Tuesday, December 19, 2017

Q&A: Charging for Copies of Financial Documents



Is there a limit how much we can charge to pull, provide and copy requested paperwork? Can we make a profit?


Yes, there is a limit to the amount a condominium association can charge its residents to provide copies of records the association is required to keep open to inspection by its owners. In New Jersey, the charge cannot exceed an amount reasonably related to the association’s copying cost, which may include any additional administrative expense incurred. Therefore, unless your governing documents provide otherwise, the association may charge the cost for copying.

It is important to keep in mind that the New Jersey Condominium Act provides that associations shall be responsible for “the maintenance of accounting records in accordance with generally accepted accounting principles open to inspection by unit owners at reasonable times.” N.J.S.A. 46:8B-14(g) (emphasis added). The accounting records required to be open to inspection by unit owners include (1) a record of all receipts and expenditures and (2) 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. Thus, while the association may charge a fee reasonably related to the association’s copying cost to provide copies, the association must grant access to inspect the financial records required to be kept open to inspection without charge to the unit owners. Even if another party, such as the Association’s managing agent or accountant, charges the association a production fee, the association cannot charge the owner a fee to merely inspect these records.

Finally, while the Condominium Act is silent as to whether owners have a right to make copies, and New Jersey case law has not resolved this precise issue, the New Jersey Department of Community Affairs takes the position that the right of inspection includes the right to copies of those documents. Thus, we recommend that you allow members to make copies of financial records that are required to be open to inspection.

Tuesday, December 12, 2017

Hudson County Court Distinguishes Controversial Palisades Decision

On December 7, 2017, a Hudson County Superior Court Judge, in the matter of Grandview II at Riverwalk Port Imperial Condominium Association, Inc. v. K. Hovnanian at Port Imperial Urban Renewal III, LLC, et al, Docket No. HUD-L-2839-14 ("Grandview II"), denied summary judgment to an architect retained by the developer who argued that the statute of limitations barred the association's claims pursuant to the Supreme Court's controversial decision in the matter of The Palisades at Fort Lee Condominium Association, Inc., v. 100 Old Palisade, LLC (“Palisades”)[1] because the developer knew of the defects more than six-years prior to the lawsuit being filed. In denying summary judgment, the Court specifically held that Palisades (1) was factually distinguishable from a project such as Grandview II that was originally developed as a condominium with the intent to transition the operational control to an association in the future and (2) did not modify the long-standing rule that claims by a condominium association against the developer, its design professionals and subcontractors do not accrue until transition. Citing Terrace Condominium Association, Inc. v. Midlantic National Bank, 268 N.J. Super. 488, 503 (Law Div. 1993). 

Becker & Poliakoff represents the plaintiff condominium association in Grandview II and argued in opposition to the motion for summary judgment, among other things, that Palisades was not only factually distinguishable, but that it did not change long-standing New Jersey case law holding that such claims do not accrue, at the earliest, until transition of control by the developer. Fortunately for common interest communities throughout New Jersey the Court agreed that "no claim could be brought by the association until the transition occurred. That is until at least seventy-five percent of the units were sold to require the transition from owner to association control." 

As recognized by the Court, the statute of limitations is a rule of equity and as such equitable considerations must control the Court. There is an inherent conflict of interest in the argument put forth by the architect in Grandview II that a cause of action for construction defects by a condominium association accrues when anyone in the chain of ownership, including the developer, first knows or reasonably should know of a defect, even if transition to unit owner control had not yet occurred. While such may be equitable in the unique circumstances presented by Palisades, where the building was constructed as an apartment complex and subsequently transitioned to a condominium, it is not realistic to suggest that a developer would initiate an action against itself, or its contractors and design professionals, prior to transitioning control to the unit owners in the normal condominium context. 

