Thursday, November 20, 2014

Community Association Collections: What's In Your Wallet?



            As the end of 2014 approaches, many community associations and board members will be forced to deal with the issue of how well they fared with resolving homeowner delinquencies for the past year.  According to an article published by the Mortgage Bankers Association, a Washington, D.C based organization, New Jersey “leads the nation in the rate of foreclosures started in the third quarter”.  

            As the mortgage foreclosure crisis continues to loom large in the Garden State, and certain communities continue to deal with “zombie properties”, boards are forced to revisit the approach taken in connection with the collection of delinquent owner accounts.

The delay in the mortgage foreclosure process not only affects the association, it also affects the homeowners who continue to remain responsible for the fees until such time as the property is sold or taken back by the lender after a sheriff’s sale.   Many individuals and boards may not be aware that the responsibility to pay the fees, post –petition, continues notwithstanding that an owner was discharged in bankruptcy and has vacated the property.    

            Has the board taken action to aggressively pursue the delinquency or is the strategy to sit back and wait for the lender to foreclose?

            Is the board properly advised regarding all the possible legal options that are available to recover the past due fees?

            There may be a light at the end of the tunnel.   A cost-effective, well- researched collection strategy has afforded many associations the ability to recover delinquent fees and attorneys’ fees that it may never have anticipated.    Are you laughing all the way to the bank?  What’s in your wallet?

Thursday, August 28, 2014



To Boot or Not to Boot? Immobilizing Vehicles for Parking Violations*

Most community associations have rules and regulations in place governing the parking of vehicles. Violations are typically addressed by the issuance of a fine or, in some instances, towing of the vehicle. However, towing a vehicle in New Jersey requires compliance with the Predatory Towing Prevention Act. In light of this, many communities are now asking the question: instead of towing a vehicle, can we immobilize it with the placement of a wheel boot?

In New Jersey, provided that there is no prohibition otherwise contained in local municipal laws, community associations are likely permitted to immobilize unauthorized vehicles parked in common areas. Nevertheless, if the association is going to charge a fee for the removal of the boot, the association must still comply with the Predatory Towing Prevention Act, including posting the required signage and contracting with a licensed towing company to apply and remove the boot. This is because the Predatory Towing Prevention Act defines “towing” as “the moving or removing from public or private property…or the immobilization of…[a] motor vehicle, for which a service charge is made...” Consequently, a community association cannot immobilize a vehicle with the placement of a wheel boot if the association intends to charge a fee to remove the boot.

The prohibition on an association charging a fee for booting of a vehicle where a licensed towing company is not contracted does not prevent an association from booting a vehicle and imposing a fine for improperly parking a vehicle, assuming the appropriate parking rules have been adopted and the unit owner responsible is offered alternative dispute resolution before any fine is imposed.

If your community is considering or is interested in more information about booting vehicles for parking violations, please consult with your attorney.

*J. David Ramsey, Esq. and Jennifer A. Loheac, Esq. contributed to this article

Friday, July 11, 2014

New Jersey Court Rules That Beneficiary of Estate is Not Responsible for HOA Fees


 
            In an opinion dated July 8, 2014, the Appellate Division of the Superior Court of New Jersey ruled that the beneficiary of a decedent’s estate was not responsible to pay delinquent homeowners’ association fees.   Homestead at Mansfield Homeowners Association v. Mount, 2014 WL 3055898.

            The matter was before the Court on appeal from a final order dismissing the association’s complaint against the residuary beneficiary for unpaid assessments.  

            On appeal, the association  relied on N.J.S.A. 3B:1-3, which provides, in substance,  that upon a person’s death, title to real and personal property vests in a devisee even before admission of a will to probate.   In Re Will of Gardner, 215 N.J.Super. 578, 586 (App. Div. 1987).

Although the residuary beneficiary acquired a vested interest in the home for which assessments were due, the Appellate Division determined that the interest was not the type that would obligate the beneficiary to pay the fees.   The Court noted that the interest was subject to the claims of creditors and to administration.   In the matter before the Court, the home was encumbered by a reverse mortgage that was in foreclosure.  Therefore, the beneficiary’s interest was subject to the claim of the creditor/ mortgagee.

