ASSEMBLY, No. 896
STATE OF NEW JERSEY
209th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2000 SESSION
Sponsored by:
Assemblyman CHRISTOPHER "KIP" BATEMAN
District 16 (Morris and Somerset)
Assemblyman STEVE CORODEMUS
District 11 (Monmouth)
Co-Sponsored by:
Assemblymen Gregg, Cohen, Kelly and Biondi
SYNOPSIS
The "New Jersey Uniform Common Interest Ownership Act."
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning common interest communities, supplementing Title 46 of the Revised Statutes, 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. TITLE 46
CHAPTER 8E
UNIFORM COMMON INTEREST OWNERSHIP
Article 1. In General
46:8E-101. Short title.
46:8E-101.1 Legislative Findings and Declarations
46:8E-102. Definitions.
46:8E-103. Variation by agreement.
46:8E-104. Separate titles and taxation.
46:8E-105. Applicability of local ordinances, regulations and building codes.
46:8E-106. Eminent domain.
46:8E-107. Supplemental general principles of law applicable.
46:8E-108. Construction against implicit repeal.
46:8E-109. Uniformity of application and construction.
46:8E-110. Severability; interpretation.
46:8E-111. Unconscionable agreement or term of contract.
46:8E-112. Obligation of good faith.
46:8E-113. Remedies to be liberally administered.
46:8E-114. Adjustment of dollar amounts.
46:8E-115. Applicability to common interest communities.
46:8E-116. Applicability to cooperatives.
46:8E-117. Applicability to small and limited expense liability planned communities.
46:8E-118. Applicability to pre-existing common interest communities.
46:8E-119. Applicability to small pre-existing planned communities.
46:8E-120. Amendments to governing instruments.
46:8E-121. Applicability to nonresidential common interest communities.
46:8E-122. Applicability to out-of-State common interest communities
Article 2. Creation, Alteration, and Termination
of Common interest communities.
46:8E-201. Creation of common interest communities.
46:8E-202. Unit boundaries.
46:8E-203. Construction and validity of declaration and bylaws.
46:8E-204. Description of units.
46:8E-205. Contents of declaration.
46:8E-206. Leasehold common interest communities.
46:8E-207. Allocation of allocated interests.
46:8E-208. Limited common elements.
46:8E-209. Plats and plans.
46:8E-210. Exercise of development rights.
46:8E-211. Alterations of units.
46:8E-212. Relocation of unit boundaries.
46:8E-213. Conveyance of units within a cooperative.
46:8E-214. Subdivision of units.
46:8E-215. Boundaries of units.
46:8E-216. Use for sales purposes.
46:8E-217. Easement rights.
46:8E-218. Amendment of declaration.
46:8E-219. Termination of common interest community.
46:8E-220. Rights of secured lenders.
46:8E-221. Master associations.
46:8E-222. Merger or consolidation of common interest communities.
46:8E-223. Addition of unspecified real estate.
46:8E-224. Master planned communities.
Article 3. Management of the Common Interest Community
46:8E-301. Organization of unit owners’ association.
46:8E-302. Powers and duties of unit owners’ association.
46:8E-302.1 Imposition of fines and late fees.
46:8E-303. Executive board members and officers.
46:8E-304. Transfer of special declarant rights.
46:8E-305. Termination of contracts and leases of declarant.
46:8E-306. Bylaws.
46:8E-307. Upkeep of common interest community.
46:8E-307.1 Use of common elements by owners
46:8E-308. Meetings.
46:8E-309. Quorums.
46:8E-310. Voting; proxies.
46:8E-311. Tort and contract liability.
46:8E-312. Conveyance or encumbrance of common elements.
46:8E-313. Insurance.
46:8E-314. Surplus funds.
46:8E-315. Assessments for common expenses.
46:8E-316. Lien for assessments.
46:8E-317. Other liens.
46:8E-318. Association records; audits.
46:8E-319. Association as trustee.
46:8E-320. Assignment of rents.
Article 4. Protection of Purchasers
46:8E-401. Applicability; waiver.
46:8E-402. Liability for pubic offering statement requirements.
46:8E-403. Effect of the act on public offering statement - The Planned Real Estate Development Full Disclosure Act.
46:8E-404. Time shares subject to development rights.
46:8E-405. Resale of units.
46:8E-406. Release of liens prior to conveyance of unit.
46:8E-406.1 Effect of sheriff's sale.
46:8E-407. Express warranties of quality.
46:8E-408. Statute of limitations for warranties.
46:8E-409. Effect of violations on rights of action; attorney's fees.
46:8E-410. Labeling of promotional material
46:8E-411. Declarant's obligation to complete and restore.
46:8E-412. Substantial completion of units.
46:8E-413. Alternative dispute resolution.
46:8E-413.1 Construction Defect Litigation; Alternative Dispute Resolution
46:8E-414. Phased resolution of claims involving common elements and other improvements to be maintained by association.
Article 5. State Oversight of Association Boards
46:8E-501. Legislative Findings. (Reserved)
46:8E-502. (Reserved)
46:8E-503. (Reserved).
46:8E-504. Registration of associations.
46:8E-505. The Ombudsman for unit owners' associations.
46:8E-506. Enforcement authority of the Department of Community Affairs.
46:8E-507. Disclosure of sanctions by association.
46:8E-508. Authority of Commissioner of Community Affairs to promulgate regulations concerning this act.
46:8E-509. Requirements for associations concerning bidding procedures, conflict of interests and fair elections.
46:8E-510. Disclosure booklets.
46:8E-511. Duty of Association to distribute disclosure booklets.
ARTICLE 1. IN GENERAL
46:8E-101. Short title.
This chapter shall be known and may be cited as the "New Jersey Uniform Common Interest Ownership Act."
46:8E-101.1 The Legislature finds and declares:
a. In response to numerous voiced concerns of individuals residing in common interest communities, the General Assembly formed the Assembly Task Force to Study Homeowners's Associations to investigate the sufficiency of statutory law concerning such communities. The Task Force was charged to "review the laws and regulations as they may or may not now apply to the establishment of condominiums and town homes and the formation of condominium associations" and to "identify any problems existing in the operation of homeowner associations, with emphasis on their formation, bylaws, awarding of contracts, management companies, eligibility of board members and elections."
b. The Task Force held a total of five public hearings throughout the State, at which various representatives of association boards, unit owners and other interest parties testified or otherwise provided information to the Task Force.
c. After reviewing all information presented to it, and in performance of its duties as charged by the General Assembly, the Task Force issued a report of its findings and recommendations on January 8, 1998.
d. The Task Force recommended that broad changes be made by the Legislature to the statutory scheme that now applies to these homeowners' associations to accomplish several goals as enumerated in the report. In general, these communities need a system which will help them to handle their day-to-day affairs more efficiently by reducing the need for litigation between associations and owners. The Task Force emphasized the need for equivalent rules for all types of associations. In recognition of the quasi-governmental functions and powers granted to association boards, and in particular the power to assess fines against owners, the Task Force recommended that there be increased governmental oversight and guidance of them.
e. It is in the public interest to amend the law as suggested by the Task Force, in order to establish clear and uniform guidelines for all types of association boards and homeowners.
f. In light of the myriad of laws applying to condominiums, cooperatives, planned real estate developments, and communities with restrictive deed covenants, the Legislature finds that the most proficient way to establish these guidelines is to incorporate existing law along with new guidelines into one comprehensive body of law which will apply to all types of communities with common elements. The Legislature finds that the adoption of the "Uniform Common Interest Ownership Act," as modified to meet the needs of New Jersey associations, along with several companion bills concerning oversight of community associations, will establish a core of law which will function as a basis to accomplish these Legislative goals.
46:8E-102. As used in this act, unless specifically provided otherwise:
"Affiliate of a declarant" means any person who controls, is controlled by, or is under common control with a declarant. A person "controls" a declarant if the person (1) is general partner, officer, director, or employer of the declarant, (2) directly or indirectly or acting in concert with one or more other persons or, through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 10 percent of the voting interest necessary to elect a majority of the directors of the declarant, or (3) has contributed more than 10 percent of the capital of the declarant. A person "is controlled by" a declarant if the declarant (4) is a general partner, officer, director, employer of the person, (5) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 10 percent of the voting interest in the person, (6) controls in any manner the election of a majority of the directors of the person, or (7) has contributed more than 10 percent of the capital of the person. Control does not exist if the powers described in this paragraph are held solely as security for an obligation and are not exercised. A lender acting primarily to obtain or protect a security interest and who does not engage in active participation of the management of the property, as defined in section 46:8E-304, is not an affiliate of the declarant.
"Allocated interests" means the following interest allocated to each unit: (1) in a condominium, the undivided interest in the common elements, the common expense liability, and votes in the association; (2) in a cooperative, the common expense liability and the ownership interest and votes in the association; and (3) in a planned community, the common expense liability and votes in the association.
"Assigns" means any person to whom rights of a unit owner have been validly transferred by lease, mortgage or otherwise.
"Association" or "unit owners' association" means the unit owners' association organized under section 46:8E-301.
"Bylaws" means the governing regulations adopted under this act, or any act repealed by this act, for the regulation or management of an association.
"Common elements" means (1) in the case of a condominium or cooperative, all portions of the common interest community other than the units; (2) in a planned community, any real estate within a planned community which is owned or leased by the association, other than a unit; (3) in all common interest communities, any other interests in real estate for the benefit of unit owners which are subject to the declaration, 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.
"Common expenses" means expenditures made by, or financial liabilities of, the association, together with any allocations to reserves.
"Common expense liability" means the liability for common expenses allocated to each unit pursuant to section 46:8E-207.
"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" does not include holding a leasehold interest of less than 20 years in a unit, including renewal options.
"Common receipts" means all income to an association, including rent or other charges derived from leasing or licensing the use of the common elements, funds collected from unit owners as common expenses, fines or late fees, and receipts designated as common by the provisions of the master deed, declaration or bylaws.
"Condominium" means a common interest community in which portions of the real estate are designated for separate ownership and the remainder of the real estate is designated for common ownership solely by the owners of those portions. A common interest community is not a condominium unless the undivided interests in the common elements are vested in the unit owners.
"Conversion building" means a building that at any time before creation of the common interest community was occupied wholly or partially by persons other than purchasers and persons who occupy with the consent of purchasers.
"Cooperative" means a common interest community in which the real estate is owned by an association, each of whose members is entitled by virtue of ownership interest in the association to exclusive possession of a unit.
“Customary association assessment” means an assessment payable in periodic installments to the association 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. The periodic installments must be due no less frequently than quarter-annually and the assessment, and any of its component parts given priority by this subsection, must be acceptable to the Federal National Mortgage Association so as to not disqualify an otherwise superior mortgage from purchase by the Federal National Mortgage Association as a first mortgage.
"Dealer" means a person in the business of selling units for his own account.
"Declarant" means any person or group of persons acting in concert who (1) as part of a common promotional plan, offers to dispose of his or its interest in a unit not previously disposed of or (2) reserves or succeeds to any special declarant right.
"Declaration" means any instruments, however denominated, that create a common interest community, including any amendments to those instruments.
"Development rights" means any right or combination of rights reserved by a declarant in the declaration to (1) add real estate to a common interest community; (2) create units, common elements, or limited common elements within a common interest community; (3) subdivide units or convert units into common elements; or (4) withdraw real estate from a common interest community.
"Dispose" or "disposition" means a voluntary transfer to a purchaser of any legal or equitable interest in a unit, but the term does not include the transfer or release of a security interest.
"Executive board" means the body, regardless of name, designated in the declaration to act on behalf of the association.
"Identifying number" means a symbol or address that identifies only one unit in a common interest community.
"Leasehold common interest community" means a common interest community in which all or a portion of the real estate is subject to a lease the expiration or termination of which will terminate the common interest community or reduce its size.
"Limited common element" means a portion of the common elements allocated by the declaration or by operation of subsection b. or d. of section 46:8E-202 for the exclusive use of one or more but fewer than all of the units.
"Master association" means an organization described in section 46:8E-221, whether or not it is also an association described in section 46:8E-301.
"Master deed" means a master deed recorded pursuant to law in effect prior to the effective date of P.L. , c. (C. )(now before the Legislature as this bill) as an instrument to create a condominium.
"Offering" means every inducement, solicitation or attempt to encourage a person to acquire an interest in a unit if undertaken for gain or profit.
"Person" means an individual, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or other legal or commercial entity. In the case of a land trust, however, "person" means the beneficiary of the trust rather than the trust or the trustee.
