessary and proper for the governance and operation of the association in accordance with the provisions of P.L. , c. (C. )(now before the Legislature as this bill).
(18) May charge an "entrance" fee or "contribution to capital expenses" fee to an owner upon the purchase of a unit in the common interest community, provided however that such charges may not exceed two months worth of commons fees chargeable at the time of the sale. The money collected from entrance fees shall be deposited by the association into an account earmarked for capital improvements or reserves for maintenance costs, and shall be utilized solely for those purposes.
c. The declaration shall 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.
d. The association, by a vote of a majority of the owners, 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, provided 80 percent of the owners vote to approve such a restriction subsequent to the transition of the governing board to owner control. The requirement of a vote of the owners shall not apply to communities which have restricted rental prior to the effective date of P.L. , c. (C. ) (now before the Legislature as this bill). A common interest community in which the rental of units is permitted shall not charge an owner a fee for the rental of the property, or require a copy of the lease to be furnished to the association, unless the association is requested by the owner to provide lease guidance, in which case fees shall be limited to $100. An association shall allocate any costs associated with governmental inspection of a rental unit to the owner of the rental unit. Any claims for damage to common elements from the rental of property shall be made against an owner in the same manner as permitted for other claims for damage to common elements pursuant to P.L.1969, c.257 (C.46:8B-1 et seq.). This paragraph shall not apply to cooperatives, which shall be governed instead by the provisions of P.L.1997, c.366 (C.46:8D-13.1).
e. 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, an association may:
(1) Exercise directly against the tenant the powers described in paragraph (11) of subsection b. 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 in accordance with the provisions of section 55 of P.L. , c. (C. )(now before the Legislature as this bill); 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.
f. The rights granted under paragraph (3) of subsection e. 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.
g. Unless a lease otherwise provides, this section shall not:
(1) Affect rights that a unit owner may have to enforce a lease or that the association has under other law; or
(2) Permit an 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.
52. (New section) Governing board members and officers.
a. Except as provided in the declaration, the bylaws, subsection b. of this section, or other provisions of P.L.1969, c.257 (C.46:8B-1 et seq.) or of P.L. , c. (C. )(now before the Legislature as this bill), a governing board may act in all instances on behalf of the association, but may not act to benefit some members individually if not in the best interest of the entire membership of the association. In the performance of their duties, officers and members of a governing board shall act in good faith and exercise honest judgment in lawful and legitimate furtherance of the association's purposes on behalf of and to protect the rights of all owner members of the association.
Notwithstanding the provisions of this section, or any other law, an individual convicted of a crime of the first or second degree, or a crime of a fiduciary nature of any degree: (1) while serving as an officer or member of a governing board shall be deemed to have resigned that position immediately upon entry of judgment of conviction; or (2) prior to an election to serve as an officer or member of an governing board, shall disclose, in writing on the ballot, such a conviction if it occurred within a three year period prior to the election.
b. An governing board shall not act on behalf of the association to: (1) amend the declaration, except when necessary to render an inconsistent portion of the declaration to be consistent with applicable law, but only to the extent necessary to achieve consistency;
(2) terminate the common interest community; or
(3) elect members of the governing board or determine the qualifications, powers and duties, or terms of office of governing board members pursuant to this section, but the governing board may fill vacancies in its membership until the next meeting of the owners at which a quorum is present, at which time the owners shall elect a member to fill the vacancy for the then unexpired portion of the term that was vacated, provided the elections are carried out in accordance with section 47 of this act.
c. Within 30 days after the adoption of a budget for a common interest community, the governing board shall provide a copy of the budget to all of the unit owners.
d. Except for master associations, and not later than the termination of any period of declarant control, the unit owners shall elect a governing board of at least three members, unless there are fewer than three owners, in which case the number of members shall be equal to the number of owners. All members of the governing board shall be unit owners and residents of the association, the residency requirement may be waived if there are not enough qualifying residents to elect. The governing board shall elect the officers from its members. The governing board members and officers shall take office upon election. Upon the termination of declarant control, the declarant shall arrange for an election, and an election monitoring body, for the election of the owner-controlled governing board, in accordance with regulations to be promulgated by the Department of Community Affairs. The election monitoring body may be one provided by the Office of the Ombudsman for Homeowners and Associations, Department of Community Affairs, or may be an independent entity which routinely performs such functions, such as the New Jersey League of Women Voters, as provided in the manner as provided under section 47 of P.L. , c. (C. )(now before the Legislature as this bill).
e. Upon assumption by the owners of control of the governing board of the association, the declarant shall forthwith deliver to the association all property of the unit owners, and all items and documents pertinent to the association, such as, but not limited to, a copy of the master declaration, declaration of covenants and restrictions, documents of creation of the association, bylaws, minute book including all minutes, any rules and regulations, association funds and an accounting therefor, including capital accounts and contributions, all personal property, insurance policies, government permits, a membership roster and all contracts and agreements relative to the association, resignations of officers and members of the governing board or other form of administration who are required to resign because the developer is required to relinquish control of the association, all tangible personal property that is property of the association, represented by the developer to be part of the common elements or ostensibly part of the common elements, and an inventory of that property. Within 60 days of completion of construction or remodeling of improvements, the declarant shall provide a copy of the plans and specifications utilized in the construction or remodeling of improvements and the supplying of equipment to the common interest community and in the construction and installation of all mechanical components serving the improvements and the site, with a certificate in affidavit form of the developer, his agent, or an architect or engineer authorized to practice in this State that such plans and specifications represent, to the best of their knowledge and belief, the actual plans and specifications utilized in the construction and improvement of the common interest property and for the construction and installation of the mechanical components serving the improvements.