Since the home was not specifically devised and, instead, fell into the residuary estate, the responsibility for assessments fell on the executor on behalf of the estate in accordance with N.J.S.A. 3B-14-23 e (1) which enumerates an executor’s responsibilities for real property that is not specifically devised.

Based, on the forgoing, the Appellate Division upheld the dismissal of the complaint for fees as against the beneficiary.  A consent judgment entered in favor of the association and against the estate was left in place.  

 

           

 

Wednesday, July 2, 2014

QUALIFIED COUNSEL SHOULD BE RETAINED TO COLLECT DELINQUENT HOA FEES By: Angela M. Morisco, Esq.


Although statistically speaking, cases involving the collection of delinquent homeowners’ association fees do not rank in the top percentage of claims for FDCPA violations filed in federal court, law firms engaged to collect delinquent fees are subject to the FDCPA and law firms have been sued for alleged FDCPA violations.

Courts are increasingly expanding the scope and application of the FDCPA. Therefore, the process of selecting experienced and qualified counsel should be carefully researched by boards and associations to ensure that the law firm’s debt collection process complies with the FDCPA and that counsel is well versed in the statute’s requirements.

Boards and associations often inquire about the benefits of using a collection agency or a traditional collection law firm.  The attraction of engaging these entities is the contingency fee arrangement rather than task based or hourly billing.   Collection agencies and collection law firms tend to work on volume.   Oftentimes, the collection process is automated and paralegal driven with minimal opportunity for attorney review and involvement in the collection process.

Collection attorneys should be aware that “it is false and misleading, within the meaning of the FDCPA, for an attorney to send a debt collection letter without having meaningfully reviewed the case.  Bock v. Pressler & Pressler, LLP, 2014 WL 2937929 (June 30, 2014) citing Lesher v. Law Offices of Mitchell N. Kay, PC, 650 F.3d 993, 1001-1003 (3rd Cir. 2011) cert. denied, 132 S.Ct. 1143 (2012).

The United States District Court for the District of New Jersey has expanded the application of the FDCPA to the preparation and court filing of a civil complaint. Bock v. Pressler & Pressler, LLP, 2014 WL 2937929 (June 30, 2014).  In Pressler, the District Court determined that the Pressler law firm violated the FDCPA when it signed, filed, and served a state court complaint in a civil suit without “substantial attorney review”.  The facts presented to the Court revealed that the law firm’s collection process was administered by “dedicated employees”, “who are not attorneys”, using specialized software that electronically transmitted information relating to collection claims.  The attorney who signed the pleading in Pressler, testified at a deposition, that on average he reviewed 300-400 complaints per day and some days, as many as 1,000.  Bock v. Pressler & Pressler, LLP, 2014 WL 2937929 (June 30, 2014). 

The District Court determined that the “meaningful involvement” rule that applies to collection demand letters also applies to the filing of a civil complaint.  The Court held that a signed complaint is inherently false and misleading, in violation of the FDCPA (15 U.S.C. § 1692 e) where at the time of signing, the attorney signing it has not (1) drafted, or carefully reviewed, the complaint; and (2) conducted an inquiry, reasonable under the circumstances, sufficient to form a good faith belief that the claims and legal contentions are supported by fact and warranted by law.   Bock  v. Pressler & Pressler, LLP, 2014 WL 2937929 (June 30, 2014).  The Court extracted the criteria from New Jersey Court Rule 1:4-8 (a) which embodies the frivolous pleading rule that applies to attorneys and advises of the effect of signing a pleading, motion or paper. 

Although this new ruling may have a chilling effect on collection law firms, it is of no consequence to experienced, qualified community association counsel.