While we believe the decision by the Hudson County Superior Court is correct and well-reasoned, it certainly will not bring an end to design professionals and subcontractors attempting to dismiss a condominium association's construction defect claims as being barred by the applicable statute of limitations based on the decision in Palisades and the developer alleged knowledge of defects. The Palisades decision, while innately fact driven, is nonetheless a decision by the Supreme Court. Thus, defendants may still attempt to argue that Palisades is not distinguishable and as a decision of the Supreme Court is the applicable controlling law. While we believe that argument to be incorrect for the very reasons argued to and set forth by the Court in Grandview II, if your association is currently experiencing problems due to potential construction or design defects it is suggested that you seek the advice of counsel immediately to best protect your interests.

[1] The full opinion in Palisades can be downloaded at: http://njlaw.rutgers.edu/collections/courts/supreme/a-101-15.opn.html

Wednesday, November 1, 2017

Q&A: Access to Financial Documents


Q: How often do HOAs need to provide financial reports that include a balance sheet, receipts for work contacted and bank statements to the contributing members?

A: It is not readily apparent from the question whether the reader is asking on behalf of a condominium association, or a homeowner’s association, as many use the term “HOA” interchangeably. Here, however, the answer is the same for both.

The New Jersey Condominium Act (“Condominium Act”) requires condominium associations to maintain accounting records, “in accordance with generally accepted accounting principles [GAAP], open to inspection at reasonable times by unit owners.” According to the Condominium Act, such records include “(i) a record of all receipts and expenditures and (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.” Thus, all those records required to be kept in accordance with GAAP, should be made available for inspection by any member upon request. New Jersey case law has also found that the right of access set forth in the Condominium Act applies to other types of associations, such as cooperative and homeowners associations.

Importantly, the Condominium Act only requires that documents kept in accordance with GAAP be open to inspection upon reasonable notice. Thus, there is no requirement under the law to provide financial reports to members of an association, unless your governing documents specifically require that you do so. For example, many Bylaws require community associations to conduct an annual audit and distribute same to its members. If your Bylaws do not have such a requirement, then documents such as balance sheets, receipts for work and bank statements need only be open to inspection.

Finally, while the Condominium Act is silent as to whether owners have a right to make copies, and New Jersey case law has not resolved this precise issue, the New Jersey Department of Community Affairs takes the position that the right of inspection includes the right to copies of those documents. Thus, we recommend that you allow members to make copies of financial records that are required to be open to inspection. And, unless your Bylaws provide otherwise, the association may charge the cost for the copying. 

Thursday, October 12, 2017

Did the New Jersey Supreme Court Reduce the Time for a Common Interest Community to Assert Construction Defect Claims?

On September 14, 2017 the New Jersey Supreme Court issued a long anticipated decision in the matter of The Palisades at Fort Lee Condominium Association, Inc., v. 100 Old Palisade, LLC (“Palisades”). The decision may have an immediate impact on recently constructed condominiums, or those to be constructed in the future, that have construction deficiencies. While innately fact-driven and evidence specific,[1] Palisades held that the six-year statute of limitations on a condominium association’s direct claims against a developer’s contractors and design professionals for construction defects begins to run upon the latter of six-years from: (a) substantial completion of the contractor’s work, or (b) when the “owner” knows, or should have known through the exercise of reasonable diligence, of the existence of a claim. 

Remarkably, the Palisades use of the term “owner” was not exclusive to the condominium association, but included the original owner of the property – i.e. the developer. In other words, the Court posited that causes of action accrue when someone in the chain of ownership, including the developer, first knows or reasonably should know of a defect and the party responsible therefore, even if transition to unit owner control had not yet occurred. Thus, although Palisades was decided on its peculiar facts, the decision opens  the possibility that direct claims by a condominium association against a developer’s contractors and design professionals could expire long before transition of control to the unit owners. 

It is not realistic to suggest that a developer would initiate an action against itself, or its contractors and design professionals, prior to transitioning control to the unit owners. Yet, in certain circumstances, this is precisely what Palisades requires to preserve the association’s claims against the developer’s contractors and design professionals. Many reading this may say, “So what, the developer is responsible and will still have to pay for the construction defects.” While it is true that the condominium association would likely still have various viable claims against its developer in such circumstances, the developer is likely a single purpose entity with little to no asserts. It is also likely that the developer failed to reserve significant funds to address warranty and other related construction defect claims. 