f. An association when controlled by the owners, shall not take any action that would be detrimental to the sale of units by the declarant, and shall continue the same level of maintenance, operation and services as immediately prior to the unit owners' assumption of control, until the last unit is sold.
g. Notwithstanding any provision of a declaration or bylaws to the contrary, the unit owners, by the lesser of a two-thirds vote of all persons entitled to vote at any meeting of the unit owners at which a quorum is present or a vote of 51 percent of all owners entitled to vote, may remove any member of the governing board with or without cause, other than a member appointed by the declarant.
h. After the effective date of P.L. , c. (C. )(now before the Legislature as this bill), a contract or other transaction between an association under owner control and one or more of its officers or trustees, or between such an association and any domestic or foreign corporation, firm, corporate business entity or association of any type or kind in which one or more of its trustees or officers are otherwise interested, shall be void or voidable solely by reason of the common trusteeship or interest. If the common trusteeship or interest is disclosed to the unit owners prior to any action that authorizes or approves a contract or transaction, and proper bidding requirements are followed, the owners may authorize such a transaction or ratify such a contract by a majority vote.
i. Accelerating the collection of customary common expenses shall be limited, upon proper notification to an owner, to the total of the monthly customary commons expenses for the remainder of the fiscal year of the association, and shall not be actuated prior to the accumulation of three month's worth of unpaid customary common expenses by an owner.
53. Section 28 of P.L.1994, c.58 (C.52:27E-73) is amended to read as follows:
28. a. The Office of Dispute Settlement may provide, in the discretion of the Public Defender, mediation, and other third party neutral services in the resolution of disputes which involve the public interest and may enter into agreements or contracts to carry out any of the purposes or functions of this section. The Office of Dispute Settlement may assist public or private parties in resolving disputes. The Office of Dispute Settlement is authorized to:
(1) Facilitate the resolution of disputes through the provision of mediation and other neutral dispute resolution services;
(2) Establish standards for the selection, assignment, and conduct of persons acting on behalf of said office in the resolution of disputes;
(3) Conduct educational programs and provide other services designed to reduce the occurrence, magnitude, or cost of disputes;
(4) Design, develop, or operate dispute resolution programs, or assist in improving or extending existing dispute resolution programs;
(5) Work with the business ombudsman, established by Executive Order No. 15, and take such other action as will promote and facilitate dispute resolution in the State; [and]
(6) Coordinate and cooperate with the Office of Administrative Law so as to avoid duplication of effort and to facilitate alternate resolution of disputes that would otherwise require administrative hearings; and
(7) The Public Defender, through the Office of Dispute Settlement, shall work with the Office of the Ombudsman for Homeowners and Associations, established pursuant to section 52 of P.L. , c. (C. ) (now before the Legislature as this bill), to promote and facilitate dispute resolution for homeowners' associations in the State, including the establishment of standards for the selection, assignment, and conduct of persons acting on behalf of that office in the resolution of disputes and the designing and conducting of training programs for volunteers used to provide services on behalf of the office; provided, however, that training programs established pursuant to P.L. , c. (C. )(now before the Legislature as this bill) shall be offered free of charge to a volunteer, in exchange for the agreement of the volunteer to offer dispute resolution services free of charge to associations. Costs of training incurred under this section shall be reimbursed from the Homeowners' Association Trust Fund established pursuant to section 48 of P.L. , c. (C. )(now before the Legislature as this bill). The Office of Dispute Settlement shall certify those individuals qualified to be included on the roster of volunteers to be maintained by the Ombudsman for Homeowners and Associations, Department of Community Affairs established pursuant to section 50 of P.L. , c. (C. ) (now before the Legislature as this bill).
b. The Public Defender may establish reasonable fees to be charged to public or private parties for the provision of the educational, consultation, dispute resolution, or other services authorized herein and may apply for and accept on behalf of the State any federal, local, or private grants, bequests, gifts, or contributions to aid in the financing of any of the programs or activities of the office. The Public Defender in the name of the State shall do all that is necessary and proper to receive or to collect all moneys due to the State, including such fees, grants, bequests, gifts, or contributions, by or reimbursement for services rendered pursuant to this section.
(cf: P.L.1994, c.58, s.28)
54. (New section) In cases of extreme delinquency in the payment of common expenses of at least 6 months or more, or in the case of delinquency of payment of common fees, late fees or fines totaling more than $2,500, an association shall be eligible to apply to the Office of the Ombudsman for Homeowners and Associations, established pursuant to section 50 of P.L. , c. (C. ) (now before the Legislature as this bill), for formal arbitration pursuant to section 55 of P.L. , c. (C. )(now before the Legislature as this bill) to reduce the outstanding charges to a judgment for a writ of attachment against the delinquent owner or owners. Upon a finding by the arbitrator that the outstanding assessments, charges or fines were properly imposed by an association upon the owner, and are duly owed, and the delinquency is not based on severe financial inability to pay, such as illness or loss of employment, a lien may be recorded on the defaulting owners' unit if not previously filed, and the arbitrator may apply, upon the approval of the Ombudsman, for a judgment for a writ of attachment from a court of competent jurisdiction in the name of the association against the personal assets of the owner of the unit. If such a writ is obtained by an arbitrator, he may cause a levy to be issued on behalf of the association upon any bank accounts or other known assets of an owner and shall turn over any proceeds obtained to the association to which such amounts are due and owing.