 

 

Friday, June 27, 2014

The New Jersey Appellate Division Confirms The Premise That “The Law Does Not Compel One To Do a Useless Act: Equity Follows the Law”

 
In a per curiam opinion dated June 25, 2014, the Appellate Division, following the principles of equity, declined to set aside a sheriff’s sale based on the defendants’ allegation of lack of notice of the sale in strict compliance with Rule 4:65-2. The Court affirmed Judge Levy’s ruling that an extension of the redemption period sufficed to remedy any alleged defect in notice. Mortgage Electronic Registration Systems, Inc. v. Eschenbach, 2014 WL 2864959 (Appellate Division June 25, 2014)

Notwithstanding the allegation of lack of notice, the Judge Levy observed that the defendants’ failed to assert that they had the ability to redeem the property. Relying on the decision in United States v. Scurry, 193 N.J. 492 (2008), he determined that, rather than ordering a hearing to determine whether the defendants received actual notice of sale and whether the defendants had the ability to redeem, the defendants would be afforded sixty days to redeem. Judge Levy opined that it would not be practical to order a hearing if the defendants were not in a position to redeem. Judge Levy stated, " . . . the law does not compel one to do a useless act and that equity follows the law." . Mortgage Electronic Registration Systems, Inc. v. Eschenbach, 2014 WL 2864959

The Appellate Division agreed and determined that the decision of Judge Levy was not an abuse of discretion and the motion to vacate the sale was properly denied. The Appellate Division referred to the Supreme Court’s decision in Scurry which explained, "it makes little sense to return the parties to the procedural juncture where the error fist occurred". United States v. Scurry 193 N.J. at 506.




Thursday, June 19, 2014

The “Pay Now Litigate Later” Principal Applies to Property Tax Appeals for COAH Condominium Units


            In an unpublished letter opinion dated June 17, 2014, the New Jersey Tax Court ruled that the owner of a condominium unit, subject to COAH restrictions, was required to pay the taxes in full prior to challenging the amount of the tax owned.   Lafayette Navesink Homes, L.L.C. v. Borough of Rumson, Docket Nos. 016024-2012; 010718-2013 (June 17, 2014)

            In the Navesink case, the plaintiff argued that the tax payment required should be relaxed since the units were state mandated affordable housing units.  The plaintiff appealed the assessment to the Monmouth County Board of Adjustment which affirmed the assessments.

At the time, the complaint was filed with the Tax Court to  appeal the assessment, taxes were due on the units.  One of the arguments proffered by the plaintiff, and  rejected by the Tax Court, was that the taxes on the COAH units were disproportionate to the rents received and should, therefore, be relaxed “in the interests of justice”.  
             The Court reiterated what is referred to as the “pay now litigate later” principle
that is “well established” with local property tax assessments.    Lafayette Navesink Homes, LLC v. Borough of Rumson  at page 4 citing, Woodlake Heights Homeowners Association, Inc. v. Township of Middletown, 7 N.J.Tax 364, 366 (App. Div. 1984).   The statutory requirement that taxes be paid in full prior to challenging the liability for same “insures the that the flow of municipal revenues will not be interrupted by the filing of tax appeals”.  Route 88 Office Association v. Township of Brick, 13 N.J. 14, 21 (Tax 1992)
               The basic takeaway is that COAH status, standing alone, will not suffice to satisfy an "interest of justice" determination.
 

             

 

             

Monday, May 5, 2014

COOPERATOR EXPO - MAY 7, 2014

Please visit the booth for Becker & Poliakoff, LLP at the Cooperator Expo on May 7, 2014. 
We will have materials and a PowerPoint presentation concerning delinquent association fees and the collection process.

I also will be at the Advice Booth from 11:00 a.m. to 12:00 p.m. to answer any questions you may have regarding collections, rent receivers, etc.
.
I will also be part of a panel discussion entitled "Collections & Evictions: What You Need to Know".
The panel will provide information on landlord / tenant relations and also on collecting monies owed. 

Please do not pass up these informational sessions. I look forward to seeing everyone!

Monday, April 7, 2014

Rent Receivers Revisited: Is the Appellate Division Decision in Woodlake at King’s Grant Condominium the Death Knell for Rent Receivers?

Last week, the Appellate Division of the New Jersey Superior Court issued a per curiam opinion denying the request of a condominium association for appointment of a rent receiver in Woodlake at King’s Grant Condominium Association, Inc. v. Christopher Coudriet, 2014 WL 1281474 (April 1, 2014)

The underlying facts giving of the matter presented to the Court are very familiar to condominium associations. Based on the facts presented, the decision is not a surprise.

According to the decision, the matter before the Appellate Division, involved a consolidated appeal for two separate condominium units owned by two different individuals. In a very familiar factual scenario, units were vacant and abandoned, both were the subject of pending mortgage foreclosure proceedings and both had a relatively substantial arrears balance to the association. The association moved for appointment of a receiver to rent out the units and apply the proceeds to pay the assessments.