In light of Palisades, if your association is currently experiencing problems due to potential construction or design defects it is suggested that you seek the advice of counsel immediately. Though the developer may ultimately still be responsible, to the extent that you may also have direct claims against the developer’s contractors and design professionals, you may need to initiate litigation sooner rather than later. 

[1] The full opinion can be downloaded at: http://njlaw.rutgers.edu/collections/courts/supreme/a-101-15.opn.htmlGenerally, in New Jersey, a condominium association has six years from the date the developer transfers control to the owners to bring a claim against the developer for deficiencies in the design and construction of the common elements. While Palisades does not appear to change this well-settled law, the Supreme Court has called into question years of trial and appellate decisions that held that the same tolling applied to claims by a condominium association against a developer’s contractors and design professionals. 

Friday, October 6, 2017

Does Your Homeowners Association Have Adult Only Swims

Did you know that adult only swims in homeowner associations can be discriminatory?

The Federal Fair Housing Act [the “Act”] prohibits policies that discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services, or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin.  “Familial status” under the Act, is defined as one or more individuals under the age of 18 being domiciled with a parent or any another person having legal custody.  Hence, the issue concerns status and not age. As such, any policy that intentionally  discriminates against families with children or a policy although neutral on its face, has a discriminatory impact, is prohibited. Courts have found that rules that limit children's access to common amenities, based solely on the fact that the children are under 18, violate the Act. An adult only swim may be found to be facially discriminatory because it treats  children and families with children differently and less favorably than households composed of adults only.  Hence, a blanket adult only policy, based upon the desire to enjoy the pool with peace and tranquility, may be found to be discriminatory.

#familial status

Thursday, September 21, 2017

Q&A: Enforcement of Violations


Q. One resident constantly complains about another resident who is in violation of a HOA rule. As a board we are aware of the violation but allow the situation because of the personal situation involved. We have communicated to the complaining resident we do not wish to discuss why we allow this violation. Do we have to provide an answer?

A.  Very often, seemingly small changes in the facts of a matter can make a significant difference in the correct legal advice.  For instance, your question indicates that a resident is complaining about a violation of a “rule.”  It makes a difference whether the rule is a restriction contained in your HOA’s declaration, or a rule that the governing board adopted.  Generally, the board has a higher duty to enforce the declaration’s restrictions, then it does in connection with its own rules, with respect to which it has greater flexibility. 

Further, you indicate that board would prefer not to aggressively pursue the rule violation because of a personal situation impacting the owner against whom a violation is alleged and you prefer not to divulge the reason for the board’s inaction to the complaining owner.  The nature of the personal situation may be meaningful in providing an answer to your inquiry.  For example, assuming, hypothetically, the rule in question involves a restriction against creating excessive noise, but the resident making the noise needs to have temporary medical equipment that is the cause of the noise.  Depending on all the facts, it may be that the person causing the noise is entitled to an accommodation under the Federal Fair Housing Act.  In such a case the board would be obligated to allow an accommodation in the enforcement of the restriction if it is “reasonable” to do so.  Further, the law concerning making accommodations to people who are disabled prohibits the disclosure of confidential information concerning the disability – although it doesn’t prohibit the board from stating that it is obligated to make an accommodation because there is a claim of disability, without providing details. 

Another example might be that the HOA has a restriction against conducting any business from a home.  Perhaps the owner is out of work and is a professional who can’t afford to rent an office. Therefore, the owner opens her business from her home.  As a result, that owner starts seeing clients from her home and has a secretary working from the house.  In that case, there is no law that protects that activity and the board has a duty to take reasonable action to enforce the restrictions.  In order to avoid a costly legal dispute with the owner conducting the business, the board may lawfully provide the offending owner with a reasonably short period of time – say, for instance, 30 days – thereby giving that owner an opportunity to earn some income but also require that she find another location for his or her business. 