55. (New section) a. Every association shall provide an internal and informal procedure in the manner as provided in P.L. , c. (C. )(now before the Legislature as this bill) that shall be readily available as a cost effective method for the resolution of qualified disputes between individual owners and the association of any common interest community subject to the provisions of P.L.1967, c.267 (C.46:8B-1 et seq.) and P.L. , c. (C. ) (now before the Legislature as this bill). For the purposes of this section, a "qualified dispute" shall be construed to mean those disputes involving the use, maintenance or ownership of the common interest property, or the bylaws or the rules of the association. An association shall not be required to provide this procedure for a dispute that is exclusively a personal dispute between two or more parties and which is unrelated to the common property, unless otherwise required in the governing documents, nor shall it be required to provide ADR for a dispute which relates solely to the boards' exercise of proper discretion or actions stemming from a proper democratic vote of the owners. For example, setting general hours for the use of any common elements would be a discretionary action by a board which would not require an alternative dispute resolution proceeding; prohibiting or restricting the use of common elements by an owner or imposing a fine would require an alternative dispute resolution proceeding. In those instances where there is disagreement between the board and an owner or owners as to whether an issue is a qualified dispute, the determination of the Office of the Ombudsman for Homeowners and Associations, established pursuant to section 50 of P.L. , c. (C. ) (now before the Legislature as this bill) shall be final.
b. The procedures for association level or informal alternative dispute resolution (ADR) shall be as follows and shall be adopted by and included in the rules and bylaws of an association.
Upon the written request of any owner, an association shall conduct an informal, internal dispute resolution proceeding within 30 days of receipt by the association of the written request.
(1) The governing board of an association may provide an internal and informal method of dispute resolution utilizing a group of members such as a covenants committee or similar group, which members may serve as a provider of this method of ADR for the association, or a mediator selected by the governing board, provided that: (a) the mediator does not serve and no one on the committee serves on the board, (b) the mediator or no one on the committee is involved in the dispute, and (c) all parties to the dispute agree to the use of the committee or mediator as the dispute resolver. If the informal ADR provided under this subsection is declined, is not offered by an association, does not occur, or occurs but does not result in an agreement of resolution of all parties, then any party to the dispute may request formal ADR under this subsection. A written declination of informal ADR by a party may be sufficient as a request for formal ADR under this section, if the writing so specifies. There shall be no charges involved in the provision of informal ADR, unless all parties agree to such charges, in which such case, the charges shall not exceed $50, which shall be a common expense.
(2) (a) Formal ADR (Mediation and arbitration). Any party, including a developer, owner or association, desiring formal ADR shall send a written request to the Office of the Ombudsman for Homeowners and Associations, established pursuant to section 50 of P.L. , c. (C. )(now before the Legislature as this bill). The Office of the Ombudsman shall review the request and determine if a qualified dispute requiring an alternative dispute resolution proceeding exists pursuant to subsection a. of this section. If it is determined that alternative dispute resolution proceedings are required, the Ombudsman shall refer the request to qualified volunteer mediators who may be available to mediate the dispute or, in the discretion of the Ombudsman, in cases involving broader public interest, or complex or multiple party disputes, to the Office of Dispute Settlement for professional mediation. A proposed mediator shall not be a participant in the dispute, nor shall a proposed mediator be a member or employee of or contracted by the governing board of the homeowners' association. The Office of the Ombudsman shall coordinate the selection and agreement by the parties to a mediator and the dates agreed upon for mediation, pursuant to rules to be adopted by the commissioner. Formal ADR meetings shall be held in the common interest community if space is available, or, if there is no suitable meeting facility at the community, at a suitable meeting facility elsewhere in the municipality or, if there is no such suitable facility, in an adjoining municipality. Court rules pertaining to mediation shall be applied as guidelines in any mediation occurring under this section.
(b) If mediation occurs under this subsection, but does not result in a written agreement between the parties to the mediation resolving the dispute, the parties shall be so notified within 10 days of the conclusion of the proceeding. Any party so notified shall have the right to file a petition for arbitration with the Office of the Ombudsman in accordance with the requirements of subsection d. of this section. An owner who, after making a written request, and agreeing to a mediator, declines, in writing, a Formal ADR meeting shall not be permitted to request arbitration.
c. Any costs of formal mediation shall be paid by the association; however, if the dispute is resolved in favor of the association, it shall be entitled to reimbursement from the other parties to the dispute, unless such reimbursement is specifically not agreed to under the resolution agreement; in no event shall the reimbursement exceed $100.
d. (1) Arbitration ADR. Within 10 days of the conclusion of formal mediation under subsection b. of this section, a party may apply to the Office of the Ombudsman for professional arbitration of the dispute, unless formal ADR was declined as set forth in subparagraph (b) of paragraph (2) of subsection b. of this section. Such arbitration shall be binding only if both parties agree. Each application shall be subject to a filing fee of no more than $75 chargeable against each party in the dispute, which shall be deposited into the fund created pursuant to section 48 of this act. If the mediator or arbitrator finds clearly that a petition was frivolous or intended for purposes of harassment, then the application may be rejected and the petitioner shall be required to reimburse the other party the cost of the filing fee.
(2) In the event the dispute involves the imposition of a special assessment that is the result of an improvement not authorized by the owners in accordance with the provisions of section 18 of P.L.1969, c. 257 (C.46:8B-18), an association shall be required to petition for Arbitration ADR proceedings, prior to the recording of a lien based on the special assessment. An association may record such a lien if the association receives a favorable decision as a result of the Arbitration ADR proceedings.
(3) The Office of the Ombudsman shall, through an agreement with the Office of Dispute Settlement in the Office of the Public Defender in the Department of State, receive and refer petitions for professional mediation or arbitration to the Office of Dispute Settlement. The Office of Dispute Settlement shall review the petitions and assign the petitions of the most emergent nature to an arbitrator or mediator for scheduling of proceedings. Any petitions for a writ of attachment for garnishment or levy by an association shall be assigned to a professional arbitrator.