"Planned community" means a common interest community that is not a condominium or a cooperative. A condominium or cooperative may be part of a planned community.
"Proprietary lease" means an agreement with an association pursuant to which a member is entitled to exclusive possession of a unit in a cooperative.
"Purchaser" means a person, other than a declarant or a dealer, who by means of a voluntary transfer acquires a legal or equitable interest in a unit other than (1) a leasehold interest, including renewal options, of less than 20 years, or (2) as security for an obligation.
"Quorum" means the number of persons required to be present at a meeting of an association or an executing board pursuant to section 46:8E-309.
"Real estate" means any leasehold or other estate or interest in, over or under land, including structures, fixtures, and other improvements and interests that by custom, usage, or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance. The term includes parcels with or without upper or lower boundaries and spaces that may be filled with air or water.
"Residential purposes" means use for dwelling or recreational purposes, or both.
"Rules" means the rules for the regulation or management of a common interest community as adopted by an association.
"Security interest" means an interest in real estate or personal property, created by contract or conveyance, which secures payment or performance of an obligation. The term includes a lien created by a mortgage, deed of trust, trust deed, security deed, contract for deed, land sales contract, lease intended as security, assignment of lease or rents intended as security, pledge of an ownership interest in an association, and any other consensual lien or title retention contract intended as security for an obligation.
"Special declarant rights" means rights reserved for the benefit of a declarant to (1) complete improvements indicated on plats and plans filed with the declaration pursuant to section 46:8E-209 or, in a cooperative, to complete improvements described in the public offering statement pursuant to section 46:8E-402; (2) exercise any development right pursuant to section 46:8E-210; (3) maintain sales offices, management offices, signs advertising the common interest community, and models pursuant to section 46:8E-216; (4) use easements through the common elements for the purpose of making improvements within the common interest community or within real estate which may be added to the common interest community pursuant to section 46:8E-217; (5) make the common interest community subject to a master association as defined in section 46:8E-221; (6) merge or consolidate a common interest community with another common interest community of the same form of ownership as defined in section 46:8E-222; or (7) appoint or remove any officer of the association or any master association or any executive board member during any period of declarant control pursuant to subsection d. of section 46:8E-303.
"Surplus" means the excess of all common receipts over all common expenses and any prepayment of reserves.
"Time share" includes both “fee simple” and “right to use” time share interests and means:
(1) An “interval estate” meaning a combination of an estate for years in a unit, during the term of which title rotates among the time share owners, coupled with a vested undivided fee simple interest in the remainder in the unit as established by the declaration creating the interval estate; or
(2) A “time span estate” meaning a combination of an undivided interest in a present estate in fee simple in a unit established by the declaration creating the time span estate, coupled with the exclusive right to possession and occupancy of the unit during a regularly recurring period.
"Unit" means a physical portion of the common interest community designated for separate ownership or occupancy, the boundaries of which are described pursuant to paragraph (4) of subsection a. of section 46:8E-205.
"Unit owner" means a declarant or other person who owns a unit, or a lessee of a unit in a leasehold common interest community whose lease expires simultaneously with any lease the expiration or termination of which will remove the unit from the common interest community, but does not include a person having an interest in a unit solely as security for an obligation. In a condominium or planned community, the declarant is, as of the date of the recording of the declaration, the owner of any unit created by the declaration. In a cooperative, the declarant is treated as the owner of any unit to which allocated interests have been allocated (section 46:8E-207) until that unit has been conveyed to another person.
46:8E-103. Variation by agreement.
The provisions of P.L. , c. (C. )(now before the Legislature as this bill), except as expressly provided therein, may not be varied by agreement, and rights conferred by it may not be waived. A declarant may not act under a power of attorney, or use any other device, to evade the limitations or prohibitions of P.L. , c. (C. )(now before the Legislature as this bill) act or the declaration.
46:8E-104. Separate titles and taxation.
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 document recorded in the county in which the cooperative is located. The transfer document 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 transferror and transferee of the unit;
(5) An executed and acknowledged consent of the cooperative executive board authorizing and approving the transfer or assignment;
(6) The number of shares transferred;
(7) A statement of the full consideration paid for the cooperative unit which includes the purchase price paid plus the amount derived from application of the percent of ownership held in conjunction with the unit to the unpaid balance of the fee or leasehold mortgage encumbering the entire structure as of the date of the transfer or assignment; and
(8) All other matters, consistent with 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 "Homestead Property Tax Rebate Act of 1990," P.L.1990, c.61 (C.54:4-8.57 et seq.), and sections 1, 3, 4 and 5 of P.L.1968, c.49 (C.46:15-5, C.46:15-7, C.46:15-8 and C.46:15-9 respectively) with respect to the imposition of the realty transfer fee.
b. In a condominium or planned community:
(1) If there is any unit owner other than a declarant, each unit that has been created, together with its interest in the common elements, constitutes for all purposes a separate parcel of real estate. A unit shall be deemed created once it has been subjected to the declaration for the common interest community by the recordation of either the declaration or an amendment to the declaration.
(2) If there is any unit owner other than a declarant, each unit shall be separately taxed and assessed, and no separate tax or assessment may be rendered against any common elements for which a declarant has reserved no development rights.
c. Any portion of the common elements for which the declarant has reserved any development right shall be separately taxed and assessed against the declarant, and the declarant alone is liable for payment of those taxes.
d. If there is no unit owner other than a declarant, the real estate comprising the common interest community may be taxed and assessed in any manner provided by law.
46:8E-105. Applicability of local ordinances, regulations and building codes.
a. No local housing code, maintenance code or other local ordinance or regulation, whether adopted prior to or after the date of P.L. , c. (C. )(now before the Legislature as this bill), shall impose any requirement upon any structure in a common interest community which would not be imposed upon a physically identical development under a different form of ownership.
b. The condominium or cooperative form of ownership shall not be prohibited through any zoning or land use law, nor shall any such law impose a requirement upon a condominium or cooperative which would not be imposed upon a physically identical development under a different form of ownership.
c. Except as provided in subsections a. and b. of this section, the provisions of P.L. , c. (C. )(now before the Legislature as this bill) shall not invalidate or modify any provision of any ordinance, rule or regulation governing the use of real estate in this State.
46:8E-106. Eminent domain.
a. If a unit is acquired by eminent domain or part of a unit is acquired by eminent domain leaving the unit owner with a remnant that may not practically or lawfully be used for any purpose permitted by the declaration, the award shall include compensation to the unit owner for that unit and its allocated interests, whether or not any common elements are acquired. Upon acquisition, unless the decree otherwise provides, that unit's allocated interests shall be reallocated to the remaining units in proportion to their allocated interests before the taking, and the association shall promptly prepare, execute, and record an amendment to the declaration reflecting the reallocations. Any remnant of a unit remaining after part of a unit is taken under this subsection shall thereafter be deemed a common element.
b. Except as provided in subsection a., if part of a unit is acquired by eminent domain, the award shall compensate the unit owner for the reduction in value of the unit and its interest in the common elements, whether or not any common elements are acquired. Upon acquisition, unless the decree otherwise provides, (1) that unit's allocated interests shall be reduced in proportion to the reduction in the size of the unit, or on any other basis specified in the declaration, and (2) the portion of the allocated interests divested from the partially acquired unit shall be reallocated to that unit and to the remaining units in proportion to their interests before the taking, with the partially-acquired unit participating in the reallocation on the basis of its reduced allocated interests.
c. If part of the common elements is acquired by eminent domain, the portion of the award attributable to the common elements taken shall be paid to the association. Unless the declaration provides otherwise, any portion of the award attributable to the acquisition of a limited common element shall be equally divided among the owners of the units to which that limited common element was allocated at the time of acquisition.
d. The executive board of the association, on behalf of the association and all affected unit owners, shall have the power to amend the declaration to reallocate interests in accordance with this section. The executive board shall reallocate the interests by amending the declaration and recording the amendment together with the court decree in every county in which any portion of the common interest community is located.
46:8E-107. Supplemental general principles of law applicable. Unless displaced by particular provisions of P.L. , c. (C. )(now before the Legislature as this bill), the principles of law and equity, including the law of corporations and unincorporated associations, the law of real property, and the law relative to capacity to contract, principal and agent, eminent domain, estoppel, fraud, misrepresentation, duress, coercion, mistake, receivership, substantial performance, or other validating or invalidating causes shall supplement its provisions.
46:8E-108. Construction against implicit repeal.
As P.L. , c. (C. )(now before the Legislature as this bill) is a general act intended as a unified coverage of its subject matter, no part of it shall be construed to be impliedly repealed by subsequent legislation if that construction can reasonably be avoided.
46:8E-109. Uniformity of application and construction.
P.L. , c. (C. )(now before the Legislature as this bill) shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of P.L. , c. (C. )(now before the Legislature as this bill).
46:8E-110. Severability; Interpretation.
a. If any provision of P.L. , c. (C. )(now before the Legislature as this bill) or the application thereof to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of P.L. , c. (c. )(now before the Legislature as this bill) which can be given effect without the invalid provisions or applications, and to this end the provisions of P.L. , c. (C. )(now before the Legislature as this bill) are severable.
b. In interpreting the terms of P.L. , c. (C. )(now before the Legislature as this bill) it is intended that: (1) any action, power, or right of an association, executive board, declarant or unit owner which is not expressly prohibited by P.L. , c. (C. )(now before the Legislature as this bill) or other law and (2) any provision of a declaration which is not in conflict with P.L. , c. (C. )(now before the Legislature as this bill) or other law shall be authorized under P.L. , c. (C. )(now before the Legislature as this bill).
46:8E-111. Unconscionable agreement or term of contract.
a. A court, upon finding as a matter of law that a contract or contract clause relative to real estate owned or to be owned under a form of common interest ownership was unconscionable at the time the contract was made, may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or limit the application of any unconscionable clause in order to avoid an unconscionable result.
Whenever it is claimed, or appears to the court, that a contract or any contract clause is or may be unconscionable, the parties, in order to aid the court in making the determination, shall be afforded a reasonable opportunity to present evidence as to:
(1) The commercial setting of the negotiations;
(2) Whether a party has knowingly taken advantage of the inability of another party reasonably to protect his interests by reason of physical or mental infirmity, illiteracy, inability to understand the language of the agreement, or similar factors; and
(3) The effect and purpose of the contract or clause; right of first refusal.
b. There shall be a rebuttable presumption of unconscionability with respect to leases involving a common interest community, including, but not limited to, leases concerning the use by unit owners of parking, recreational or other common facilities or areas. The presumption may be rebutted by a lessor through the presentation of evidence demonstrating 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:
(1) None of the persons executing the lease were, at the time of the lease execution, elected by unit owners other than the declarant;
(2) The lease requires either the association or the unit owners to pay real estate taxes on the real estate described in the lease;
(3) The lease requires either the association or the unit owners to insure buildings or other facilities on the real estate described in the lease against fire or any other hazard;
(4) The lease requires either the association or the unit owners to perform some or all maintenance obligations pertaining to the real estate or facilities located upon the real estate described in the lease;
(5) The lease requires either the association or the unit owners to pay rents to the lessor for a period of ten years or more;
(6) 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 units to secure claims for rent;
(7) The lease requires an annual rental which exceeds 20% of the appraised value of the leased real estate as improved; provided that for purposes of this subsection “annual rental” means the amount due during the first 12 months of the lease from 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 real estate the first tax year after the sale of a unit in the common interest community;
(8) The lease provides for a periodic rental increase based upon reference to a price index;
(9) The lease, declaration or other common-interest-community document requires that every transferee of a unit must assume the obligations under the lease.
c. When any parking, recreational or other common facility or area has been leased for the use of the unit owners for 20 years or more, the association or the unit owners shall have the option of renewing the lease for the parking, recreational or other common facility or area or of buying such facility or area and real estate at a conscionable price.
d. No contract for the sale of a unit executed on or after the effective date of P.L. , c. (C. )(now before the Legislature as this bill), nor any declaration or association by-laws adopted on or after that effective date, shall contain a clause or provision affording the declarant or the association the right of first refusal to buy a unit upon resale, gift or devise by a unit owner. No declaration or association by-law, whenever adopted, shall be amended on or after the effective date of P.L. , c. (C. )(now before the Legislature as this bill) to include any such clause or provision affording the right of first refusal. This section shall not apply to the State of New Jersey or any political subdivision of this State or any department, division, office, agency or bureau thereof or any authority or instrumentality created thereby if said right is required by State or federal law.