The issue was whether the motion judge abused her discretion in denying the application. The application for appointment of a rent receiver was made by the association in the context of its lien foreclosure proceedings

Although this decision did not yield a favorable result for Woodlake at King’s Grant Condominium Association, this author opines that this decision is not the death knell for associations interested in pursuing rent receiver applications.

The decision provides guidance concerning the factors a court will consider when presented with an application for a rent receiver. The factors are discussed in the context of an application that would be made by a mortgagee for appointment of a receiver.  First, although the Court noted that existence of a contractual provision in the mortgage documents, or a provision in the governing documents allowing for the appointment of a receiver, standing alone will not be dispositive of the application,  such provisions will be considered by the court.

Although, most governing documents do not contain provisions specific to rent receivers, some documents do contain a general  remedies provision allowing an Association to use  all legal and equitable remedies to enforce compliance with the terms of its documents.  The rent receiver  application should contain a reference to any such provisions.

Next, the lender should and must be served with notice of the application. If the lender does not appear and object, this may work in favor of the association.

Finally, the Court noted that the Condominium Act does not expressly authorize the relief the Association was seeking.

Notwithstanding the forgoing, there is an alternate statutory remedy that may be useful to condominium associations.  Generally speaking, in the context of condominium association collections, prior to commencing a lien foreclosure, the association has made other attempts to collect the outstanding maintenance arrears that have not produced any results or payments. The association likely has recorded a claim of lien and has commenced a civil suit and may have an unsatisfied judgment.

N.J.S.A. 2A:17-66, authorizes the Superior Court to appoint a receiver of property in aid of execution on behalf of a judgment creditor. Although the decision to appoint a receiver is still an extraordinary remedy and rests within the sound discretion of the court, the application may succeed if the association can demonstrate that it has exhausted all other avenues for post- judgment enforcement.  The association now has a statutory basis to rely on and can argue that the first mortgage will remain in place unaffected by the appointment of a receiver and the receivership will be limited in time and amount to enforcement of the judgment. The courts may be more comfortable with this alternate approach.

Thursday, March 27, 2014

Law Enacted to Prevent Significant Flood Insurance Rate Increases


Late last week the President signed into law a bill that will provide relief to millions of homeowners whose flood insurance premiums were expected to soar through the roof.  A portion of the Biggert-Waters Flood Insurance Act of 2012, designed to help the national flood insurance program (NFIP) get out of debt, required the Federal Emergency Management Agency (FEMA) to implement increased insurance rates that reflected the true cost of flood risk and put an end to subsidies on existing properties at the time of sale.  The planned increases, due to take effect next year, would have jeopardized the financial stability of homeowners across the nation.

In response, Congress passed the “Homeowner Flood Insurance Affordability Act of 2014,” which sets a cap on flood insurance premium increases, restores grandfathered rates, retains subsidized rates and provides for reforms to flood mapping procedures.  Briefly, the Flood Insurance Affordability Act requires FEMA to implement the following measures:     

Affordability:
•    Flood insurance premium rate increases for the NFIP will be capped at 18% annually;1
•    Reinstate flood insurance subsidies on existing properties at the time of sale;2
•    Reinstate grandfathering for property owners mapped into higher risk areas; 
•    Refund homeowners who overpaid premiums;3
•    Institute monthly installment payment options;
•    Strive to minimize annual premiums that exceed one-percent of total coverage provided;
•    Complete a study on how to keep the NFIP affordable. 

Flood Mapping:
•    Notify, coordinate and cooperate with communities during any mapping or map updating;
•    Provide funding to reimburse successful appeals to FEMA flood maps;
•    Provide communities credit for non-federal levees and locally funded flood mitigation procedures in new flood maps.

The Community Associations Institute (CAI) petitioned Congress on behalf of community associations that purchase flood insurance policies to adopt this law to avoid the specter of grossly increased premiums, which would have an impact on monthly maintenance fees.  We are pleased to see that the efforts of CAI have paid off with the adoption of the Flood Insurance Affordability Act. If you have any questions regarding the Flood Insurance Affordability Act or the national flood insurance program in general, please consult with your attorney. 