(4) Emergency relief. If emergency relief is required, a motion to stay the alternative dispute proceedings may be filed. The motion must be accompanied by a verified petition alleging facts that, if proven, would support entry of a temporary injunction, and if an appropriate motion and supporting papers are filed, the office shall abate the alternative dispute proceedings pending a court hearing and disposition of a motion for temporary injunction.
(5) A party to an arbitration ADR proceeding shall not be required to be represented by counsel, but shall be permitted to have counsel present at all proceedings, if so desired.
e. Other than a binding arbitration ADR proceeding, nothing in P.L. , c. (C. )(now before the Legislature as this bill) shall affect the right of a party to file a claim with a court of competent jurisdiction; provided, however, that such a claim shall not be filed while any dispute resolution services are ongoing, unless such procedures have been abated pursuant to subsection d. of this section. No application for dispute resolution, including informal, formal, or arbitration alternative dispute resolution shall be filed with regard to any matter pending before a court of competent jurisdiction, except upon the order of the court.
f. The Office of Dispute Settlement, through the office of the Public Defender in conjunction with the Commissioner of Community Affairs, shall promulgate regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), setting forth the procedures to be utilized in providing dispute resolution services under this section, including minimal requirements for petitions, qualifications for volunteer or professional dispute resolvers, including sufficient training for mediating disputes in a common interest community, and requirements for knowledge of community association issues, and any other requirements necessary to provide such services, including impartiality. Court rules adopted by the Supreme Court for mediation shall be incorporated into the standards adopted by the Office, to extent they would not be burdensome or costly to the parties involved. The Department of Community Affairs shall reimburse the Office of Dispute Settlement the costs of any professional arbitration or mediation services provided under this section, and there shall be appropriated from the Homeowners' Association Trust Fund created pursuant to section 48 of P.L. , c. (C. )(now before the Legislature as this bill) such sums as are necessary to provide staffing and other support services to the Office of Dispute Settlement.
56. a. The Legislature finds that it is in the best interest of the citizens of this State and in accordance with the principles enunciated by the court in the Mount Laurel decisions and the "Fair Housing Act," P.L.1985, c.222 (C.52:27D-301 et al.), to ensure continued affordability of housing units reserved for occupancy by low and moderate income families. To the extent that a large proportion of these units are located in inclusionary common interest communities, there is a need to provide a mechanism for homeowners' associations to assist low and moderate income families in continuing to afford the common monthly maintenance fees assessed by these associations, without unduly burdening the other owners in these communities.
b. A homeowners' association of an inclusionary common interest community may apply to the Ombudsman established pursuant to section 50 of P.L. , c. (C ) (now before the Legislature as this bill) for a grant or loan on behalf of low and moderate income families within the community. Any loan or grant provided shall be at the discretion of the Commissioner of Community Affairs; provided however, that the commissioner shall give preference to those associations in which an increase in maintenance fees was caused by an unforeseen circumstance requiring repairs or replacement of improvements or for code enforcement actions. The funding for any grants or loans pursuant to this section shall be provided out of those funds available in the Homeowners' Association Trust Fund created pursuant to section 48 of P.L. , c. (C ) (now before the Legislature as this bill), and shall require the approval of the Council on Affordable Housing (COAH).
57. (New section) a. The Legislature finds and declares:
It is in the best interest of the citizens of this State to provide for the regulation of managers of community associations, to insure that persons who hold themselves out as possessing professional qualifications as managers of community associations are, in fact, qualified to render management services of a professional nature, and to provide for the maintenance of high standards of professional conduct by those certified as managers of community associations.
It is further declared to be in the best interest of such citizens to limit and restrict the issuance of certificates to community association managers who have been certified to possess the necessary knowledge in the relevant financial, managerial and supervisory services and to require compliance with the requirements which are to be established pursuant to P.L. , c. (C. ) (now pending before the Legislature as this bill).
b. The Commissioner of Community Affairs shall, by regulation and pursuant to the "Administrative Procedure Act," P.L.1967, c.410 (C.52:14B-1 et seq.), establish standards, procedures and fees for the certification of common interest community association managers as those communities are defined in the "Common Interest Community and Homeowners' Association Act, " P.L.1969, c.257 (C.46:8B-1 et seq.). The certification requirement shall apply to any person engaged in the business of property management for common interest communities, regardless of whether the person holds a license to practice another profession, but shall not apply to owners who are managing the common interest property themselves.
The standards established by the commissioner shall be consistent with those standards adopted by the National Board of Certification for Community Association Managers (NBC-CAM), and shall be developed in consultation with the Community Association Manager Certification Standards Board established pursuant to this section.
c. There is hereby established the Community Association Manager Certification Standards Board. For the purposes of complying with the provisions of Article V, Section IV, paragraph 1 of the New Jersey Constitution, the board shall be allocated within the Department of Community Affairs, but shall be independent from the department. The board shall consist of eleven members to be appointed by the Governor as follows:
(1) Five members who shall be managers of community associations, two of whom shall be members of the Institute of Real Estate Managers, two of whom shall be members of the Community Associations Institute; and one of whom shall be predominantly employed by associations with fewer than 200 units.
(2) One member who shall be an attorney-at-law in good standing with the bar of New Jersey with significant experience in the representation of common interest communities or owners in such communities;
(3) One member who shall be an accountant with significant experience in financial accounting for community associations;
(4) One member who shall be a member of a governing board of a common interest community; and;
(5) Three members who shall be unit owners residing in a common interest community and not qualified under paragraphs 1 through 4 above, to be nominated by the Common-Interest Homeowners Coalition of New Jersey.