46:8E-112. Obligation of good faith.
Every contract or duty governed by P.L. , c. (C. )(now before the Legislature as this bill) shall impose an obligation of good faith in its performance or enforcement.
46:8E-113. Remedies to be liberally administered.
a. The remedies provided by P.L. , c. (C. )(now before the Legislature as this bill) shall be liberally administered to the end that the aggrieved party is put in as good a position as if the other party had fully performed. However, consequential, special, or punitive damages shall not be awarded except as specifically provided in this act or by other rule of law.
b. Any right or obligation declared by P.L. , c. (C. )(now before the Legislature as this bill) shall be enforceable by judicial proceeding.
46:8E-114. Adjustment of dollar amounts.
As used in this section:
"Index" means the changes in the Consumer Price Index compiled by the Bureau of Labor Statistics, United States Department of Labor for the following series: Urban Wage Earners and Clerical Workers (CPI-W); U.S. City Average, All Items and 1982-84 = 100.
"Reference Base Index" means the average index level of the 36-month period encompassing 1982,1983 and 1984.
a. From time to time, the dollar amounts specified in section 46:8E-117 and subsection c. of section 46:8E-318 shall be adjusted, as provided in subsections b. and c of this section.
b. The dollar amount specified in section 46:8E-117 and any amount stated in the declaration pursuant to that section, and the dollar amounts specified in subsection c. of section 46:8E-318 shall be adjusted on July 1 of each year if the percentage of change, calculated to the nearest whole percentage point, between the Index at the end of the preceding year and the Reference Base Index is 10 percent or more; however
(1) The portion of the percentage change in the Index in excess of a multiple of 10 percent shall be disregarded and the dollar amount shall be adjusted only in multiples of 10 percent of the dollar amount in effect on the date of enactment;
(2) The dollar amount shall not be adjusted if the amount required by this section is that currently in effect pursuant to P.L. , c. (C. )(now before the Legislature as this bill) as a result of earlier application of this section; and
(3) In no event may the dollar amount be adjusted below the amount in effect on the date of enactment.
c. If the Index is revised after January, 1988, the percentage of adjustment pursuant to this section shall be calculated on the basis of the revised Index. If a revision of the Index changes the Reference Base Index, a revised Reference Base Index shall be determined by multiplying the Reference Base Index then applicable by the rebasing factor furnished by the Bureau of Labor Statistics. If the Index is superseded, the index referred to in this section shall be the one represented by the Bureau of Labor Statistics as reflecting most accurately the changes in the purchasing power of the dollar for consumers.
46:8E-115. Applicability to common interest communities.
a. P.L. , c. (C. )(now before the Legislature as this bill) shall apply to all common interest communities created within this State after the effective date of P.L. , c. (C. )(now before the Legislature as this bill).
b. Except as provided in sections 46:8E-117, 46:E-118 and 46:8E-119, P.L. , c. (C. )(now before the Legislature as this bill) shall apply to all common interest communities created within this State prior to its effective date of P.L. , c. (C. )(now before the Legislature as this bill). The applicability of P.L. , c. (c. )(now before the Legislature as this bill) to common interest communities existing prior to its effective date shall not affect the priority of any lien recorded prior to the effective date of P.L. , c. (C. )(now before the Legislature as this bill).
c. Pursuant to section 6 of P.L. ,c. (C. ) (now before the Legislature as this bill), "The Cooperative Recording Act of New Jersey” P.L.1987, c.381 (C. 46:8D-1 et seq.) is repealed. Therefore, upon the effective date of P.L. , c. (C. ) (now before the Legislature as this bill), all master declarations filed under "The Cooperative Recording Act of New Jersey” with respect to any cooperative will be deemed to be revoked. The county clerk or register of each county is hereby authorized and directed to cancel the master declaration for each cooperative promptly following the effective date of P.L. , c. (C. ) (now before the Legislature as this bill). Each county clerk or register is authorized to discontinue the maintenance of the Master Register as was required under P.L.1987, c.381. All cooperatives shall register pursuant to section 46:8E-504 (now before the Legislature as this bill) with the Department of Community Affairs.
46:8E-116. Applicability to cooperatives.
Except as provided in section 119, all cooperatives shall be subject to the provisions of P.L. , c. (C. )(now before the Legislature as this bill).
46:8E-117. Applicability to small and limited expense liability planned communities.
a. If a planned community:
(1) contains fewer than 10 units; or
(2) provides, in its declaration, that the annual average common expense liability of all units restricted to residential purposes, exclusive of optional user fees and any insurance premiums paid by the association, may not exceed $300, as adjusted pursuant to section 46:8E-114, the planned community shall be subject only to sections 46:8E-104, 46:8E-105, 46:8E-106, 46:8E-201, and 46:8E-316, unless the declaration provides that the community shall be subject to P.L. , c. (c. )(now before the Legislature as this bill) in its entirety.
b. The exemption provided in paragraph (1) above shall apply only if:
(1) The declarant has a reasonable basis for concluding that the maximum stated assessment will be sufficient to pay the expenses of the planned community; and
(2) The declaration provides that the assessment may not be increased during the period of declarant control without the consent of all unit owners.
46:8E-118. Applicability to pre-existing common interest communities; exemptions.
All preexisting common interest communities shall be controlled by all of the provisions of this act; however, such associations shall be permitted to maintain existing provisions of a declaration, bylaws, or plats or plans of those common interest communities to the extent those provisions are not in conflict with the provisions of P.L. , c. (C. )(now before the Legislature as this bill). For example, a common interest community that has consistently maintained in its master deed or declaration and bylaws a definition of common elements which differs from the definition provided in P.L. , c. (C. ) (now before the Legislature as this bill) shall be permitted to maintain such a definition provided that other provisions of P.L. , c. (C. )(now before the Legislature as this bill) are not violated by maintaining that definition.
A common interest community may apply to the commissioner for an exemption from the provisions of this act. The commissioner may grant such an exemption if it apppears:
a. The governing documents, deeds and other information indicate that the property does not qualify as a common interest community as defined pursuant to P.L. , c. (C. ) now before the Legislature as this bill); or
b. The limited nature of the common or shared elements of the community are such that inclusion of the community under all of the provisions of P.L. , c. (C. )(now before the Legislature as this bill) is not warranted. Notwithstanding an exemption granted by the commissioner under this subsection, an association shall remain responsible for the maintenance of any common or shared elements, and the powers and responsibilities granted pursuant to Article 3 of P.L. , c. (C. )(now before the Legislature as this bill) shall apply to such an association.
46:8E-119. Applicability to small pre-existing planned communities.
If a cooperative or planned community created within this State before the effective date of P.L. , c. (C. )(now before the Legislature as this bill) contains fewer than 10 units and is not subject to any development rights, it shall be subject only to sections 46:8E-104, 46:8E-105, and 46:8E-106, unless the declaration is amended to provide that the small pre-existing cooperative or planned community shall be subject to all sections of P.L. , c. (C. )(now before the Legislature as this bill).
46:8E-120. Amendments to governing instruments.
Notwithstanding any law or regulation to the contrary, the declaration, bylaws, or plats and plans of any common interest community created before the effective date of P.L. , c. (C. )(now before the Legislature as this bill) may be amended to conform to it. Pursuant to section 46:8E-303, an executive board may vote to amend any of the above documents without obtaining unit owner approval.
An amendment to the declaration, bylaws, or plats and plans authorized by this section must be adopted in conformity with any procedures and requirements for amending the instruments specified in those instruments or, if there are none, in conformity with section 46:8E-218. If an amendment grants to any person any rights, powers, or privileges under P.L. , c. (C. )(now before the Legislature as this bill), all correlative obligations, liabilities, and restrictions imposed by P.L. , c. (C. )(now before the Legislature as this bill) shall also apply to that person.
46:8E-121. Applicability to nonresidential common interest communities.
a. As used in this section, "nonresidential common interest community" means a common interest community in which all units are restricted exclusively to nonresidential purposes.
b. A nonresidential common interest community is not subject to P.L. , c. (C. )(now before the Legislature as this bill) unless the declaration otherwise provides.
c. The declaration of a nonresidential common interest community may provide that P.L. , c. (C. )(now before the Legislature as this bill) in its entirety applies to the community or that only sections 46:8E-104, 46:8E-105 and 46:8E-106 apply.
d. If a nonresidential common interest community has opted to be subject to P.L. , c. (C. )(now before the Legislature as this bill) in its entirety, then the declaration may also require, subject to section 46:8E-111 that:
(1) Notwithstanding the provisions of section 46:8E-305 (Termination of contracts and leases of declarant), any management contract, employment contract, lease of recreational or parking areas or facilities, and any other contract or lease between an association and a declarant or an affiliate of a declarant, shall continue in force after the declarant turns over control of the association; and
(2) Notwithstanding the provisions of section 46:8E-103 (Variation by agreement), purchasers of units may be required to execute proxies, powers of attorney, or similar devices in favor of the declarant regarding particular matters enumerated in those instruments.
e. A common interest community that contains units restricted exclusively to nonresidential purposes and other units which may be used for residential purposes shall not be subject to P.L. , c. (C. )(now before the Legislature as this bill) unless the units that may be used for residential purposes would comprise a common interest community in the absence of the nonresidential units, or the declaration provides that P.L. , c. (C. )(now before the Legislature as this bill) applies as provided in subsections c. or d. of this section.
46:8E-122. Applicability to out-of-state common interest communities.
P.L. , c. (C. )(now before the Legislature as this bill) shall not apply to common interest communities or units located outside this State which are governed by the "Real Estate Sales Full Disclosure Act," P.L.1989, c.239 (C.45:15-16.27 et seq.).
ARTICLE 2
CREATION, ALTERATION AND TERMINATION OF
COMMON INTEREST COMMUNITIES
46:8E-201. Creation of common interest communities.
A common interest community may be created pursuant to P.L. , c. (C. )(now before the Legislature as this bill) only by recording a declaration executed in the same manner as a deed and, in a cooperative, by conveying the real estate subject to that declaration to the association. The declaration must be recorded in every county in which any portion of the common interest community is located and must be indexed in the grantee's index in the name of the common interest community and the association and in the grantor's index in the name of each person executing the declaration.
46:8E-202. Unit boundaries.
Except as provided by the declaration:
a. If walls, floors, or ceilings are designated as boundaries of a unit, then all lath, furring, wallboard, plasterboard, plaster, paneling, tiles, wallpaper, paint, finished flooring, and any other materials constituting any part of the finished surfaces thereof shall be a part of the unit, and all other portions of the walls, floors, or ceilings shall be a part of the common elements.
b. If any chute, flue, duct, wire, conduit, bearing wall, bearing column, or any other fixture lies partially within and partially outside the designated boundaries of a unit, then any portion thereof serving only that unit shall be a limited common element allocated solely to that unit, and any portion thereof serving more than one unit or any portion of the common elements shall be a part of the common elements.
c. Subject to paragraph b., all spaces, interior partitions, and other fixtures and improvements within the boundaries of a unit shall be a part of the unit.
d. Any shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios, and all exterior doors, windows, skylights or other fixtures designed to serve a single unit, but located outside the unit's boundaries, shall be limited common elements allocated exclusively to that unit.
46:8E-203. Construction and validity of declaration and bylaws.
a. All provisions of the declaration and bylaws shall be severable.
b. The Rule Against Perpetuities shall not apply. Any provision of a declaration, bylaws, rules, or regulations adopted pursuant to paragraph (1) of subsection a. of section 46:8E-302 shall not be subject to or held to be in violation of any principle of law against perpetuities or restraints on alienation.
c. In the event of a conflict between the provisions of the declaration and the bylaws, the declaration shall prevail except to the extent the declaration is inconsistent with P.L. , c. (C. )(now before the Legislature as this bill).
d. Title to a unit and common elements shall not be rendered unmarketable or otherwise affected by reason of failure of the declaration to comply with P.L. , c. (C. )(now before the Legislature as this bill).
46:8E-204. Description of units.
A description of a unit which sets forth the name of the common interest community, the recording data for the declaration, the county and municipality in which the common interest community is located, and the identifying number of the unit, shall be a legally sufficient description of that unit and all rights, obligations, and interests appurtenant to that unit which were created by the declaration or bylaws.