1. To fund subsidized rates, a $25 surcharge fee will be applied to most homeowner policies and a $250 fee will apply to non-residential or non-primary residence properties
2. Properties in compliance with previous flood maps cannot be hit with large increases when new maps show  greater risk of flooding
3. For example, to owners who purchased after Biggert Waters became law and later learned that a change in ownership ended subsidized flood insurance premiums


Thursday, March 6, 2014

To Receive Or Not To Receive, That Is The Question: Legal And Accounting Principles For Board’s And Associations To Consider When Contemplating A Request For Appointment Of A Rent Receiver

Undoubtedly, in the current economic climate, many community associations and boards are faced with the dilemma of dealing with and managing units that are vacant and have been abandoned by the owners. Generally, these units are burdened with significant debt and maintenance arrears that continue to accrue each month. Additionally, these units are commonly in the process of being foreclosed by the lender. However, the lender is usually not acting expeditiously to advance the foreclosure proceeding to a sheriff’s sale. As such, associations and boards have become interested in requesting the court to appoint a rent receiver with authority to obtain a tenant and to rent and to lease the unit and to apply the income received to pay down the arrears. Oftentimes, this may be the only opportunity an association will have to achieve some sort of monetary recovery against an absent and or judgment proof owner.

Since an application must be made to the court, expenses and legal fees will necessarily be incurred and a decision also needs to be made to select a qualified entity or individual who will be approved by the court to be the appointed receiver.   

Some of the legal issues to consider are as follows: First, there is no guarantee that the application will be granted. The relief requested is equitable in nature and the court has discretion to grant or deny the application based on the facts. Currently, there is no statutory basis or specific legal precedent that affords associations the absolute right to have a receiver appointed. The decisions on these applications vary by court and by judge.

Most courts and judges will require that the foreclosing lender be served with notice of the application and the lender will generally submit an objection and opposition to the application based on protection of the alleged superiority of its first mortgage and security interest.

Please click here to read the entire article which appeared in the January 2014 edition of Community Trends.

Wednesday, March 5, 2014

The FDCPA and Debts That Can Cause Despair: Issues Implicated in Connection with Debt Collection for Communtiy Associations

The Fair Debt Collection Practices Act (15 U.S.C. § 1692) commonly known and referred as the FDCPA is a federal statute that regulates the conduct of debts collectors in connection with activity to collect consumer debt on behalf of creditors.

Although normally associated with and discussed in the context of credit card debt collection and other similar types of consumer debt, it is undisputable the FDCPA applies to action undertaken by attorneys to collect past due condominium and homeowner association maintenance fees and related charges.

As such, attorneys and law firms engaged to collect maintenance fees on behalf of association clients must be vigilant to comply with the requirements of the FDCPA and be aware of the damages that can be awarded for a violation. Penalties for violations include compensation for actual damages or $1,000.00 per violation as well as awards for attorneys’ fees to a successful plaintiff.

As such, FDCPA compliance will be taken into consideration at the time a law firm is engaged to collect past due maintenance fees by a community association. Typically, a retainer agreement will contain an indemnification provision advising that the association agrees to indemnify its counsel in the event the association or its management company provides counsel with a misstatement of the amount due that results in attorney liability under the FDCPA.

For more information, please read my recent article in the July, 2013 issue of Community Trends, Published by CAI New Jersey.

Tuesday, February 25, 2014

Maintaining Confidentiality in a Transparent Age*

Maintaining Confidentiality in a Transparent Age - New Jersey Condo Blog
Despite the fact that we live in a transparent age, there are legitimate concerns and reasons for board members to keep certain information confidential. Disclosure of confidential information by a board member could compromise the association or present an unwarranted invasion of privacy upon another. For example, liability on the part of the corporation or the individual board members could arise from disclosure of sensitive matters such as delinquencies, litigation, contract negotiation, staff employment and the retention of contractors and professionals. For this reason, encompassed within the fiduciary obligations of the board is the requirement that the corporation's information be kept confidential to the extent that the information is privileged or that its release may compromise the corporation.[1]