The initial terms of appointment to the Community Association Manager Certification Standards Board shall be staggered as follows: three members shall be appointed to a term of one year; three members shall be appointed to a term of two years; and three members shall be appointed to a term of three years. If there is a vacancy for any cause, the Governor shall make an appointment, in the same manner as the original appointment, to become immediately effective for the unexpired term. Successive appointments shall be for a term of three years.
d. The board shall select one of its members as chairperson and another as vice chairperson and shall meet as necessary at the call of the chairperson or the commissioner. Members of the board may be reimbursed for actual and necessary travel and other expenses as provided by law and subject to the availability of funds therefor. Personnel employed by the Department of Community Affairs shall provide such administrative support as may be requested by the board.
e. The board shall provide suggested standards and modifications to the standards to be adopted by the Commissioner of Community Affairs pursuant to P.L. , c. (now before the Legislature as this bill). The board may also provide guidelines for the revocation of a certification of a community association manager.
58. (New section) a. Meetings of the governing board of an association, open to the members or their tenants of the community, shall be held at least once every three months throughout the calendar or fiscal year, unless unanimously waived by all members, and as often as necessary in order to conduct the business of the association. Meetings of the association membership shall be held at least annually. Meetings shall be held at the community property, or, if there is no suitable meeting facility at the community, at a suitable meeting facility elsewhere in the municipality or, if there is no such suitable facility, in an adjoining municipality.
A meeting of the governing board of an association occurs whenever a quorum of the board gathers to conduct association business. All meetings of the membership or the governing board shall be open to all members except for meetings between the board and its attorney with respect to proposed or pending litigation where the contents of the discussion would otherwise be governed by the attorney-client privilege.
The governing board shall establish an agenda for each meeting. Copies of the agenda shall be available at least 48 hours before the meeting for distribution to homeowners. Notices of all board meetings must be posted in a conspicuous place in the community at least 48 hours in advance of a meeting, except in an emergency. In the alternative, if notice is not posted in a conspicuous place in the community, notice of each board meeting must be mailed or delivered to each member at least seven days before the meeting, except in an emergency. Notwithstanding this general notice requirement, for communities with more than 100 members, the bylaws may provide for a reasonable alternative to posting or mailing of notice for each board meeting, including publication of notice, provision of a schedule of board meetings, or the conspicuous posting and repeated broadcasting of the notice on a closed-circuit cable television system serving the homeowners' association. However, if broadcast notice is used in lieu of a notice posted physically in the community, the notice must be broadcast at least four times every broadcast one hour of each day that a posted notice is otherwise required.
When broadcast notice is provided, the notice and agenda must be broadcast in a manner and for a sufficient continuous length of time so as to allow an average reader to observe the notice and read and comprehend the entire content of the notice and the agenda. The bylaws may provide for giving notice by electronic transmission in a manner authorized by law for meetings of governing board, committee meetings requiring notice under this section, and annual and special meetings of the members; however, a member must consent in writing to receiving notice by electronic transmission.
b. Notice concerning assessments. An assessment may not be levied at a board meeting unless a written the notice of the meeting is
provided to all members at least 14 days before the meeting, which notice includes a statement that assessments will be considered at the meeting and the nature of the assessments.
In addition to these requirements, notices concerning meetings at which the budget or a rule or bylaw change will be discussed shall be mailed or hand delivered to each homeowner at least five days in advance of the meeting.
c. Voting. Board members may not vote by proxy or by secret ballot at board meetings, except that secret ballots may be used in the election of officers. This subsection also applies to the meetings of any committee or other similar body, when a final decision will be made regarding the expenditure of association funds, and to any body vested with the power to approve or disapprove architectural decisions with respect to a specific part of residential property owned by a member of the community.
d. Audio recordings for personal use by homeowners in attendance shall be permitted at meetings open to the owners, in accordance with guidelines developed by the commissioner.
e. All homeowners who attend a meeting shall be given a reasonable opportunity to comment on matters under consideration by the governing board or otherwise of concern to homeowners. The commissioner shall have the authority to review complaints, investigate and take enforcement pursuant to section 46 of P.L. , c. (C. )(now before the Legislature as this bill) concerning complaints by owners of lack of reasonable opportunities to speak, meetings being closed or inadequately noticed in conflict with the provisions of this section.
f. Minutes. Minutes shall be taken at all meetings. Minutes shall accurately reflect the actions taken and subjects discussed at the meeting, but need not be verbatim. Draft copies of minutes so marked of meetings open to all homeowners shall be prepared within ten business days after the meeting or ten days prior to the next meeting, whichever comes first, and shall be made available to any homeowner thereafter within 48 hours of a request for a copy thereof. Approved copies of minutes shall be made available to homeowners within 48 hours after the date of approval of the minutes upon a request for a copy thereof. A permanent record of all approved minutes shall be maintained by the association at its business office, where they shall be available for review by all homeowners, except that minutes of a closed session may be withheld from such review for a reasonable period of time when necessitated by the reason for which the meeting was closed, or may be provided in redacted form, by removing confidential information as necessary. The commissioner shall establish guidelines and procedures for meetings under this section, pursuant to the "Administrative Procedure Act, P.L.1968, c.410 (C.52:14B-1 et seq.), and shall enforce the regulations pursuant to the powers granted in section 46 of P.L. , c. (C. ) (now before the Legislature as this bill). The minutes taken at a closed session shall be included in the minutes of the entire meeting that is made available to all homeowners, which shall be in redacted form unless the need for confidentiality has passed at the time approved minutes are distributed to the homeowners. The commissioner shall have the power to order minutes distributed upon a determination that the need for confidentiality has passed.
All approved minutes shall be filed with the person responsible for administering the business office of the association, where it shall be posted prominently.