46:8E-205. Contents of declaration.
a. The declaration shall contain:
(1) The names of the common interest community and the association and a statement that the common interest community is either a condominium, cooperative, or planned community;
(2) The name of every county in which any part of the common interest community is situated;
(3) A legally sufficient description of the real estate included in the common interest community;
(4) In a condominium or planned community, a description of the boundaries of each unit created by the declaration, including the unit's identifying number, its size or number of rooms, and its location within a building if it is within a building containing more than one unit;
(5) A description of any limited common elements, other than those specified in subsection b. and d. of section 46:8E-202, together with a statement that they may be so allocated;
(6) A description of any real estate, except real estate subject to development rights, that may be allocated subsequently as limited common elements, other than limited common elements specified in subsections b. and d. of section 46:8E-202, together with a statement that they may be so allocated;
(7) A description of any development rights and other special declarant rights reserved by the declarant, together with a legally sufficient description of the real estate to which each of those rights applies, and a time limit within which each of those rights must be exercised;
(8) If any development right may be exercised with respect to different parcels of real estate at different times, a statement to that effect together with (a) either a statement fixing the boundaries of those portions and regulating the order in which those portions may be subjected to the exercise of each development right or a statement that no assurances are made in those regards, and (b) a statement as to whether, if any development right is exercised in any portion of the real estate subject to that development right, that development right must be exercised in all or in any other portion of the remainder of that real estate;
(9) Any other conditions or limitations under which the rights described in paragraph (8) may be exercised or will lapse;
(10) An allocation to each unit of the allocated interests in the manner described in section 46:8E-207;
(11) Any restrictions (a) on alienation of the units, including any restrictions on leasing which exceed the restrictions on leasing units which executive boards may impose pursuant to subsection c. of section 46:8E-302, and (b) on the amount for which a unit may be sold or on the amount that may be received by a unit owner on sale, condemnation, or casualty loss to the unit or to the common interest community, or on termination of the common interest community;
(12) The recording data for recorded easements and licenses appurtenant to or included in the common interest community or to which any portion of the common interest community is or may become subject by virtue of a reservation in the declaration; and
(13) All matters required by sections 46:8E-206 through 46:8E-209, section 46:8E-217, and subsection d. of section 46:8E-303.
b. The declaration may contain any other matters the declarant considers appropriate, including any restrictions on the uses of a unit or the number or other qualifications of persons who may occupy units.
46:8E-206. Leasehold common interest communities.
a. Any lease the expiration or termination of which may terminate the common interest community or reduce its size shall be recorded. Every lessor of such leases in a condominium or planned community shall sign the declaration. The declaration shall state:
(1) The recording data for the lease;
(2) The date on which the lease is scheduled to expire;
(3) A legally sufficient description of the real estate subject to the lease;
(4) Any right of the unit owners to redeem the reversion and the manner whereby those rights may be exercised, or a statement that they do not have those rights;
(5) Any right of the unit owners to remove any improvements within a reasonable time after the expiration or termination of the lease, or a statement that they do not have those rights; and
(6) Any rights of the unit owners to renew the lease and the conditions of any renewal, or a statement that they do not have those rights.
b. After the declaration for a leasehold condominium or leasehold planned community is recorded, neither the lessor nor the lessor's successor in interest may terminate the leasehold interest of a unit owner who makes timely payment of a unit owner's share of the rent and otherwise complies with all covenants which, if violated, would entitle the lessor to terminate the lease. A unit owner's leasehold interest in a condominium or planned community shall not be affected by failure of any other person to pay rent or fulfill any other covenant.
c. Acquisition of the leasehold interest of any unit owner by the owner of the reversion or remainder shall not merge the leasehold and fee simple interests unless the leasehold interests of all unit owners subject to that reversion or remainder are acquired.
d. If the expiration or termination of a lease decreases the number of units in a common interest community, the allocated interests shall be reallocated in accordance with subsection a. of section 46:8E-106 as if those units had been taken by eminent domain. Reallocations shall be confirmed by an amendment to the declaration which shall be prepared, executed, and recorded by the association.
46:8E-207. Allocation of allocated interests.
a. The declaration shall allocate to each unit:
(1) In a condominium, a fraction or percentage of undivided interests in the common elements and in the common expenses of the association as enumerated in subsection c. of section 46:8E-315, and a portion of the votes in the association;
(2) In a cooperative, an ownership interest in the association, a fraction or percentage of the common expenses of the association as enumerated subsection c. of section 46:8E-315, and a portion of the votes in the association; and
(3) In a planned community, a fraction or percentage of the common expenses of the association as enumerated in subsection c. of section 46:8E-315, and a portion of the votes in the association.
b. The declaration shall state the formulas used to establish allocations of interests. Those allocations shall not discriminate in favor of units owned by the declarant or an affiliate of the declarant.
c. If units may be added to or withdrawn from the common interest community, the declaration shall state the formulas to be used to reallocate the allocated interests among all units included in the common interest community after the addition or withdrawal.
d. The declaration may provide: (1) that different allocations of votes shall be made to the units on particular matters specified in the declaration; (2) for cumulative voting only for the purpose of electing members of the executive board; and (3) for class voting on specified issues affecting the class if necessary to protect valid interests of the class. A declarant shall not utilize cumulative or class voting for the purpose of evading any limitation imposed on declarants by P.L. , c. (C. )(now before the Legislature as this bill) nor shall units constitute a class because they are owned by a declarant.
e. Except for minor variations due to rounding, the sum of the common expense liabilities and, in a condominium, the sum of the undivided interests in the common elements allocated at any time to all the units shall each equal one if stated as a fraction or 100 percent if stated as a percentage. In the event of a discrepancy between an allocated interest and the result derived from application of the pertinent formula, the allocated interest shall prevail.
f. In a condominium, the common elements shall not be subject to partition, and any purported conveyance, encumbrance, judicial sale, or other voluntary or involuntary transfer of an undivided interest in the common elements made without the unit to which that interest is allocated shall be void.
g. In a cooperative, any purported conveyance, encumbrance, judicial sale, or other voluntary or involuntary transfer of an ownership interest in the association made without the possessory interest in the unit to which that interest is related shall be void.
h. Except to the extent that the declaration provides for limited common elements, it shall provide that the right of a unit owner to the use of the common elements is a right in common with all other unit owners.
46:8E-208. Limited common elements.
a. Except for the limited common elements described in subsections b. and d. of section 46:8E-202, the declaration shall specify to which unit or units each limited common element is allocated. An allocation shall not be altered without the consent of the unit owners whose units are affected.
b. Except as the declaration otherwise provides, a limited common element shall be reallocated by an amendment to the declaration executed by the unit owners between or among whose units the reallocation is made. The persons executing the amendment shall provide a copy thereof to the association, which shall record it. The amendment shall be recorded in the names of the parties and the common interest community.
c. A common element not previously allocated as a limited common element shall be so allocated only pursuant to provisions in the declaration made in accordance with paragraph (7) of subsection a. of section 205 (46:8E-205). The allocations shall be made by amendments to the declaration.
46:8E-209. Plats and plans.
a. Plats and plans shall be a part of the declaration, and shall be required for all common interest communities except cooperatives. Separate plats and plans shall not be required if all of the information required by this section is contained in either a plat or plan. Each plat and plan shall be clear and legible and contain a certification that the plat or plan contains all of the information required by this section.
b. Each plat shall show or project:
(1) The name and a survey or general schematic map of the entire common interest community;
(2) The location and dimensions of all real estate not subject to development rights, or subject only to the development right to withdraw, and the location and dimensions of all existing improvements within that real estate;
(3) A legally sufficient description of any real estate subject to development rights, labeled to identify the rights applicable to each parcel;
(4) The extent of any encroachments by or upon any portion of the common interest community;
(5) To the extent feasible, a legally sufficient description of all easements serving or burdening any portion of the common interest community;
(6) Except as provided in subsection h. of this section, the approximate location and dimensions of any vertical unit boundaries not shown or projected on plans recorded pursuant to subsection d. of this section and that unit's identifying number;
(7) The location with reference to an established datum of any horizontal unit boundaries not shown or projected on plans recorded pursuant to subsection d. of this section and that unit's identifying number;
(8) A legally sufficient description of any real estate in which the unit owners will own only an estate for years, labeled as "leasehold real estate";
(9) The distance between non-contiguous parcels of real estate comprising the common interest community;
(10) The approximate location and dimensions of any porches, decks, balconies, garages, or patios allocated as limited common elements, and also a narrative description of any other limited common elements; and
(11) In the case of real estate not subject to development rights, all other matters customarily shown on land surveys.
c. A plat also shall show the intended location and dimensions of any contemplated improvement to be constructed anywhere within the common interest community. Any contemplated improvement shown shall be labeled either "MUST BE BUILT" or "NEED NOT BE BUILT".
d. Except as provided in subsection h. of this section, to the extent not shown or projected on the plats, plans of the units shall show or project:
(1) The approximate location and dimensions of the vertical boundaries of each unit, and that unit's identifying number;
(2) The approximate location of any horizontal unit boundaries, with reference to an established datum, and that unit's identifying number; and
(3) The approximate location of any units in which the declarant has reserved the right to create additional units or common elements as enumerated in subsection c. of section 46:8E-210, identified appropriately.
e. Unless the declaration provides otherwise, the horizontal boundaries of part of a unit located outside a building shall have the same elevation as the horizontal boundaries of the inside part, and need not be depicted on the plats and plans.
f. Upon exercising any development right, the declarant shall record either new plats and plans necessary to conform to the requirements of subsections a., b., and d. of this section, or new certifications of plats and plans previously recorded if those plats and plans otherwise conform to the requirements of those subsections.
g. Any certification of a plat or plan required by this section shall be made by a professional surveyor, architect, or engineer who has been licensed by this State.
h. Plats and plans need not show the location and dimensions of the units' boundaries or their limited common elements if:
(1) The plat shows the location and dimensions of all buildings containing or comprising the units; and
(2) The declaration includes other information that shows or contains a narrative description of the general layout of the units in those buildings and the limited common elements allocated to those units.
46:8E-210. Exercise of development rights.
a. To exercise any development right reserved under paragraph (8) of subsection a. of section 46:8E-205, the declarant shall prepare, execute, and record an amendment to the declaration (section 46:8E-217 and, in a condominium or planned community, comply with section 46:8E-209. The declarant shall be the unit owner of any units thereby created. The amendment to the declaration shall assign an identifying number to each new unit created, and, except in the case of subdivision or conversion of units described in subsection b. of this section, reallocate the allocated interests among all units. The amendment shall describe any common elements and any limited common elements thereby created and, in the case of limited common elements, designate the unit to which each is allocated to the extent required by section 46:8E-208 (Limited common elements).
b. Development rights may be reserved within any real estate added to the common interest community if the amendment adding that real estate includes all matters required by section 46:8E-205 or section 46:8E-206, as the case may be, and, in a condominium or planned community, the plats and plans include all matters required by section 46:8E-209. This provision does not extend the time limit on the exercise of development rights imposed by the declaration pursuant to paragraph (8) of subsection a. of section 46:8E-205.
c. Whenever a declarant exercises a development right to subdivide or convert a unit previously created into additional units, common elements, or both:
(1) If the declarant converts the unit entirely to common elements, the amendment to the declaration shall reallocate all the allocated interests of that unit among the other units as if that unit had been taken by eminent domain (section 46:8E-106; and
(2) If the declarant subdivides the unit into two or more units, whether or not any part of the unit is converted into common elements, the amendment to the declaration shall reallocate all the allocated interests of the unit among the units created by the subdivision in any reasonable manner prescribed by the declarant.
d. If the declaration provides, pursuant to paragraph (7) of subsection a. of section 46:8E-205, that all or a portion of the real estate is subject to a right of withdrawal:
(1) If all the real estate is subject to withdrawal, and the declaration does not describe separate portions of real estate subject to that right, none of the real estate shall be withdrawn after a unit has been conveyed to a purchaser; and
(2) If any portion is subject to withdrawal, it shall not be withdrawn after a unit in that portion has been conveyed to a purchaser.
46:8E-211. Alterations of units.
Subject to the provisions of the declaration and other provisions of law, a unit owner:
a. May make any improvements or alterations to his unit that do not impair the structural integrity or mechanical systems or lessen the support of any portion of the common interest community;
b. Shall not change the appearance of the common elements, or the exterior appearance of a unit or any other portion of the common interest community, without permission of the association; or
c. After acquiring an adjoining unit or an adjoining part of an adjoining unit, may remove or alter any intervening partition or create apertures therein, even if the partition in whole or in part is a common element, if those acts do not impair the structural integrity or mechanical systems or lessen the support of any portion of the common interest community. Removal of partitions or creation of apertures under this paragraph shall not be an alteration of boundaries.