While transparency is important, keeping certain information concerning the corporation’s activities confidential may be required as it prevents undue harm to the corporation, its board members, members, staff and related third-parties. The members of a common interest community elect a board of directors or trustees who are responsible for managing the activities of the association, thereby requiring the board to act in a fiduciary capacity. The members of the board owe fiduciary obligations to the corporation itself and to the unit owners, similar to that of a corporate board to its shareholders.[2] Included within these fiduciary obligations are the duty of care and the duty of loyalty.[3] The duty of care requires trustees to “discharge their duties in good faith and with that degree of diligence, care and skill which ordinary, prudent persons would exercise under similar circumstances, in like positions.”[4] The duty of loyalty requires trustees to act in the best interests of the corporation and its members, especially in those circumstances where the trustee has a material conflict of interest.[5] The duty of loyalty requires trustees to discharge their duties in a manner that the trustee believes to be in the corporation’s best interest. Therefore, implicit within the duty of loyalty is some degree of a duty of confidentiality. For example, there is no doubt that a director must maintain the confidentiality of attorney-client privileged information. Many courts have also held that a board members right to learn of privileged information comes with the obligation to maintain the confidentiality of that communication, as the privilege belongs to the corporation and is not that of the board member’s to waive.[6]

Ultimately, board members are expected to protect and maintain the confidentiality of certain information. If you have have any question as to whether or not you may be required to keep information confidential, please consult with your attorney.

*J. David Ramsey, Esq. and Jennifer A. Loheac, Esq. contributed to this article. 

[1] See N.J.S.A. 46:8B-13; N.J.S.A 45:22A-46(a); See Moore v. Radburn Ass'n, Inc., A-4284-07T2, 2010 WL 910189 (App. Div. Mar. 18, 2010) (upholding a resolution adopted by the board excluding residents from working sessions of the board and, at the board's discretion, from certain confidential discussions that occurred during voting meetings. While not commenting directly on the issue of confidentiality, the court noted that applicable statutes clearly permitted boards to exclude members from conference or working sessions at which no binding votes are to be taken. Moreover, the court found nothing in the statutes requiring that any meetings where there was a quorum present and association affairs being discussed to be considered open meetings as opposed to conference or working sessions to which residents could be properly excluded and therefore information kept confidential).

[2] See Siller v. Hartz Mountain Associates, 93 N.J. 370, 382 (1983); Siddons v. Cook, 382 N.J. Super. 1 (App. Div. 2005); See also Thanasoulis v. Winston Towers 200 Ass'n, Inc., 110 N.J. 650, 657 (1988).

 [3] See N.J.S.A. 15A:6-14; N.J.S.A. 15A:2-8(c). [4] See Nonprofit Act, N.J.S.A. 15A:6-14. 

[5] See Business Act, N.J.S.A. 14A:2-7(3).

[6] See Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343, 348-49 (1985); See People ex. rel. Spitzer v. Greenberg, 50 A.D.3d 195, N.Y.S. 2d 196, 200-01 (2008); See Stewart Equip. Co. v. Gallo, 32 N.J. Super. 15 (Law Div. 1954)

Thursday, February 13, 2014

New Jersey Court Declines to Impose Liability on A Condominium Association for a Slip and Fall on Interior Sidewalk

After muddling through multiple snowstorms this winter, this article is particularly appropriate to compose on a snow day!

In a recent decision, the Appellate Division declined to impose liability on a condominium association for a plaintiff’s slip and fall that occurred on an interior sidewalk within the community property.

New Jersey imposes a duty on commercial property owners to maintain sidewalks adjacent to their business property, in “reasonably good condition” and imposes liability when the failure to do so results in injury to a pedestrian.  Stewart v. 104 Wallace Street, Inc., 87 N.J. 146 (1981).

Recently, in Qian v. Toll Brothers, Inc. et al., 2014 WL 476306, the Court rejected a plaintiff’s attempt to extend the duty imposed on a commercial property owners to a condominium association.
Traditionally, New Jersey law recognizes that residential property owners have no common law duty to their maintain sidewalks adjacent to streets and roads used by the public.

More specifically, in New Jersey, a condominium complex is recognized as a residential entity and therefore protected from liability due to a slip and fall on its abutting public sidewalk.  Luchejko v. City of Hoboken, 207 N.J. 191 (2011)

In Qian, the plaintiff, aware of and concerned about ice accumulation, slipped and fell on ice on an association interior sidewalk after a walk to the market.