59. (New section) a. An association shall maintain detailed financial and business records, including a record of all receipts and expenditures, using a trust accounting method, for a period which complies with customary business standards and procedures and would allow a full and accurate auditing of all records, but in any event for not less than five years, unless the governing documents of the association require a longer period. All records required to be made available to a purchaser upon resale of a unit shall be made available to a homeowner within 24 hours upon request.
b. Except as otherwise provided in this section, all records of the association required to be maintained, including, but not limited to all books, bills, including bills for professional services, financial notes, contracts, and financial records, shall be made available to homeowners upon request within seven business days of receipt of the request and at a charge not to exceed the reasonable cost of reproduction. The commissioner shall establish guidelines and procedures for reasonable charges and production of records under this section, pursuant to the "Administrative Procedure Act, P.L.1968, c.410 (C.52:14B-1 et seq.), and shall enforce the regulations pursuant to the powers granted in section 46 of this act.
c. An association shall not be required to make available any records the disclosure of which would be an unreasonable violation of the privacy of any homeowner; provided, however, the nonpayment of common fees for a period greater than 60 days shall not be deemed a private matter.
d. Any denial of access to records by an association shall indicate the specific reasons why inspection of the records is being denied. No owner shall be required to sign an indemnification pledge or agreement not to disclose documents prior to being granted access to the records. A homeowner who is aggrieved by denial of access to records shall have the right to appeal the denial to the commissioner.
e. An association shall provide equal access to members to information provided or maintained by it by any means, including, but not limited to, a newsletter or Internet site. An association shall provide proportional access to members with opposing viewpoints to those expressed previously through the media maintained by the association.
f. All common areas and recreational facilities serving any homeowners' association shall be available to owners in the homeowners' association served thereby and their invited guests for the use intended for such common areas and recreational facilities. The entity or entities responsible for the operation of the common areas and recreational facilities may adopt reasonable rules and regulations pertaining to the use of such common areas and recreational facilities. No entity or entities shall unreasonably restrict any owner's right to peaceably assemble or right to invite public officers or candidates for public office to appear and speak in common areas and recreational facilities. If charges are assessed for the use of a common facility, such charges shall be uniformly imposed on all members of an association, regardless of whether the members using the facility are governing board members.
60. (New section) a. An association shall maintain, and make available to any homeowner within five business days, a permanent record of all notices and orders issued by any governmental agency having jurisdiction over the association or the common interest community. The record shall also include documentation of all actions taken in response to any such notice or order and shall identify the persons responsible for the matter that gave rise to the notice or order.
b. An association shall provide each homeowner with a copy of the most recent annual financial statement of the association within 30 days of its acceptance by the governing board and at no cost to the homeowner, which shall include the salaries and bonuses paid to employees of the association.
61. (New section) Every association having gross annual receipts in excess of $75,000 shall have a certified annual audit prepared of its financial books and records, which audit shall be available within 180 days of the expiration of the fiscal year for which it is performed. Every association having gross annual receipts of at least $25,000, but not more than $75,000, shall have such an audit prepared not less frequently than once every three years. All audits shall be prepared by a New Jersey certified public accountant in accordance with generally accepted accounting principles. Small associations under 100 units but otherwise meeting the requirements of this section may apply through the Ombudsman to the Division of Local Government Services in the department for assistance in preparing the audit.
62. (New section) Bidding requirements.
a. All contracts as further described herein or any contract that is not to be fully performed within one year after the making thereof, for the purchase, lease, or renting of materials or equipment to be used by an association in accomplishing its purposes, and all contracts for the provision of services, shall be in writing. If a contract for the purchase, lease, or renting of materials or equipment, or for the provision of services, requires payment by the association on behalf of any condominium operated by the association in the aggregate that exceeds five percent of the total annual budget of the association, including reserves, the association shall obtain competitive bids for the materials, equipment, or services. Nothing in this section shall be construed to require the association to accept the lowest bid; provided however that the reasons for acceptance of any bid which is not the lowest bid shall be documented in the records of the association and that a vote of approval by a majority of the unit owners shall be required for any bid which is greater than 20 percent of the total amount of expenditures budgeted for in the most recent annual budget.
b. Notwithstanding the provisions of subsection a. of this section, contracts with employees of the association, and contracts for attorney, accountant, architect, community association property manager, timeshare management firm, engineering, and landscape architect services shall not be subject to the bidding provisions of this section. The provisions of this section shall not apply to associations which have not transitioned to unit owner control.
c. Nothing in this section shall permit contracts which are prohibited pursuant to any section of P.L. , c. (C. )(now before the Legislature as this bill) or P.L.1969, c.257 (C.46:8B-1 et seq.).
Associations with less than 100 units may opt out of the provisions of this section if two-thirds of the unit owners vote to do so, which opt-out may be accomplished by a proxy specifically setting forth the exception from this section.
63. (New section) Conflicts of interest. The provisions of this section shall apply to those associations in which the control of the governing board has transitioned to the owners.
a. No member of the governing board, employee or property manager of an association shall have an interest in a business organization or engage in any business, transaction or professional activity which is in conflict with the proper discharge of his or her duties on behalf of the association, including, but not limited to, having a substantial direct or indirect interest in any contracts for work or materials used by the association, or in any sales, leases or agreements in connection with any lands owned by the association, or in any fees or compensation of any kind paid to any broker, architect, engineer, vendor or other person doing business with the association. Contracts in which such an individual has any type of an interest may only be entered into with the approval of 80 percent of the owners.
b. No such board member, employee or property manager shall use his or her position to secure or attempt to secure unwarranted privileges for any person.
c. No such board member, employee or property manager shall act in his or her capacity as a board member or employee or property manager in any matter in which he or she, a related person, or any other person residing in his or her household or the household of a related person, or any business organization in which any of such persons has an interest, has a direct or indirect financial or personal involvement that might reasonably be expected to impair the objectivity or independence of judgment of the board member, employee or property manager.
d. Responsibility for safeguarding and preserving property: A governing board of an association and any property management personnel contracted by an association, shall be responsible for safeguarding and preserving all common property within the common interest community, so as to comply with all applicable laws and to protect the investment made by the owners of the lots, parcels, units or interests subject to the jurisdiction of the association and shall enforce rules requiring the proper maintenance of such common property. Governing boards and property managers shall comply with all rules which may be adopted by the commissioner, including, but not limited to, accounting procedures and financial and common property facility management requirements.