46:8E-212. Relocation of unit boundaries.
a. Subject to the provisions of the declaration and other provisions of law, the boundaries between adjoining units may be relocated by an amendment to the declaration upon application to the association by the owners of those units. If the owners of the adjoining units have specified a reallocation between their units of their allocated interests, the application shall state the proposed reallocations. Unless the executive board determines, within 30 days, that the reallocations are unreasonable, the association shall prepare an amendment that identifies the units involved and states the reallocations. The amendment shall be executed by those unit owners, contain words of conveyance between them, and, on recordation, be indexed in the name of the grantor and the grantee, and in the grantee's index in the name of the association.
b. Subject to the provisions of the declaration and other provisions of law, boundaries between units and common elements may be relocated to incorporate common elements within a unit by an amendment to the declaration upon application to the association by the owner of the unit who proposes to relocate a boundary. Unless the declaration provides otherwise, the amendment shall be approved only if persons entitled to cast at least 67 percent of the votes in the association, including 67 percent of the votes allocated to units not owned by the declarant, agree to the action. The amendment shall describe any fees or charges payable by the owner of the affected unit in connection with the boundary relocation and the fees and charges shall be assets of the association. The amendment shall be executed by the unit owner of the unit whose boundary is being relocated and by the association, contain words of conveyance between them, and on recordation be indexed in the name of the unit owner and the association as grantor or grantee, as appropriate.
c. The association in a condominium or planned community shall prepare and record plats or plans as necessary to show the altered boundaries of affected units, and their dimensions and identifying numbers. The association in a cooperative shall prepare and record amendments to the declaration, including any plans, as necessary to show or describe the altered boundaries of affected units, and their dimensions and identifying numbers.
46:8E-213. Conveyance of units within a cooperative.
If a unit in a cooperative is sold, conveyed, voluntarily or involuntarily encumbered, or otherwise transferred by a unit owner, the interest in that unit which is sold, conveyed, encumbered, or otherwise transferred shall be the right to possession of that unit under a proprietary lease, coupled with the allocated interests of that unit, and the association's interest in that unit shall not be thereby affected.
46:8E-214. Subdivision of units.
a. If the declaration expressly so permits, a unit may be subdivided into two or more units. Subject to the provisions of the declaration and other relevant provisions of law, upon application of a unit owner to subdivide a unit, the association shall prepare, execute, and record an amendment to the declaration, including in a condominium or planned community the plats and plans, subdividing that unit.
b. The amendment to the declaration shall be executed by the owner of the unit to be subdivided, assign an identifying number to each unit created, and reallocate the allocated interests formerly allocated to the subdivided unit to the new units in any reasonable manner prescribed by the owner of the subdivided unit.
46:8E-215. Boundaries of units.
The existing physical boundaries of a unit or the physical boundaries of a unit reconstructed in substantial accordance with the description contained in the original declaration shall be its legal boundaries, rather than the boundaries derived from the description contained in the original declaration, regardless of vertical or lateral movement of the building or minor variance between those boundaries and the boundaries derived from the description contained in the original declaration. This section shall not relieve a unit owner of liability in case of his willful misconduct or relieve a declarant or any other person of liability for failure to adhere to any plats or plans or, in a cooperative, to any representation in the public offering statement.
46:8E-216. Use for sales purposes.
Unless the declaration provides otherwise, a declarant may maintain sales offices, management offices, and models in units or on common elements in the common interest community. In a cooperative or condominium, any sales office, management office, or model not designated as a unit by the declaration shall be a common element. If a declarant ceases to be a unit owner, he shall cease to have any rights with regard to such office or model unless it is removed promptly from the common interest community in accordance with a right to remove which has been reserved in the declaration. Subject to any limitations in the declaration, a declarant may maintain signs on the common elements advertising the common interest community.
46:8E-217. Easement rights.
a. Subject to the provisions of the declaration, a declarant shall possess an easement through the common elements as may be reasonably necessary for the purpose of discharging the declarant's obligations or exercising special declarant rights, whether arising under P.L. , c. (C. )(now before the Legislature as this bill) or reserved in the declaration.
b. In a planned community, subject to the provisions of paragraph (6) of subsection a. of section 46:8E-302 and of section 46:8E-312, unit owners shall have an easement (l) in the common elements for purposes of access to their units and (2) to use the common elements and all real estate that must become common elements pursuant to paragraph (6) of subsection a. of section 46:8E-205 for all other purposes.
46:8E-218. Amendment of declaration.
a. Except in cases of amendments that may be executed by a declarant under subsection f. of section 46:8E-209 or section 46:8E-210, or by the association under section 46:8E-106, subsection d. of section 46:8E-206, subsection c. of section 46:8E-208, subsection a. of section 46:8E-212, or by certain unit owners under subsection b. of section 208 (46:8E-208), subsection a. of section 212 (46:8E-212), subsection b. of section 46:8E-214, or subsection b. of section 46:8E-217, or by the executive board in accordance with subsection b. of section 46:8E-303 and except as limited by subsection d. of this section, the declaration, including any plats and plans, shall be amended only by vote or agreement of unit owners of units to which at least 67 percent of the votes in the association are allocated, or any other majority the declaration specifies, provided that in no case shall the declaration be amended by less than 67 percent or a quorum of the members, which quorum may not be less than 60 percent of the membership in the association qualified to vote. The declaration may specify a smaller number only if all of the units are restricted exclusively to non-residential use.
b. An action to challenge the validity of an amendment adopted by an association pursuant to this section, other than an action by a governmental official or entity authorized to do so by statute or regulation adopted pursuant to statute, shall not be brought more than one year after the amendment is recorded.
c. Every amendment to a declaration shall be recorded in every county in which any portion of the common interest community is located and shall be effective only upon recordation. An amendment, except an amendment pursuant to subsection a. of section 46:8E-212, shall be indexed in the grantee's index in the name of the common interest community and the association and in the grantor's index in the name of the parties executing the amendment.
d. Except to the extent expressly permitted or required by other provisions of P.L. , c. (C. )(now before the Legislature as this bill), an amendment shall not create or increase special declarant rights, increase the number of units, or change the boundaries of any unit or the allocated interests of a unit in the absence of unanimous consent of the unit owners.
e. Amendments to the declaration required by P.L. , c. (C. )(now before the Legislature as this bill) to be recorded by the association shall be prepared, executed, recorded, and certified on behalf of the association by any officer of the association designated for that purpose or, in the absence of designation, by the president of the association.
f. By vote or agreement of unit owners of units to which at least 80 percent of the votes in the association are allocated, or any larger percentage specified in the declaration, an amendment to the declaration may reasonably prohibit or restrict the permitted uses of or behavior in a unit or the number or other qualifications of persons who may occupy units to the extent such prohibition or restriction is not prohibited by law. The amendment shall provide reasonable protection for a valid use or occupancy existing at the time the amendment was adopted.
g. The time limits specified in the declaration pursuant to paragraph (8) of subsection a. of section 46:8E-205 (Contents of the declaration) within which reserved development rights must be exercised shall be extended, and additional development rights may be created, if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by the declarant, agree to that action. The agreement shall be effective 30 days after an amendment to the declaration reflecting the terms of the agreement is recorded, unless all the persons holding the affected special declarant rights or security interest in those rights: (1) record a written objection within that 30 day period, in which case the amendment shall be void; or (2) consent in writing at the time the amendment is recorded, in which case the amendment shall be effective when recorded.
46:8E-219. Termination of common interest community.
a. Except in the case of a taking of all the units by eminent domain pursuant to section 46:8E-106 or in the case of foreclosure against a cooperative of a security interest that has priority over the declaration of that cooperative, a common interest community may be terminated only by agreement of unit owners of units to which at least 80 percent of the votes in the association are allocated, or any larger percentage the declaration specifies. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to nonresidential uses.
b. An agreement to terminate 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.
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) The 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 under section 46:8E-312, 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.
46:8E-220. Rights of secured lenders.
a. The declaration may require that all or a specified number or percentage of the lenders who hold security interests encumbering the units or who have extended credit to the association approve specified actions of the unit owners or the association as a condition to the effectiveness of those actions, but no requirement for approval shall operate to (1) deny or delegate control over the general administrative affairs of the association by the unit owners or the executive board, or (2) prevent the association or the executive board from commencing, intervening in, or settling any litigation or proceeding, or (3) prevent any insurance trustee or the association from receiving and distributing any insurance proceeds except pursuant to section 46:8E-313.
b. A lender who has extended credit to an association secured by an assignment of income pursuant to paragraph (14) of subsection a. of section 46:8E-302 or an encumbrance on the common elements pursuant to section 46:8E-312 may enforce its security agreement in accordance with its terms, subject to the requirements of P.L. , c. (C. )(now before the Legislature as this bill) and other law.
46:8E-221. Master associations.
a. If the declaration provides that any of the powers described in section 302 (46:8E-302) are to be exercised by or may be delegated to a profit or nonprofit corporation that exercises those or other powers on behalf of one or more common interest communities or for the benefit of the unit owners of one or more common interest communities, all provisions of 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 described in section 46:8E-301, a master association may exercise the powers set forth in paragraph (2) of subsection a. of section 46:8E-302 only to the extent expressly permitted in the declarations of common interest communities which are part of the master association or expressly described in the delegations of power from those common interest communities to the master association.
c. If the declaration of any common interest community provides that the executive board may delegate certain powers to a master association, the members of the executive board shall have no liability for the acts or omissions of the master association with respect to those powers following delegation.
d. The rights and responsibilities of unit owners with respect to the unit owners' association as set forth in sections 46:8E-302, 46:8E-303, 46:8E-308, 46:8E-309, 46:8E-310 and 46:8E-312 shall apply in the conduct of the affairs of a master association only to persons who elect the board of a master association, whether or not those persons are otherwise unit owners within the meaning of P.L. , c. (C. )(now before the Legislature as this bill).
e. Regardless of the fact that a master association may also be an association as described in section 46:8E-301, 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 executive board of the master association shall be elected after the period of declarant control in any of the following ways:
(1) All of the unit owners of each of the common interest communities subject to the master association may elect all of the members of the master association's executive board.
(2) All of the members of the executive boards of all common interest communities subject to the master association may elect all members of the master association's executive board.
(3) All of the unit owners of each common interest community subject to the master association may elect specified members of the master association's executive board.
(4) All of the members of the executive board of each common interest community subject to the master association may elect specified members of the master association's executive board.
46:8E-222. Merger or consolidation of common interest communities.
a. Any two or more common interest communities of the same form of ownership, by agreement of the unit owners as provided in subsection b. of this section, may be merged or consolidated into a single common interest community. In the event of a merger or consolidation, unless the agreement otherwise provides, the resultant common interest community shall be the legal successor, for all purposes, of all of the pre-existing common interest communities, and the operations and activities of all associations of the pre-existing common interest communities shall be merged and consolidated into a single association that shall hold all of the powers, rights, obligations, assets, and liabilities of the pre-existing associations.
b. An agreement of two or more common interest communities to merge or consolidate pursuant to subsection a. of this section shall be evidenced by an agreement prepared, executed, recorded, and certified by the president of the association of each of the pre-existing common interest communities following approval by the owners of units to which are allocated the percentage of votes in each common interest community required to terminate that common interest community. The agreement must be recorded in each county in which a portion of the common interest community is located and shall not be effective until recorded.
c. Where a merger of two or more common interest communities involves the merger of two or more nonprofit corporations, the corporations shall comply with all of the requirements of N.J.S.15A:10-1, concerning the procedure for merger, of the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq.
d. Every merger or consolidation agreement shall provide for the reallocation of the allocated interests in the pre-existing associations among the units of the resultant common interest community either (1) by stating the reallocations or the formulas upon which they are based or (2) by stating the percentage of overall allocated interests of the new common interest community which shall be allocated to all of the units comprising each of the pre-existing common interest communities, and providing that the portion of the percentages allocated to each unit formerly comprising a part of the pre-existing common interest community shall be equal to the percentages of allocated interests allocated to that unit by the declaration of the pre-existing common interest community.
46:8E-223. Addition of unspecified real estate.