While the board may be empathetic to an owner facing personal difficulties, it still has a duty to enforce the restrictions contained in a declaration.  The law doesn’t mandate that a board show no humanity to their fellow residents by temporarily allowing a violation, particularly if the violation is technical in nature and does not cause any harm to the welfare of the other residents.  Ultimately, however, the board has the duty to enforce the use restrictions, particularly where another owner is validly complaining about a violation and no law protects the violating owner.  Because these situations can be nuanced and the correct answer depends on an analysis of all of the facts, we urge you to discuss this with an attorney who specializes in community association law.

Tuesday, September 19, 2017

Q&A: Mandatory Evacuation During a Hurricane?


Q.  Can we order our residents to evacuate our association in cases of things like hurricanes? Does a state emergency order play a role? If the state orders a mandatory evacuation can we fine residents who remain?
A.  Generally, if the State or local authorities have not issued an evacuation order, the answer is no.  Unless your governing documents had an unusual provision granting the board the authority to issue an evacuation order, absent a government order of evacuation, the board would not have the authority to issue such an order.  Typically, the powers of a board are far greater with respect to the use of the common elements as opposed to the use of the units.  A board cannot unilaterally tell an owner that he or she must leave their own home, when the governmental entity hasn’t made that determination.  If the State has issued a mandatory evacuation order and your governing document require an owner to comply with all law, then it might be possible to fine an owner for failing to evacuate. If, though, an owner didn’t evacuate and it did not cause the association or fellow owners any harm, it would appear to be an overreaction to a situation where the association’s efforts might be better targeted towards recovering from the hurricane, rather than seeking to fine owners who failed to evacuate.

Thursday, August 17, 2017

New Legislation to Enhance Owner Participation in Community Association Elections


On Thursday, July 13, Governor Christie signed legislation to enhance owner participation in community association elections. The CAI Legislative Action Committee, with Community Association Practice Chair, Dave Ramsey, leading the effort, worked side-by-side with Senator Gordon, the primary sponsor of the bill, to ensure that the final version of the law would be balanced and not impose undue burdens on community associations while making the election process democratic where it currently isn’t. Only through an eleventh-month effort and the willingness of Senator Gordon to listen to, and accommodate, CAI’s concerns was this able to occur.
A few important features of the new law:
• Although the law is effectively immediately, the implementation of portions of the bill that may require associations to modify some procedural aspects of their election process are delayed until October 1, 2017 to give associations an adequate opportunity to prepare.
• Subject to certain exceptions, in those few associations where the owners are not members of the association, effectively immediately, they are.
• Starting with elections occurring after October 1, Unit owners in good standing will have the right to nominate themselves or other owners in good standing. Bylaws requiring nomination by a Nominating Committee or requiring the signing of a petition by other owners will no longer be required, though Nominating Committees may continue to nominate owners for election to the board – but not exclusively.
• Certain time periods are statutorily imposed, including notices seeking nominees for the board must be sent to all owners not less than 30 days before the notice of the election meeting is sent.
• Notice of the election meeting must go out 14 or more days before the meeting but not more than 60 days before (this impacts many associations that previously had a minimum time notice period of 10 days).
• Board members’ names must be listed alphabetically on all ballots.
• Electronic voting in board elections is statutorily authorized and electronic notice of meetings is also authorized if permitted under the bylaws.
• In a provision unrelated to elections, governing boards may amend bylaws without a vote of the owners in two methods: First, it may amend the bylaws to be consistent with federal, state or local law. Second, it may propose an amendment to the bylaws together with a ballot to reject the amendment and if not more than 10% of the owners’ vote, within 30 days, to reject the bylaws amendment, it becomes enacted.
A number of other parties also voiced concerns about the new law, including the Department of Community Affairs and the New Jersey Builders Association. While a number of language clarifications from each of those parties were accepted, through the efforts of the Legislative Action Committee provisions that were overly burdensome or had negative impacts on community associations were successfully fended off. While there were numerous association election bills posted in the Senate and Assembly this year, most of which would have imposed significant burdens on associations were therefore unacceptable to CAI, only this bill reached the Senate and Assembly floors for a vote, and passed each house unanimously.
Look forward to a future article by Dave Ramsey in Community Trends providing additional details about this bill and a CAI program in late August in which he will provide information concerning important exceptions to the law and tips on how to take advantage of certain beneficial provisions in it.