64. Section 5 of P.L.1987, c.381 (C.46:8D-5) is amended to read as follows:
5. A plan of cooperative ownership is created by recording in the office of the county recording officer of the county wherein the land is located a master declaration and master register of all cooperative units allocated for separate occupancy, each of which documents shall be executed and acknowledged by all owners of the land and shall set forth the matters required by sections 6 and 7 of [this act] P.L.1987, c.381 and by registering and incorporating as required pursuant to P.L. , c. (C. ) (now before the Legislature as this bill).
(cf: P.L.1987, c.381, s.5)
65. Section 7 of P.L.1987, c.381 (C.46:8D-5) is amended to read as follows:
7. The master register shall contain the following elements:
a. Separate identification of each unit by distinctive letter, name or number or combination thereof.
b. The percent of common ownership representing each owner's proportionate undivided interest in the common elements; the interests shall be stated as percentages aggregating 100% or as fractions provided the aggregate interests equal one.
c. The name and present address of each present owner and occupant of each identified unit.
(P.L.1987, c. 381, s.7)
66. (New section) The commissioner shall promulgate any regulations necessary for the enforcement and effectuation of P.L.1969, c.257 (46:8B-1 et seq.) as amended by P.L. , c. (C. ) (now before the Legislature as this bill) and sections 35 through 68 of P.L. , c. (C. )(now before the Legislature as this bill), in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and in accordance with the intent of the Legislature to provide for democratic principles to apply to all areas of governance by homeowners' associations of common interest communities.
67. (New section) To the extent the provisions of P.L.1991, c.483 (C.46:8C-1 et seq.), or any supplements thereto, are inconsistent with the provisions of P.L. , c. (C. ) (now before the Legislature as this bill), the provisions of P.L. , c. (C. ) (now before the Legislature as this bill) concerning homeowners' associations shall control.
68. (New section) To the extent the provisions of P.L.1987, c.381 (C.46:8D-1 et seq.), or any supplements thereto, are inconsistent with the provisions of P.L. , c. (C. ) (now before the Legislature as this bill), the provisions of P.L. , c. (C. ) (now before the Legislature as this bill) concerning homeowners' associations shall control.
69. The following are hereby repealed:
Sections 2 through 6 of P.L.1993, c.30 (C.45:22A-44 through C.45:22A-48);
Sections 26 and 27 of P.L.1969, c.257 (C.46:8B-26 and C.46:8B-27); and
Section 3 of P.L.1980, c. 103 (C.46:8B-38).
70. This act shall take effect on the 180th day following enactment, but the Commissioner of Community Affairs may take such anticipatory administrative action in advance as shall be necessary for the implementation of the act.
STATEMENT
This bill expands and retitles the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.) as the "Common Interest Community and Homeowners' Association Act." The "Condominium Act" currently applies only to condominiums; the bill would expand it to include all types of common interest communities, residential and commercial, including, but not limited to, condominiums, planned real estate developments and cooperatives. Common interest communities contain property which has shared ownership by all owners in the community, known as "common elements" and which are managed by homeowners' associations. These revisions are necessary to provide a comprehensive and uniform body of law for these associations to follow.
The bill is based, in part, on a national model act of the Uniform Law Commissioners known as the "Uniform Common Interest Ownership Act," but because New Jersey already has significant statutory law regulating certain homeowners' associations, not all provisions of the national model legislation is adaptable or necessary. For example, many of its provisions regulating developers duplicate provisions already incorporated into the "Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.). In addition, the New Jersey "Condominium Act," (which also was based on a uniform legislative model), provides a readily workable framework for incorporating new requirements regulating homeowners' associations and expanding those requirements to all types of homeowners' associations. The bill also contains many revisions to address the need for owners in these communities to have democracy in the self-governance of their respective communities.
In many ways, a common interest community governing board functions as a mini-local government. Condominium associations are permitted to have a statutory lien on an owners' home for unpaid common expenses, similar to a municipal tax lien for unpaid property taxes. These associations have also been granted the power by the Legislature to impose fines on owners, and to have a statutory lien for those fines, similar to the lien for unpaid common expenses. Insufficient safeguards exist under current law, however, to ensure that principles of fairness and democracy are being followed by a homeowners' association board in the imposition of fines and the filing of a lien unreviewed by a judicial body. The bill therefore eliminates the ability of an association to have a statutory lien for fines; an association may still file such liens through a judicial process. In addition, the bill creates a new special process which will permit, under certain circumstances, the garnishment of an owner's personal income or other assets in satisfaction of unpaid common expenses or fines.
New Jersey's statutes have chiefly permitted regulation of homeowners' associations during the developer-controlled stage of building the community through the Department of Community Affairs (DCA) . Although current statutes provide for some limited oversight for the time period subsequent to developer control, in the areas of access to records, meetings open to members, and alternative dispute resolution of an association, these protections are not clearly delineated and are often misinterpreted by boards. Many associations claim to pre-date or to not fall under the jurisdiction of the statutes. Some boards believe that their actions are circumscribed only by whatever limits, if any, are contained in their bylaws or whatever is prohibited by general corporate law. Some board members have used the protections offered by non-profit corporation law, and the lack of State oversight to obtain unfair advantage and personal gain over other member-owners. More than a few association boards have ignored orders from the Department of Community Affairs requiring access by members to the records of the association, the holding of meetings open to members, or the submission of an owners' complaint to an alternative dispute resolution (ADR) proceeding as required by the statutes. In some instances, unfair or corrupt election practices have been documented. The DCA currently has limited power to intervene in such cases and needs better enforcement tools to deter such behavior. Without such tools, in order to enforce the statutes and regulations, homeowners must obtain private counsel and litigate against their board, while continuing to pay the board's attorney through the common monthly maintenance fees. In a recent law suit filed by owners, it cost approximately one million dollars in attorneys fees and court costs in order to have the court approve access by members to the financial records of the association, despite the fact that such access is statutorily required.