In a planned community, if the right is originally reserved in the declaration, the declarant, in addition to any other development right, may amend the declaration at any time during as many years as are specified in the declaration for adding additional real estate to the planned community without describing the location of that real estate in the original declaration; but, the amount of real estate added to the planned community pursuant to this section shall not exceed 10 percent of the real estate described in paragraph (3) of subsection a. of section 46:8E-205 and the declarant shall not in any event increase the number of units in the planned community beyond the number stated in the original declaration pursuant to paragraph (4) of subsection a. of section 46:8E-205, unless by vote of unit owners, other than the declarant, to which at least 51 percent of the votes in the association are allocated approve: a. the addition of real estate in excess of 10 percent of the real estate described in paragraph (3) of subsection a. of section 46:8E-205, or b. a number of units in excess of the number stated in the original declaration pursuant to paragraph (4) of subsection a. of section 46:8E-205.
46:8E-224. Master planned communities.
a. The declaration for a common interest community may state that it is a master planned community if the declarant has reserved the development right to create at least 500 units that may be used for residential purposes and has obtained preliminary site plan or subdivision approval permitting the declarant to construct at least 500 residential units pursuant to the "Municipal Land Use Law," P.L.1975, c.291 (C.40:55D-1 et seq.).
b. If the requirements of subsection a. of this section are satisfied, the declaration for the master planned community need not state a maximum number of units and need not contain any of the information required by paragraphs (3) through (13) of subsection a. of section 46:8E-205 until the declaration is amended under subsection c. of this section.
c. At the time each unit in a master planned community is conveyed to a purchaser, the declaration must contain (1) a sufficient legal description of the unit and all portions of the master planned community in which any other units have been conveyed to a purchaser; and (2) all of the information required by paragraph (3) through (13) of subsection a. of section 46:8E-205 with respect to that real estate.
d. Notwithstanding any other provision of P.L. , c. (C. )(now before the Legislature as this bill):
(1) The only real estate in a master planned community which shall be subject to P.L. , c. (c. )(now before the Legislature as this bill) that is comprising: (a) units that have been declared or which are being offered for sale; and (b) any other real estate described pursuant to subsection c. of this section;
(2) Other real estate that is or may become part of the master planned community shall be subject only to other applicable laws and to any other restrictions and limitations that appear of record; and
(3) If the public offering statement conspicuously identifies the fact that the community is a master planned community, the disclosure requirements contained in Article 4 of P.L. , c. (C. )(now before the Legislature as this bill) shall apply only with respect to units that have been declared or are being offered for sale in connection with the public offering statement and to the real estate described in subsection c. of this section.
e. The limitations contained in section 46:8E-223 (Addition of unspecified real estate) shall not apply to a master planned community.
f. Subject to the requirements of good faith in section 46:8E-112 and unconscionability in section 46:8E-111, the period of declarant control of the association for a master planned community shall terminate: in the manner set forth below; or at such earlier time as may be specified in the declaration; or as the declarant specifies in a recorded instrument after delivering written notice to all the unit owners in the same manner as notice is required for an amendment to the declaration.
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, not fewer than 25 percent of the members of the executive board shall be elected by the owners.
(2) Sixty days after conveyance of 50 percent of the lots, parcels, units or interests, not fewer than 40 percent of the members of the executive 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 executive board shall terminate, at which time the owners shall elect the entire executive board; except that the developer may retain the selection of one executive board member so long as there are any units remaining unsold in the regular course of business.
The percentages specified in this subsection 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. Unless the bylaws provide otherwise, each unit conveyed to an owner shall be entitled to one vote.
ARTICLE 3
MANAGEMENT OF THE COMMON INTEREST COMMUNITY
46:8E-301. Organization of unit owners' association
A unit owners' association shall be organized no later than the date the first unit in the common interest community is conveyed or possession is taken. The membership of the association at all times shall consist exclusively of all of the unit owners or, following termination of the common interest community, of all of the former unit owners entitled to distributions of proceeds under section 46:8E-219 or their heirs, successors or assigns. An association shall be organized as a for-profit or nonprofit corporation, trust, or partnership.
Process may be served upon a unit owners' association by serving the president or chief executive 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.
46:8E-302. Powers and duties of unit owners' association.
a. An association, acting through its executive board, and in addition to any specific requirements contained in other provisions of P.L. , c. (now before the Legislature as this bill), shall be responsible for the performance of the following duties:
(1) The maintenance, repair, replacement, cleaning and sanitation of the common elements.
(2) The adoption, distribution, amendment and enforcement of rules governing the use and operation of the common interest community.
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) May adopt and amend bylaws and rules and regulations, provided that any rules or regulations adopted by resolution of an association shall be recorded in the same place as the bylaws;
(2) May 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 executive board at least one month prior to the meeting at which the executive 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 executive board votes on the budget. The executive board’s presiding officer may, at the officer’s discretion, limit the budget comment period to not less than 30 minutes, and reasonable limitations may be placed upon the comment time given each unit owner seeking to comment, to allow sufficient time for all unit owners seeking to comment.
(3) May hire and discharge managing agents and other employees, agents, and independent contractors;
(4) May institute, defend, or intervene in litigation or administrative proceedings in its own name on matters affecting the common interest community;
(5) May make contracts and incur liabilities;
(6) May 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;
(8) May acquire, hold, encumber, and convey in its own name any right, title, or interest to real estate or personal property, but (a) common elements in a condominium or planned community shall only be conveyed or subjected to a security interest pursuant to section 46:8E-312 and (b) part of a cooperative shall only be conveyed, or all or part of a cooperative shall only be subjected to a security interest, pursuant to section 46:8E-312;
(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 described in subsections b. or d. of section 46:8E-202, and for services provided to unit owners;
(11) May impose charges for late payment of assessments and reasonable fines upon unit owners for violations of the declaration, by-laws, rules and regulations of the association, subject to the provisions of section 46:8E-302.1;
(12) May impose reasonable charges for the preparation and recordation of amendments to the declaration, resale certificates required by section 405 (46:8E-405), or statements of unpaid assessments;
(13) May provide for the indemnification of its officers and executive 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.
(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);
(17) May exercise all other powers that may be exercised in this State by legal entities of the same type as the association; and
(18) May exercise any other powers necessary and proper for the governance and operation of the association.
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 may adopt rules with respect to units that may be used for residential purposes to:
(1) Prevent any use of or behavior in residential units which violates the declaration or adversely affects the use and enjoyment of other units or the common elements by other unit owners; or
(2) Reasonably restrict the leasing of residential units so long as the rules are designed to meet the then-current underwriting requirements adopted by institutional lenders who regularly lend money secured by first mortgages on units in common interest communities, or regularly purchase those mortgages.
Otherwise, an association shall not regulate any use of or behavior in units unless empowered to do so by the declaration or P.L. , c. (C. )(now before the Legislature as this bill).
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 a. of this section;
(2) After giving notice to the tenant and the unit owner and an opportunity to be heard, levy reasonable fines against the tenant for the violation; and
(3) Enforce any rights against the tenant for the violation which the unit owner as landlord might have exercised under the lease in accordance with State law, or which the association might have exercised directly against the unit owner or both.
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.
46:8E-302.1 Imposition of fines and late fees.
a. Whenever an association imposes 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. For the purposes of the notice, it shall be sufficient if the information concerning the late fee is included, but listed separately, on the next invoice for the commons assessment which is mailed to the unit owner. An executive board of an association may consider the waiving of late fees charged to a unit owner upon a demonstration of hardship or unusual circumstances.
b. Whenever an association, pursuant to the powers granted under paragraph (11) of subsection b. of section 46:8E-302, considers the imposition of a fine upon a unit owner, the association shall ascertain whether the unit owner was issued a warning notice regarding a violation of the same rule or bylaw provision within the previous six months.
(1) If the unit owner was not issued a warning notice within the previous six months regarding a violation of the same rule or bylaw provision, then the association shall issue a warning notice to that unit owner, and may not impose a fine on that unit owner for that violation.
(2) If the unit owner was issued a warning notice within the previous six months regarding a violation of the same rule or bylaw provision, then the association may propose that a fine be imposed upon that unit owner, provided that such fines are in accordance with the schedule set forth in subsection c. of this section. A written notice concerning the violation and the proposed fine shall be mailed to the unit owner first class mail, return receipt requested, and shall indicate that the unit owner shall have the right to request alternative dispute resolution within 14 days concerning the imposition of the fine.
c. The fines imposed pursuant to this schedule shall be in addition to any amounts which may be assessed by an association to cover physical property damages attributable solely to the unit owner in connection with a violation. A fine imposed for a violation of the declaration, by-laws, rules and regulations of the association may not exceed $25 for a first violation. Thereafter, a continuing per diem fine may be assessed, not to exceed $25, but in no case shall the aggregate fine imposed for a violation exceed $2,500. An association shall not impose fines for moving automobile violations 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).
d. The commissioner shall establish regulations effectuating this section.
46:8E-303. Executive board members and officers.
a. Except as provided in the declaration, the bylaws, subsection b. of this section, or other provisions of P.L. , c. (C. )(now before the Legislature as this bill), an executive board may act in all instances on behalf of the association. In the performance of their duties, officers and members of an executive board shall act in good faith and exercise honest judgment in lawful and legitimate furtherance of the association's purposes.
Notwithstanding the provisions of P.L. , c. (C. )(now before the Legislature as this bill) 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 an executive 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 executive 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 executive board shall not act on behalf of the association to: (1) amend the declaration pursuant to section 46:8E-218, 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 under section 46:8E-219; or (3) elect members of the executive board or determine the qualifications, powers and duties, or terms of office of executive board members pursuant to subsection f. of this section, but the executive board may fill vacancies in its membership until the next annual meeting of the membership at which a quorum is present, at which time the membership shall elect a member to fill the vacancy for the then unexpired portion of the term that was vacated.
c. Within 30 days after the adoption of a budget for a common interest community, the executive board shall provide a copy of the budget to all of the unit owners.
d. Subject to subsection e. of this section, the declaration may provide for a period of declarant control of the association, during which a declarant, or persons designated by him, may appoint and remove the officers and members of the executive board. Regardless of the period provided in the declaration, a period of declarant control of the executive board shall terminate no later than the earlier of: (1) 60 days after conveyance of 75 percent of the lots, parcels, units or interests that may be created to unit owners other than a declarant; (2) two years after all declarants have ceased to offer units for sale in the ordinary course of business; (3) two years after any right to add new units was last exercised; or (4) the date the declarant, after giving written notice to unit owners, records an instrument voluntarily surrendering all rights to control activities of the association. A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of that period, but in that event the declarant may require, for the duration of the period of declarant control, that specified actions of the association or executive board, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective.
e. Not later than 60 days after conveyance to unit owners other than a declarant of 25 percent of the lots, parcels, units or interests that may be created, at least one member and not less than 25 percent of the members of the executive board shall be elected by unit owners other than a declarant. Not later than 60 days after conveyance to unit owners other than a declarant of 50 percent of the lots, parcels, units or interests that may be created, not less than 40 percent of the members of the executive board shall be elected by unit owners other than a declarant. Not later than 60 days after conveyance of at least 50 percent of the lots, parcels, units or interests that may be created and, at that time, at least 70 percent of the units that may be created are occupied, not less than 60 percent of the members of the executive board must be elected by unit owners other than a declarant. The percentages specified in this section shall be calculated upon the basis of the whole number of units entitled to membership in the association.
f. Except as otherwise provided in subsection e. of section 46:8E-221, but not later than the termination of any period of declarant control, the unit owners shall elect an executive board of at least three members, a majority of whom shall be unit owners. The executive board shall elect the officers. The executive board members and officers shall take office upon election.
g. Upon assumption by the owners of control of the executive 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.
h. 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.
i. Notwithstanding any provision of a declaration or bylaws to the contrary, the unit owners, by a two-thirds vote of all persons present and entitled to vote at any meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant.
j. No contract or other transaction between an association and one or more of its trustees, or between 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 directors are otherwise interested, shall be void or voidable solely by reason of the common trusteeship or interest, or solely because the trustee or trustees are present at a meeting of the executive board or a committee thereof that authorizes or approves the contract or transaction, or solely because the trustee’s or trustees’ votes are counted for that purpose, if the contract or other transaction is fair and reasonable to the association at the time it is authorized, approved or ratified and either:
(1) the fact of the common trusteeship or interest is disclosed or known to the executive board or committee prior to its taking action to approve any contract or transaction, and the executive board or committee authorizes or approves the contract or transaction by unanimous written consent, provided at least one trustee so consenting is disinterested, or by affirmative vote of a majority of disinterested trustees, even though the disinterested trustees be less than a quorum; or
(2) the fact of the common trusteeship or interest is disclosed to the unit owners prior to any action that authorizes or approves a contract or transaction, and they authorize, approve or ratify the contract or transaction.