The plaintiff argued that the association by-laws required it to maintain the common elements and the association, in fact, collected maintenance fees in order to do so. The Association had also contracted with a landscape maintenance company to remove snow and ice.

The Court declined to agree with the plaintiff’s assertion that an interior sidewalk in a private community was different from an abutting public sidewalk since all members of the public had access.

Interestingly, in Qian, the Court did acknowledge the factual difference in the location of the fall in the Luchejko case but noted any departure from the commercial/ residential distinctions would need to be addressed by the Supreme Court.

Thursday, January 16, 2014

Neighboring Tree Threatens Your Community, What Can You Do?

(As originally published in the January 2013, “Restore the Shore” issue of Community Trends, CAI-NJ)

In the aftermath of a severe storm you may find that a neighboring property’s tree has fallen on to your community’s property.  Even leaning trees or overhanging branches may create a nuisance; or worse, a potentially hazardous condition.  In the unfortunate event that a neighboring property’s tree should fall, causing damage to community property, you should immediately contact your insurance company to alert them of the potential claim.  Under New Jersey law, absent proof of some negligence or unreasonable activity, liability is not likely to be imposed upon the neighboring property owner; even despite the fact that the tree was located on the neighbor’s property. 

In the case of leaning tress or overhanging branches, there is a long-standing principle in New Jersey law providing that this may constitute a nuisance for which an action for damages lies.   In such a circumstance a property owner is entitled to the right of self-help to lop off overhanging tree branches to the property line, but no further.   These legal remedies, however, should only be used as a last resort.

The absolute best solution is to put the neighboring property owner on notice of the nuisance or hazardous condition and coordinate a solution together.  More likely than not the neighboring property owner will recognize the potential liability of failing to take action and will be more than happy to trim back the portions of the tree overhanging onto your community’s property.  There may even be an applicable local ordinance related to the upkeep and removal of trees requiring the neighboring property owner to keep trees trimmed to prevent the creation of a nuisance or hazardous condition. 

Immediately resorting to a legal remedy, such as filing a lawsuit or acting upon self-help rights, is not preferred and has effects that cannot be undone.  For example, should the community elect to act upon self-help rights, they may be subjecting themselves to liability for trespassing or for damage caused to the neighboring property.  More often than not you will find that in order to properly trim back the tree branches you will need access to the neighbor’s property, which will require permission.  Furthermore, electing to trim the tree branches can result in damage to the neighbor’s property or create a condition which is harmful to the health of the tree and endangers the tree’s continued vitality; both of which may impose liability upon the community.   

It is important to remember that the owner of the tree is your neighbor.  The fact is, after the matter is resolved, you will continue to remain neighbors and, presumably, would prefer to maintain a cordial relationship.  If you find that a neighboring property owner is not willing to cooperate concerning a tree which has fallen onto or is leaning over your community’s property you should immediately contact your attorney.

Ackerman v. Ellis, 81 N.J.L. 1 (Sup. Ct. 1911). 
Wegener v. Sugarman, 104 N.J.L. 26 (Sup. Ct. 1927). 

Friday, January 10, 2014

Federal Disaster Assistance for Condominium Associations and Cooperatives May be on the Horizon

In the wake of Hurricane Sandy, many communities throughout the tri-state area suffered severe and catastrophic damage.  Community associations, much similar to single family homeowners, turned to the Federal Emergency Management Agency (FEMA) for financial assistance, only to be turned away.  Surprisingly, federal law does not currently permit FEMA to provide financial assistance directly to cooperatives, condominiums or homeowners associations to repair essential common elements.  Despite the fact that many common elements likely to be damaged in a natural disaster are necessary to the continued habitability of the structure, such as the exterior of the building or the mechanical room, these non-profit entities are only eligible to receive low interest loans from the Small Business Administration (SBA).