Historically, the courts have treated a homeowners' association board as just another type of corporate entity, and the owners of the property as distantly involved shareholders or as some type of tenants of the association. Recently, however, the Appellate Division of the Superior Court, in Verna v. The Links at Valleybrook Neighborhood Association, Inc., A-5438-01T1, recognized the governmental nature of a homeowners' association governing board. In other recent litigation, Twin Rivers v. Twin Rivers Homeowners' Association, MER-C-121-00, the court held in an unreported opinion that certain constitutional rights under the New Jersey and United States Constitution may not apply to persons residing in common interest communities. It is the intent of the sponsor to unequivocally override this latter holding. For these types of governing boards, the law must be clear that: (1) these associations are quasi-governmental entities, subject to transparent government models, not merely the corporate business model; and (2) a homeowners' association is subject to the political jurisdiction and ordinances of a municipality, regardless of any bylaws to the contrary.
In order to impart the governmental model upon these associations under the law, the bill creates a new type of corporation. The bill specifically delineates the powers and limitations of a governing board of a homeowners' which acts for all of the members of a common interest community in a democratic fashion. All such boards would be required to be organized as this special corporation type, including cooperatives, which will be permitted to issue shares under this corporate form. Refiling will not be required under the act, as all homeowners' associations will be deemed to exist as this form of corporate entity. To the extent that the previously adopted bylaws under a different corporate form conflict with the new corporate law, the new law will preempt those bylaws.
To address the statutory shortcomings described above, and to eliminate potential conflict of interests arising from the relationship of the department with developers, the bill enhances the DCA regulatory powers over owner-controlled governing boards of homeowners' associations. The bill also creates a new entity within the department known as the Ombudsman for Homeowners and Associations. This office will assist homeowners in understanding their rights and responsibilities and the remedies available to them, as well as assist governing board members and officers of associations in receiving appropriate training to allow them to properly discharge their functions and duties.
The bill also creates an Advisory Council on Common Interest Communities to assist the department in formulating and revising its regulations and policies regarding homeowners' associations. The Advisory Council will consist of nine members appointed by the Governor, and will contain representative members for owners, board members, governmental entities and a nonpartisan voting rights group. The bill also creates a new certification requirement for common interest community property managers, and establishes the Community Association Manager Certification Standards Board to assist the department in the establishment of standards and sanctions regarding certification. The board will consist of owners, property managers and representatives from the Institute of Real Estate Managers, and the Community Associations Institute.
The bill will allow homeowner associations more flexibility to maintain customized rules, as many do now, provided that a majority of the owners affirmatively authorize retaining or creating such rules. This will help address the fact that developer-created bylaws and rules are often difficult for owner-controlled associations to change, due to the number of votes necessary under the bylaws.
The bill expands the requirement for alternative dispute resolution (ADR) by establishing a uniform and low-cost method of ADR that must be utilized by all homeowners' associations. This system would utilize certain arbitrators and volunteers trained by the State to act as mediators to disputes arising in common interest communities.
The Ombudsman in the Department of Community Affairs would have very specific powers to monitor the elections of these special corporations, which will be required to be conducted by a panel of non-candidate homeowners, or a special election monitor, such as the New Jersey League of Women Voters. A property manager, who is hired by the incumbent board, would no longer be permitted to run the elections, and would required to obtain certification in order to continue employment.
The bill would also provide funding for grants and loans to homeowner associations maintaining common property in inclusionary common interest communities containing units reserved for low and moderate income families.
The costs of the Office of the Ombudsman, dispute resolution and the increased enforcement and regulatory duties for the department under the bill would be met by a registration fee required to be paid annually by each unit owner living in a common interest community.
Other highlights of the bill include:
Members that sue the board and win on the major issues litigated will be entitled to reimbursement of reasonable costs and attorneys' fees.
Expenditures for capital improvements or other costs beyond a certain percentage of an association budget would require the approval of a majority of the members.
Certain contracts would be subject to bidding; conflict of interest rules for board members would be established pursuant to the bill.
Regular audits would be required to be performed. Budget and other assistance would be provided through the Division of Local Government Services in the Department of Community Affairs.
Specific guidelines for open meetings and minutes are established.
Specific requirements for access to records by owners are established.
Homeowners' associations will be required to register and file an annual report with the Department of Community Affairs; the report shall divulge income, assets and expenses, as well as salaries and compensation paid to all individuals, and the report will also be required to be distributed to members of the community.
The bill eliminates the requirement to form a homeowners' association, at the option of the developer and the municipality, when the common elements or limited common elements consist only of open space, including walking trails thereon, and sewerage or drainage basins; a trust fund would be established and maintained by the municipality to maintain the minimal common elements in such a case.
While liens for unpaid common expenses are granted to all types of homeowners' associations under the bill, liens for fines imposed would no longer be permitted. However, a new collection power is granted to the common interest community association in the form of an expedited method of obtaining a writ of attachment for garnishment or levy on the personal assets of a delinquent owner who has the financial ability to pay, but continues to fail to pay duly owed and assessed commons fees, fines, special assessments or late fees. This power would be granted through arbitration processes outlined in the bill.