46:8E-304. Transfer of special declarant rights.
a. A special declarant right created or reserved under P.L. , c. (C. )(now before the Legislature as this bill) shall be transferred only by an instrument evidencing the transfer and recorded in each county in which any portion of the common interest community is located. The instrument shall not be effective unless executed by the transferee.
b. Upon transfer of any special declarant right, the liability of a transferor declarant shall be as follows:
(1) A transferor shall not be relieved of any obligation or liability arising before the transfer and shall remain liable for warranty obligations imposed upon him by this act. Lack of privity shall not deprive any unit owner of standing to maintain an action to enforce any obligation of the transferor.
(2) If a successor to any special declarant right is an affiliate of a declarant as that term is defined in section 46:8E-102, the transferor shall be jointly and severally liable with the successor for any obligations or liabilities of the successor relating to the common interest community.
(3) If a transferor retains any special declarant rights, but transfers other special declarant rights to a successor who is not an affiliate of the declarant, the transferor shall be liable for any obligations or liabilities imposed on a declarant by P.L. , c. (C. )(now before the Legislature as this bill) or by the declaration relating to the retained special declarant rights and arising after the transfer.
(4) A transferor shall have no liability for any act or omission or any breach of a contractual or warranty obligation arising from the exercise of a special declarant right by a successor declarant who is not an affiliate of the transferor.
c. Unless otherwise provided in a mortgage instrument, deed of trust, or other agreement creating a security interest, in the case of a foreclosure of a security interest, sale by a trustee under an agreement creating a security interest, tax sale, judicial sale, or sale under federal Bankruptcy Code or receivership proceedings, of any units owned by a declarant or real estate in a common interest community subject to development rights, a person acquiring title to all of the property being foreclosed or sold, upon his request, shall succeed to all special declarant rights related to that property held by that declarant; otherwise such a person shall succeed only to those or to any rights reserved in the declaration pursuant to section 46:8E-216 and held by that declarant to maintain models, sales offices, and signs. The judgment or instrument conveying title shall provide for transfer of only those special declarant rights requested.
d. Upon foreclosure of a security interest, sale by a trustee under an agreement creating a security interest, tax sale, judicial sale, or sale under federal Bankruptcy Code or receivership proceedings, of all interests in a common interest community owned by a declarant:
(1) The declarant shall cease to have any special declarant rights, and
(2) The period of declarant control shall terminate unless the judgment or instrument conveying title provides for the transfer of all special declarant rights held by that declarant to a successor declarant.
e. The liabilities and obligations of a person who succeeds to special declarant rights shall be as follows:
(1) A successor to any special declarant right who is an affiliate of a declarant shall be subject to all obligations and liabilities imposed on the transferor by P.L. , c. (C. )(now before the Legislature as this bill) or by the declaration.
(2) A successor to a sole right reserved in the declaration to maintain models, sales offices, and signs under section 46:8E-216 shall not exercise any other special declarant right, and shall not be subject to any liability or obligation as a declarant, except the obligation to provide a public offering statement and any liability arising as a result thereof.
(3) A successor to all special declarant rights held by a transferor who succeeded to those rights pursuant to a deed or other instrument of conveyance in lieu of foreclosure or a judgment or instrument conveying title under subsection c. of this section, may declare in a recorded instrument the intention to hold those rights solely for transfer to another person. Thereafter, until transferring all special declarant rights to any person acquiring title to any unit or real estate subject to development rights owned by the successor, or until recording an instrument permitting exercise of all those rights, that successor shall not exercise any of those rights other than any right held by his transferor to control the executive board in accordance with subsection d. of section 46:8E-303 for the duration of any period of declarant control, and any attempted exercise of those rights shall be void. So long as a successor declarant may not exercise special declarant rights under this subsection, the successor declarant is not subject to any liability or obligation as a declarant other than liability for his acts and omissions under subsection d. of section 46:8E-303.
(4) A successor to any special declarant right, other than a successor described in paragraphs (1), (2) or (3) of this subsection shall be subject to the obligations and liabilities imposed by P.L. , c. (C. )(now before the Legislature as this bill) or the declaration:
(a) On a declarant which relate to the successor's exercise or non-exercise of special declarant rights; or
(b) On his transferor, other than:
(i) misrepresentations by any previous declarant;
(ii) warranty obligations on improvements made by any previous declarant, or made before the common interest community was created;
(iii) breach of any fiduciary obligation by any previous declarant or his appointees to the executive board; or
(iv) any liability or obligation imposed on the transferor as a result of the transferor's acts or omissions after the transfer.
f. Nothing in this section shall subject any successor to a special declarant right to any claims against or other obligations of a transferor declarant, other than claims and obligations arising under P.L. , c. (C. )(now before the Legislature as this bill) or the declaration.
g. Notwithstanding any provision of this section or any other law to the contrary, a lender who makes a loan of money, or who maintains an indicia of ownership primarily to protect a security interest in property subject to P.L. , c. (C. )(now before the Legislature as this bill) for a loan made by the lender or a predecessor in interest, the proceeds of which are used or may be used by the borrower to finance the design, manufacture, construction, repair, modification or improvement of real or personal property for sale or lease to others, shall not as a result of its actions as a lender be liable for any loss or damage occasioned by any defect or deficiency in the real or personal property so designed, manufactured, constructed, repaired, modified or improved or for any loss or damage resulting from the failure of the borrower to use due care in the design, manufacture, construction, repair, modification or improvement of such real or personal property, unless: (1) the lender or holder has knowingly been a party to misrepresentations with respect to such real or personal property; or (2) the lender or holder of the security interest actively participates in the management of the property.
h. For the purpose of subsection g. of this section, the following shall apply:
(1) (a) “Active participation in the management” or “participation in the management” means actual participation in the construction of the property or management or operational affairs of the property by the lender and shall not include the mere capacity, or ability to influence, or the unexercised right to control the property or its management or operations. A holder of security interest shall be considered to be in active participation in the management, only if the lender exercises control at a level comparable to that of a manager of the property, such that the lender has assumed or manifested responsibility, for the overall management of the property encompassing the day-to-day decision making with respect to all, or substantially all, of the operational, as opposed to financial or administrative, aspects of the property. Operational aspects of the property shall include functions such as that of property manager, construction manager, operations manager, chief operating officer or chief executive officer. Financial or administrative aspects shall include functions such as that of credit manager, accounts payable or receivable manager, or both, personnel manager, controller, chief financial officer or similar functions.
(b) Unless a lender is otherwise deemed to be an affiliate under this section, no act or omission prior to the time that indicia of ownership are held primarily to protect a security interest shall constitute evidence of participation in management.
(c) Actions that are consistent with holding ownership indicia primarily to protect a security interest shall not constitute participation in management for purposes of P.L. , c. (C. )(now before the Legislature as this bill). The authority for the lender to make such actions may, but need not, be contained in contractual or other documents specifying requirements for financial, environmental, or other warranties, covenants, conditions, representations or promises from the borrower. Loan policing and work-out activities shall cover and include all activities up to foreclosure and its equivalents.
(2) “Lender” means a person who maintains indicia of ownership primarily to protect a security interest. A lender shall include the initial lender, such as a loan originator, any subsequent holder of the security interest, such as a successor-in-interest or subsequent purchaser, a guarantor of an obligation, surety or any other person who holds ownership indicia primarily to protect a security interest, or a receiver or other person who acts on behalf of for the benefit of a lender.
(3) “Indicia of ownership” means evidence of a security interest, evidence of an interest in real or personal property securing a loan or other obligation, including any legal or equitable title to real or personal property acquired incident to foreclosure and its equivalents. Evidence of such interests shall include, but is not limited to, mortgages, security agreements, deeds of trust, liens, surety bonds and guarantees of obligations, title held pursuant to lease financing transaction in which the lessor does not select initially the leased property, hereinafter “lease financing transaction,” legal or equitable title obtained pursuant to foreclosure and their equivalents. Evidence of such interests shall also include assignments, pledges or other rights to or other forms of encumbrance against property that are held primarily to protect a security interest. A person is not required to hold title or a security interest in order to maintain indicia of ownership.
(4) “Primarily to protect a security interest” means that the holder’s indicia of ownership are held primarily for the purpose of securing payment or performance of an obligation, but does not include indicia of ownership held primarily for investment purposes, or ownership indicia held primarily for purposes other than as a protection for a security interest. A holder will be deemed to maintain indicia of ownership primarily to protect a security interest even when the holder has secondary reasons for maintaining indicia of ownership.
i. A lender who engages in policing activities prior to foreclosure shall remain within the exemptions provided in subsection g. of this section provided that the lender does not, by such activities, participate in the management of the property, or is not otherwise determined to be an affiliate of the declarant. Such policing activities shall include, but are not limited to, requiring the borrower to comply or come into compliance with applicable federal, State and local laws, rules and regulations during the term of the security interest; securing or exercising authority to monitor or inspect the property during the term of the security interest; or taking other actions to adequately police the loan or security interest, such as requiring a borrower to comply with any of its warranties, covenants, conditions, representations or promises.
j. A lender who engages in work-out activities prior to foreclosure and its equivalents shall remain within the exemption provided that the lender does not by such action participate in the management of the property. For purposes of this act, “work-out activities” means those actions by which a lender, at any time prior to foreclosure and its equivalents, seeks to: prevent, cure or mitigate a default by the borrower or obligor; or preserve or prevent the diminution of the value of the security. Work-out activities include, but are not limited to: restructuring or renegotiating the terms of the security interest; requiring payment of the additional rent or interest; exercising forbearance; requiring or exercising rights pursuant to an assignment of accounts or other amounts owing to an obligor; requiring or exercising rights pursuant to an escrow agreement pertaining to amounts owing to an obligor; providing specific or general financial or other advice, suggestions, counseling or guidance; and exercising any right or remedy the lender is entitled to by law or under any warranties, covenants, conditions, representations or promises from the borrower.
46:8E-305. Termination of contracts and leases of declarant.
Except as provided in section 46:8E-121, any contract or agreement affecting the use, maintenance, management or access of the common elements entered into between the declarant and itself or a company owned, operated or controlled by the declarant or in which it has a financial interest prior to non-declarant unit owners being entitled to elect a majority of the executive board, shall not be entered into for a period in excess of one year. The contracts or agreements shall not be renewed for periods in excess of one year and the association may, at the end of any one-year period, terminate any further renewals or extensions thereof.
This section shall not apply to:
Any lease the termination of which would terminate the common interest community or reduce its size, unless the real estate subject to that lease was included in the common interest community for the purpose of avoiding the right of the association to terminate a lease under this section, or a proprietary lease.
46:8E-306. Bylaws.
a. The bylaws of an association, which shall initially be recorded with the declaration, shall provide:
(1) The number of members of the executive board and the titles of the officers of the association;
(2) Election by the executive board of a president, treasurer, secretary, and any other officers of the association the bylaws may specify;
(3) The qualifications, powers and duties, terms of office, and manner of electing and removing executive board members and officers and filling vacancies;
(4) Which, if any, of its powers the executive board or officers may delegate to other persons or to a managing agent;
(5) Which of its officers may prepare, execute, certify, and record amendments to the declaration on behalf of the association;
(6) A method for amending the bylaws; and
(7) For alternative dispute resolution in accordance with the terms of section 46:8E-413 of P.L. , c. (C. ) (now before the Legislature as this bill).
b. Subject to the provisions of the declaration, the bylaws may provide for any other matters the association deems necessary and appropriate. No amendment to a bylaw shall be effective until recorded in the same office as existing bylaws.
46:8E-307. Upkeep of common interest community.
a. Except to the extent provided by the declaration, subsection b. of this section, or subsection h. of section 46:8E-313, an association shall be responsible for the maintenance, repair, cleaning and replacement of the common elements, and each unit owner shall be responsible for maintenance, repair, and replacement of the owner's unit. Each unit owner shall afford to the association and the other unit owners, and to their agents or employees, such access through the owner's unit as reasonably necessary for those purposes. If damage is inflicted on the common elements or on any unit through which access is taken, the entity responsible for the damage shall be liable for the prompt repair thereof.
b. In addition to the liability that a declarant as a unit owner has under P.L. , c. (C. )(now before the Legislature as this bill), the declarant alone shall be liable for all expenses in connection with real estate subject to development rights. A unit owner or other portion of the common interest community shall not be subject to a claim for payment of development rights expenses. Unless the declaration provides otherwise, any income or proceeds from real estate subject to development rights shall inure to the declarant.
c. In a planned community, if all development rights have expired with respect to any real estate, the declarant shall remain liable for all expenses of that real estate unless, upon expiration, the declaration provides that the real estate shall become common elements or units.