Friday, August 4, 2017

Benefits of the Municipal Services Act

Many communities are either not receiving the benefits of the Municipal Services Act or are being substantially shortchanged by the municipality in reimbursements due

New Jersey’s Municipal Services Act (the “Act”), N.J.S.A. 40:67-23.2 – 23.8, requires that every municipality provide “qualified private communities” with certain municipal services on its roads or streets or reimburse those communities for such services.  The purpose of the Act is to eliminate double payment for services (such as snow and ice removal, lighting of the roads and streets and collection or disposal of garbage, recyclables and leaves) by residents who pay for them through both their property taxes and association common expenses.  The vast majority of condominiums, as well as other community associations in the State of New Jersey, meet the requirements of a “qualified private community,” as defined in the Act.

If the municipality chooses to perform the designated services, it must do so in the same fashion as it does throughout the municipality.  However, if the municipality selects the reimbursement option under the Act, the municipality enters into a written agreement with the Association to reimburse it annually for the municipality’s actual cost (not that of the Association’s) to obtain the covered services.  While these costs may be significantly less than the Association’s cost to hire private contractors, as is often the case, many municipalities reimburse communities amounts which do not reflect the true full costs to the municipality.  For example, costs associated with the services should include and take into consideration direct and indirect costs such as: labor (straight and overtime), supervisory and administrative personnel, employee benefits, materials, fuel and oil, vehicles and equipment, and the housing of vehicles and equipment and maintenance of same.   Moreover, in some circumstances, a community may be entitled to greater reimbursements when taking into consideration certain “difficulty” factors, such as the steepness of the roads. 

Those communities that do not currently have an agreement in place with the municipality may be entitled to significant monetary sums for the prior years the municipality failed to either provide services or reimburse the community for same.  For newer developments, it is important to keep in mind that it is not necessary that the roads meet municipal standards/specification or that they be accepted by the municipality for dedication for the Act to apply.  In such circumstances, the municipality still has a duty to reimburse the community. 

Despite the enactment of the Act in 1993, many communities are either not receiving the benefits of the Act or are being substantially shortchanged in the municipality’s calculation of the costs for such services.  For this reason, it is important that communities have counsel who specialize in common interest communities, such as those at Becker & Poliakoff, LLP, to carefully negotiate with a municipality in order to assure they receive the maximum amount to which they are entitled.  

Monday, July 31, 2017

Q&A: Scheduling of Annual Meetings


Q. We're not prepared for our annual meeting which is in August. We'd like to reschedule for September. Can we do that or should we just have an unprepared annual meeting in August to just say we had one?

A. While we would normally not advise a board to ignore the requirements of the governing documents, assuming there is no ulterior motive for delaying the annual meeting – for instance, the board desires to obtain bids on a large contract and award it before new members who are opposed to the contract might be elected to the board – then our usual advice in this situation would be to schedule the meeting on the earliest date that you know you would be prepared to have the meeting.  Most  bylaws contain an agenda for the annual meeting.  The board’s preparation for the meeting need not include anything not listed on the bylaws agenda.  Also keep in mind that if there are matters beyond the agenda, for instance, the preparation of, and vote on, an amendment to your governing documents, a special meeting of the members may be scheduled for that and it need not be undertaken at the annual meeting.

While bylaws often contain language that requires the annual meeting to be on a specific day of a particular month, there is little relief an owner can seek for delaying the meeting by a reasonably short period of time.  It may also be that since August is a peak vacation month, it may be difficult to obtain a quorum for the meeting.  Under some state statutes an owner dissatisfied that the annual meeting is not being held consistent with the requirements of the bylaws may go to court and obtain an order requiring the annual meeting to be held on a specific date; but it is unlikely that a court would schedule it earlier than you are planning and, typically, under statutes that provide for this, there is no penalty to the board or the association for failing to have held the meeting earlier. 