FEMA offers grants for recovery efforts to “individuals” and “households” through its Individuals and Households Program (IHP).   The Federal Government has interpreted the IHP to exclude condominium associations and cooperatives by considering them to be a business, despite the fact that they are simply non-profit entities set up by property owners.   However, on July 31, 2013, Rep. Steve Israel (D-NY), introduced a bill to amend the Act to provide assistance for condominiums and housing cooperatives damaged by a major disaster.   The bill will amend the definition of the terms “individual” and “household” in the Act to specifically include the “residential elements that are the legal responsibility of an association for a condominium or housing cooperative.”  

The introduction of this bill is good news for condominium associations and cooperatives, which have a fiduciary responsibility to its residents to maintain and repair common areas.  Becoming eligible for FEMA grants to assist in the recovery of natural and other disasters would alleviate additional financial burdens on residents and put these communities on equal footing with single family homeowners.  Interestingly, however, the bill does not include within the definition of “individual” and “household” a homeowners association.  This is probably because damage to the common elements of a typical homeowners association is not likely to affect the habitability of the homes in the community.  Fortunately, homeowners in an association can are already eligible for assistance for their individual homes. 

While the introduction of this bill to Congress is not likely to provide any assistance to those affected by Hurricane Sandy, as severe weather becomes more common in the Northeast region the passage of the bill will serve to ensure that condominium associations and cooperatives are not shortchanged in disaster aid in the future. 

See the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Act”).  Note, individual condo owners can receive assistance for their individual units, whereas individual owners of cooperatives cannot.  In a cooperative, the owners sign leases for the rights to their units, rather than owing them and, therefore, do not qualify for the IHP.  

See H.R. 2887, 113th Congress (2013-2014), http://beta.congress.gov/113/bills/hr2887/BILLS-113hr2887ih.pdf
See fn. 2. 

Friday, January 3, 2014

Fiduciary Duty and the Remediation of Construction and Design Defects

The existence of a construction or design defect in a community association gives way to a unique paradox in the nature and scope of the fiduciary duty board members owe to the association and its members.  On one hand the board has a fiduciary duty to maintain and provide for the necessary repairs to the common elements.  As a result, the board will likely feel pressure from unit owners to immediately address construction or design defects, especially where the defect presents a health or safety concern.  On the other hand the board also has an essential obligation to preserve evidence of the defects in the event litigation proves necessary.  As fate would have it, the immediate undertaking of invasive inspections or repairs may improperly destroy evidence needed to demonstrate liability and damages.  Fortunately, with proper advice and counsel these seemingly inconsistent fiduciary obligations can be satisfied.

The failure to preserve evidence (or the destruction thereof) for use by an adverse party where litigation is probable or pending is known as “spoliation.”  The defense of spoliation is premised upon the prejudice that may result where there is not an equal opportunity to inspect the alleged defects and observe any repairs.  For example, professionals hired by an association may “destroy” evidence of defects while undertaking invasive inspections, correcting a design or repairing the defect.  Even despite exigent circumstances and the fact that association’s retained professionals may document conditions they observe, the failure to give all responsible parties an opportunity to similarly inspect the defect and observe any repairs may severely limit the association’s ability to establish liability and damages.

Therefore, when undertaking remediation efforts, it is important that the association work with legal counsel and other professionals to: (1) develop an orderly procedure for identifying defects; (2) alert all potentially culpable parties; (3) provide an opportunity to inspect; and, (4) permit all parties to observe and document all investigations, testing and remediation efforts.   Understandably, the need for repair in some instances may be so time-sensitive that little if any opportunity may be afforded to provide notice of an inspection.  While an association is less likely to be penalized for seemingly unavoidable spoliation, if you are currently experiencing problems due to potential construction or design defects, please be sure to seek the advice of counsel immediately.  While the members of the board have fiduciary duty to maintain and repair the common elements and may feel pressure to do so sooner rather than later, it’s important to remember they likewise have a fiduciary duty to ensure the preservation of the evidence of construction defects in the event litigation proves necessary. 

1 See Robertet Flavors, Inc. v. Tri-Form Const., Inc., 203 N.J. 252 (2010) (Property owner was not allowed to present evidence of claims of mold infiltration and a defective curtain wall against contractor because the owner’s lack of notice of and an opportunity to inspect the remediation work undertaken deprived the contractor of the ability to defend those claims.  As a result, the property owner’s evidence was limited to the conditions that were observable prior to remediation).   
2 See Robertet, supra., 203 N.J. at 258.