Friday, July 21, 2017

Q&A: Unsightly Neighboring Property

Q. We want to clean up the property next door to our association. The association does not own the property. It's less money to just have it cleaned up compared to getting the current owner to clean it up. We would have permission from the owner. As a board can we approve or do we need to advise all the owners for their input?
A.  There are several variables that need to be resolved to know whether spending the Association’s money is appropriate and lawful in this case.  First, while you state that the adjoining property needs to be “cleaned up,” you do not indicate whether this is a matter of cleaning brush, or whether there might be old cars there, perhaps an old barrel that held an unknown substance, etc.  If there is any chance that there is something like old vehicles, in connection with which you do not know who holds the title, or any materials that might constitute a “hazardous substance” under federal or state law, we would recommend against becoming involved in any way, since the possibility of serious liability is much too great.

Assuming that the issue is limited to cleaning up overgrown vegetation and the association has written permission from the owner to undertake the cleanup that details exactly what the owner is agreeing to allow the association to do, you need to ask two additional questions.  First, do the governing documents permit the Association to expend money for this purpose?  Typically there are two places to look for an answer to this question.  One would be in a provision that refers to the budget and the purpose of the expenses the association can include in the budget.  Secondly, there is usually a section of the bylaws setting forth the duties, powers and authority of the board.  In some instances these are stated permissibly, in other words suggesting that the board has, at a minimum, these powers.  Other times the section of the bylaws is stated in such a manner so as to limit the powers of the board.

Finally, there also needs to be a determination by the board that this is truly an association matter.  Is this to help a small portion of all the unit owners, but does not impact the vast majority of owners?  Is there a board member that is impacted and that is why the board is considering this action?  How much money would actually be spent?  If the amount is relatively nominal given the scope of the association’s budget and it is for the general benefit of the association that suggests one direction, but if it benefits few owners or it were to particularly benefit a member of the board, it suggests a different answer.

There are enough complexities in this issue that we would urge the board to consult with legal counsel before taking action.

Friday, July 14, 2017

Q&A: Handling Requests for Emotional Support Animals

I live in a 40-unit condo building, which has a NO PET AMENDMENT from 1980. A woman recently purchased a unit and has been seen with a dog that barks all the time. She signed all the disclosure forms that stated “no pets” and had given the Board a note from a nurse practitioner that the dog is an emotional support animal. What can we do?


The Federal Fair Housing Act (42 U.S.C. §§3601-3619) and the regulations promulgated thereunder require “housing providers,” including entities such as condominium associations in New Jersey, to make “reasonable accommodations” to disabled persons in rules, policies, practices or services when such accommodations may be necessary to afford a person with a disability the equal opportunity to use and enjoy a dwelling. New Jersey’s Law Against Discrimination (N.J.S.A. 10:5-1 et seq.) similarly requires accommodation of the disabled.  Decisions of federal and state courts in interpreting the Federal Fair Housing Law and New Jersey’s Law Against Discrimination have held that in certain instances housing providers, such as a condominium, must accommodate those with a legitimate physical or emotional disability requiring the support or assistance of an animal.

Notwithstanding, simply providing a note from a nurse practitioner stating that “the dog is an emotional support animal,” does not provide the governing body of a condominium the reasonable opportunity to establish that the resident suffers from a disability defined by law; and, further, requires the physical assistance or emotional support of a dog to reasonably accommodate their disability. Thus, in this instance, it likely would not be unreasonable for the association to request additional information to allow its governing body to evaluate the reasonableness of the request.

For example, the association may reasonably request that the resident provide a certification of a Physician or other qualified Treating Professional certifying: (a) the disability or handicap suffered (b) said disability or handicap meets the standards set forth by the Federal Fair Housing Act; (c) to the major life activities substantially limited by the disability or handicap; (d) whether treatment is available for the disability or handicap; (e) to the description of the accommodation requested; (f) as to whether the accommodation requested alleviates or mitigates the disability or handicap; and, (g) as to whether any alternative accommodations exist. If, upon receipt of such additional information, the association concludes that the resident is disabled under the law and that the physical assistance or emotional support of the identified animal is reasonably necessary to accommodate the disability, then approval of the accommodation is required by law.

Where an accommodation is required by law, the resident is still required to maintain the animal in accordance with existing rules and regulations; which often include, among other requirements, that residents permit no activity that creates a nuisance or annoyance to other residents. Such rules require the resident to take all actions necessary to prevent the animal from making noise that may unreasonably annoy or disturb the peace of neighboring residents.

Keep in mind that where an accommodation is required to be made by law, the animal is not considered a “pet.” Rather, it is an animal that the resident has claimed is required under the law for the physical assistance or emotional support for the disability that the resident is afflicted with. Therefore, the governing board of a community association should seek the advice of legal counsel before denying the request of a resident for a physical assistance or emotional support animal. The association’s legal counsel is best suited to advise and assist the governing board with implementation of appropriate procedures should the board receive such a request.  

Monday, June 5, 2017

Becker & Poliakoff Wins Multi-Million Dollar Jury Verdict In Landmark Construction Case

Media Contacts:
Kris Conesa or Andi Phillips
Roar Media
kconesa@roarmedia.com or aphillips@roarmedia.com
(305) 975-5934 or (305) 401-5098

Jury Finds Subsidiary of National Developer Hovnanian Enterprises Inc. Liable for Breach of Contract and Violation of the New Jersey Consumer Fraud Act 

MORRISTOWN, NJ & FORT LAUDERDALE, Fla. – June 5, 2017 – Becker & Poliakoff secured a landmark $9 million-plus jury verdict Thursday against a subsidiary of Hovnanian Enterprises, Inc. (NYSE: HOV). The award includes punitive (treble) damages for violation of the New Jersey Consumer Fraud Act and also entitles the plaintiff to recover attorneys’ fees, costs and prejudgment interest. The jury found that Hovnanian Enterprises used the subsidiary as an instrument to commit a fraud or injustice on purchasers of condominium units. The ultimate recovery against all parties, including the project architect and geotechnical engineer, could exceed $20 million.

After a six-week trial in New Jersey Superior Court (Docket No. HUD-L-2560-13), the jury agreed that Hovnanian, after learning that the condominium building was being improperly constructed with plywood flooring in violation of the building code, chose to nevertheless continue construction. Hovnanian then sought to reclassify the building type. The jury agreed with the plaintiff’s position that the reclassification was never approved by governmental authorities. The units were then sold without disclosing the code violations or the lack of approval to the buyers. The claim arose out of construction problems with the six-story, 132-unit residential and commercial building in Port Imperial, West New York, NJ.

Matthew Meyers, a Shareholder in Becker & Poliakoff’s Morristown office, represented the homeowners and initiated the suit against Hovnanian. “Hovnanian knew that the use of combustible materials in the flooring was in violation of the building code, and instead of fixing the mistake, attempted to change the building’s classification. They then sold units knowing that the change in classification had never been approved. They continued to arrogantly defend their conduct at trial but the jury would have none of it. Hopefully, after this verdict, Hovnanian will get the message.”

“A key point making this landmark case particularly unique is that the parent company, Hovnanian Enterprises, was found to have used its shell subsidiary to perpetrate an injustice on the condominium unit buyers,” said Becker & Poliakoff shareholder John Cottle, who was first chair/lead trial counsel in the case representing the homeowners. “This is a rare instance in which the ‘corporate veil’ was pierced, and we expect the result of this will be that Hovnanian Enterprises will ultimately be held responsible for the judgment.”

In addition to Cottle, the Becker & Poliakoff trial team from Florida included: Perry M. Adair, Miami managing shareholder and a board-certified construction law attorney; and Sanjay Kurian, a shareholder and board-certified construction law attorney. The New Jersey team included Vincenzo Mogavero, a shareholder and litigation Chair and Martin Cabalar, in addition to Mr. Meyers. 

About Becker & Poliakoff
Becker & Poliakoff, with headquarters in Fort Lauderdale, Fla., is a multi-practice commercial law firm with attorneys, lobbyists and other professionals at offices across the United States. More information is available at www.bplegal.com.

Friday, May 12, 2017

David Ramsey Receives CAI Distinguished Service Award

Hearty congratulations go out to J. David Ramsey, shareholder in Becker & Poliakoff’s community association practice group. David was recently honored with the Distinguished Service Award at the Community Associations Institute’s (CAI) Annual Conference Awards dinner in Las Vegas.

The Distinguished Service Award is CAI’s most prestigious award and is periodically presented in recognition of longstanding, extraordinary contributions to the Institute. A member of CAI for over 30 years, David served as president in 2003-04 and remains actively involved in CAI’s Government and Public Affairs Committee, chairs the New Jersey Chapter’s Strategic Planning Committee and is a member of the New Jersey Legislative Action Committee. David has spent the majority of his legal career advocating on behalf of community associations, particularly in New Jersey and New York.

Tuesday, February 7, 2017


Once a judgment for condominium arrears is entered and various post judgment enforcement remedies have proved unavailing to locate assets, i.e. there are no bank accounts in the debtor’s name and no employment information can be located, there is one more tool in the toolbox!

New Jersey Court Rule 4:59 - 1 (d) (1) permits a judgment creditor to file a motion for an order to sell real property where the judgment debtor's assets are insufficient or cannot be located. The Appellate Division recently reversed an order denying such relief where the lower court held that notice to the mortgagee was a prerequisite. The relevant consideration under the rule is whether the judgment creditor made reasonable efforts to locate personal property. If you have an unsatisfied judgment, this remedy may be available as an alternative to a lien foreclosure. This strategy has been effective to bring delinquent condominium owners to the table when no bank accounts or employment can be located.

Submitted by :  Angela M. Morisco, Esq.

Thursday, January 12, 2017

Q&A: Disclosure of Tenant Information

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Q:        Does a condominium association board have an obligation to disclose information to an owner about an individual who is leasing a unit? If the lessee has a permanent guest with a criminal background does the board have an obligation to disclose this to the owner? 

A:        Typically, a condominium association in New Jersey would not have an obligation to disclose information to an owner about another resident who is renting a unit or is a guest in a unit. The New Jersey Condominium Act sets forth the duties of a governing board of a condominium association. With respect to disclosures, the Condominium Act specifically requires the association to maintain accounting records, in accordance with generally accepted accounting principles, open to inspection at reasonable times by unit owners. See N.J.S.A. 46:8B-14(g). Such records include (i) a record of all receipts and expenditures and (ii) an account for each unit setting forth any shares of common expenses or other charges due. The Condominium Act further states that the board shall have such other duties as set forth in the master deed or bylaws. N.J.S.A. 46:8B-14(i). Therefore, unless the master deed or bylaws set forth disclosure obligations in addition to those above, there is generally no duty to disclose information with respect to tenants.

Nevertheless, the Condominium Act still requires the board to exercise its power 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. Thus, where there is a risk of foreseeable criminal harm, an association has an obligation to take reasonable action.  What that reasonable action may be depends on the particular facts. Therefore, the board must balance the possibility that any specific notice to other residents of the community may result in the resident that lawfully resides in the community being harassed by other residents, thereby creating a potential liability for the association. This is a very complex balancing act for the board and it should not be undertaken without the advice of the association’s attorney. 

It would be a rare case in which notice of past criminal history of a resident should be reported to the other owners in the community. That determination should be made in consult with the association’s attorney and consider the type of crime committed (such as whether the crime was violent in nature), the age of the person at the time the crime was committed, the length of time since the crime was committed, and the amount of time during which the person has not been subject to incarceration and has not committed another crime. Even where the decision to disclose such matters is made, the board should ensure that the notice is limited to purely factual matters. 

Fear Not the Dreaded Legal Fees: Part Two

BY:  ANGELA M. MORISCO, ESQ. Very often boards of condominiums and other community associations hesitate to engage in litigation ag...