46:8E-307.1 Use of common elements by owners.
Associations shall permit the use of the rooms suitable for gatherings or meetings on a scheduled reservation basis for reasonable time allotments by the owners within the common interest community. In the event that there are scheduling conflicts, or reasons why the room should not be utilized at the time requested, it shall be within the discretion of the board to determine whether or not the room should be made available and for whom it shall be reserved. An association shall not be required pursuant to this section to make any common elements available for religious or political events. Discussion groups concerning any facet of the common interest community or meetings scheduled by owners concerning candidates for the association board shall not be considered political events for the purposes of this section. Use of the common elements in the manner set forth in this section shall not qualify as a meeting pursuant to section 46:8E-308, nor shall such a meeting qualify as a special meeting of unit owners. An association shall be permitted to charge a modest fee or require a security deposit for use of the room to cover cleaning, maintenance, or potential damages which might result from such use.
46:8E-308. Meetings.
a. A meeting of the unit owners' association shall be held at least annually. Special meetings of an association may be called by the president, a majority of the executive board, or by unit owners having 20 percent, or any lower percentage specified in the bylaws, of the votes in the association. Not less than 10 nor more than 60 days in advance of any unit owners's association meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or placed in the United States mail in a postpaid envelope to the proper mailing address of each unit or to any other mailing address designated in writing by the unit owner. The notice of any meeting shall state the time and place of the meeting and the items on the agenda, including the general nature of any proposed amendment to the declaration or bylaws, any budget changes, and any proposal to remove an officer or member of the executive board.
b. A meeting of the executive board of a unit owners' association open to its members shall be held at least two times each year. All meetings of an executive board at which official action is or will be taken shall be open to attendance by all unit owners, and adequate notice of any such meeting shall be given to all unit owners in the manner prescribed in subsection a. or subsection b. of this section. An executive board may provide a schedule of meeting dates for the next succeeding twelve month period. For any meeting not listed on such schedule at which official action is to be taken, a notice shall be provided as set forth in subsection a. of this section. Working sessions of an executive board shall be permitted and such meetings shall be open to attendance by unit owners. An executive board shall not be required to allow comments from unit owners at working sessions, but shall be required to arrange for a meeting place large enough to accommodate the anticipated number of unit owners wishing to observe a working session, whenever practicable. At each meeting required under this section to be open to all unit owners, minutes of the proceedings shall be taken. Minutes shall be reasonably comprehensible, and shall show the time and place of the meetings, the members present, the subjects considered, the actions taken and any other relevant information. Copies of minutes shall be made available to all unit owners within a reasonable time. For the purposes of this subsection, "reasonable time" means no later than within a short time after the next open meeting, at which time the minutes shall be approved.
c. (1) Notwithstanding the provisions of subsection b. of this section, the executive board may exclude or restrict attendance at those meetings, or portions of meetings, dealing with (a) any matter the disclosure of which would constitute an unwarranted invasion of individual privacy; (b) any pending or anticipated litigation or contract negotiations; (c) 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 (d) any matter involving the employment, promotion, discipline or dismissal of a specific officer or employee of the association.
(2) The executive board shall not exclude or restrict attendance at any meeting or portion thereof to discuss any matter described in paragraph (1) of this subsection until it shall first adopt, at a meeting to which all unit owners were permitted to attend, a motion stating: (a) the general nature of the subject to be discussed; and (b) as precisely as possible, a time when and the circumstances under which the discussions conducted in closed session of the executive board may be disclosed to the unit owners.
(3) Minutes shall be taken in any closed session, in the same manner as provided for in subsection b. of this section, but need not be made available until the subject matter of the meeting may be disclosed to the unit owners.
(4) A formal or binding vote shall not be taken at any closed session unless that meeting falls under the exceptions enumerated in paragraph (1) of this subsection. If a vote is taken in a closed session, the fact that a vote was taken (without disclosure of confidential information) shall be confirmed in a public session which is open to all unit owners.
d. Copies of the agenda for an executive board meeting shall be made available to the unit owners at the beginning of each open meeting of the executive board. At each open meeting of the executive board, a period of unit-owner comment shall be provided following the calling of the roll, which period of unit-owner comment may be limited to not more than 30 minutes in its entirety, and reasonable limitations may be placed upon the time given to each unit owner seeking to comment, to allow sufficient time for all unit owners seeking to comment. Executive boards shall also provide a unit owner comment period prior to any vote of the executive board concerning the adoption of rules or regulations. The presiding officer, at the officer’s discretion, may limit this comment period to not less than 15 minutes, and may reasonably limit the time of an individual's comment period in order to provide each unit owner seeking to comment an opportunity to do so. The failure to provide an adequate comment period or an opportunity for each member wishing to comment to do so shall not be a basis upon which an action otherwise properly taken by the executive board may be voided.
46:8E-309. Quorums.
a. Unless the bylaws provide otherwise, a quorum shall be deemed to be present throughout any meeting of the association if persons entitled to cast 20 percent of the votes that may be cast for election of the executive board are present in person or by proxy at the beginning of the meeting.
b. Unless the bylaws specify a larger percentage, a quorum shall be deemed to be present throughout any meeting of the executive board if persons entitled to cast 50 percent of the votes on that board are present at the beginning of the meeting.
46:8E-310. Voting; proxies.
a. If only one of several owners of a unit is present at a meeting of the association, that owner shall be entitled to cast all the votes allocated to that unit. If more than one of the owners are present, the votes allocated to that unit shall be cast only in accordance with the agreement of a majority in interest of the owners, unless the declaration expressly provides otherwise. It shall be considered majority agreement if any one of the owners casts the votes allocated to that unit without protest being made promptly to the person presiding over the meeting by any of the other owners of the unit.
b. Votes allocated to a unit may be cast pursuant to a proxy duly executed by a unit owner. A proxy vote shall only be valid if it is a limited proxy which directs the person casting the vote to vote in a particular manner on a specific agenda item. If a unit is owned by more than one person, each owner of the unit may vote, unless the additional vote would violate the terms of the declaration, or register protest to the casting of votes by the other owners of the unit through a duly executed proxy. A proxy shall be void if it is not dated.
c. An association shall provide that those unit owners wishing to cast anonymous ballots shall be provided a method to do so, provided that the association may utilize reasonable methods to verify that ballots are being cast only by unit owners having the right to do so in accordance with this act, the declaration and the by-laws. If a unit is owned by more than one person, each owner of the unit may vote through a duly executed anonymous ballot, unless the additional ballot would violate the terms of the declaration and provided that the association adopts procedures to ensure that the total number of ballots cast for each unit does not exceed the permitted number of ballots under the declaration. A unit owner may revoke a ballot executed pursuant to this section only by actual notice of revocation to the person presiding over a meeting of the association and provided the ballot may be identified as that of the unit owner seeking to revoke it.
d. If the declaration requires that votes on specified matters affecting the common interest community be cast by lessees rather than unit owners of leased units: (1) the provisions of subsections a. and b. of this section shall apply to lessees as if they were unit owners; (2) unit owners who have leased their units to other persons shall not cast votes on those specified matters; and (3) lessees shall be entitled to notice of meetings, access to records, and other rights respecting those matters as if they were unit owners. Unit owners shall also be given notice, in the manner provided in section 46:8E-308, of all meetings at which lessees are entitled to vote.
e. No votes allocated to a unit owned by the association shall be cast.
f. Any vote permitted under P.L. , c. (C. )(now before the Legislature as this bill) may, at the election of the executive board, be made electronically provided that (1) the association is able to verify that the vote is cast by a unit owner having the right to do so, and (2) the ballot may be cast anonymously or, when that is not reasonably practicable, the identity of the unit owner and selection indicated on any ballot shall only be known to a person or persons appointed to count the ballots, which person or persons shall not be a member of the executive board and who shall subscribe to an oath not to divulge the identity of, or selection indicated by, any unit owner. If the anonymity of an electronic ballot cannot be guaranteed, electronic voting shall be permitted, provided a unit owner is given the option of casting an anonymous written ballot. A unit owner voting by electronic means shall be deemed to be present at a meeting provided that the unit owner elects a proxy pursuant to subsection b. of this section. In such event, the proxy may provide that the unit owner’s vote will be as directed in the unit owner’s electronic ballot.
46:8E-311. Tort and contract liability.
a. A unit owner, except as an officer of the association, shall have no authority to act for or bind the association. An association, however, may assert tort claims concerning the common elements and facilities of the development as if the claims were asserted directly by the unit owners individually.
b. A unit owner shall not be liable for an injury or damage arising out of the condition or use of the common elements, other than as provided elsewhere in P.L. , c. (C. )(now before the Legislature as this bill) concerning a unit owners' intentional or negligent acts. The association or a unit owner other than the declarant shall not be liable for that declarant's torts in connection with any part of the common interest community which that declarant has the responsibility to maintain.
c. An action alleging a wrongful act by an association, including an action arising out of the condition or use of the common elements, may be maintained against the association but shall not be maintained against any unit owner. If the wrongful act occurred during any period of declarant control and the association has given the declarant reasonable notice of and an opportunity to defend against the action, the declarant who then controlled the association shall be liable to the association or to any unit owner for: (1) all losses not covered by insurance suffered by the association or that unit owner arising from that wrongful act, and (2) all costs that the association would not have incurred but for the wrongful act, including any breach of contract remedies. Whenever a declarant is liable to the association under this section, the declarant also shall be liable for all expenses of litigation, including reasonable attorney's fees, incurred by the association.
d. Any statute of limitations affecting an association's right of action against a declarant under P.L. , c. (C. )(now before the Legislature as this bill) shall be tolled until the period of declarant control terminates. A unit owner shall not be precluded from maintaining an action contemplated by this section because he is a unit owner or a member or officer of the association. Liens resulting from judgments against the association shall be governed by section 46:8E-316.
e. When the bylaws provide, an association shall not be liable in any civil action brought by or on behalf of a unit owner to respond in damages as a result of bodily injury to the unit owner occurring on the common elements of the association. An association shall not be liable for the exercise of discretion, when, in the face of competing demands, it determines whether and how to utilize and apply existing resources, including those allocated for equipment, facilities, and personnel unless a court concludes that the determination of the association was palpably unreasonable. This subsection shall not grant immunity to any association causing bodily injury to a unit owner on the association's common elements by its willful, wanton or grossly negligent act of commission or omission.
46:8E-312. Conveyance or encumbrance of common elements.
a. In a condominium or planned community, portions of the common elements may be conveyed or subjected to a security interest by the association if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by a declarant, or any larger percentage the declaration specifies, agree to that action; but all owners of units to which any limited common element is allocated shall agree in order to convey that limited common element or subject it to a security interest. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to non-residential uses. Proceeds of the sale shall be an asset of the association, but the proceeds of a sale of limited common elements must be distributed equitably among the owners of units to which the limited common elements were allocated.
b. Part of a cooperative may be conveyed and all or part of a cooperative may be subjected to a security interest by the association if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by a declarant, or any larger percentage the declaration specifies, agree to that action; but, if fewer than all of the units or limited common elements are to be conveyed or subjected to a security interest, then all unit owners of those units, or the units to which those limited common elements are allocated, shall agree in order to convey those units or limited common elements or subject them to a security interest. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to nonresidential uses. Proceeds of the sale shall be an asset of the association. Any purported conveyance or other voluntary transfer of an entire cooperative, unless made pursuant to section 46:8E-219, shall be void.
c. An agreement to convey common elements in a condominium or planned community, or to subject them to a security interest, or in a cooperative, an agreement to convey any part of a cooperative or subject it to a security interest, shall be evidenced by the execution of an agreement, or ratifications thereof, in the same manner as a deed, by the requisite number of unit owners. The agreement shall specify a date after which the agreement will be void unless recorded. The 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.
d. An association, on behalf of the unit owners, may contract to convey an interest in a common interest community pursuant to subsection a. of this section, but the contract shall not be enforceable against the association until approved pursuant to subsections a., b., and c. of this section. Thereafter, the association shall have all of the powers necessary and appropriate to effect the conveyance or encumbrance, including the power to execute deeds or other instruments.
e. Unless made pursuant to this section, any purported conveyance, encumbrance, judicial sale, or other voluntary transfer of common elements or of any other part of a cooperative shall be void.
f. A conveyance or encumbrance of common elements or of a cooperative pursuant to this section shall not deprive any unit of its rights of access and support.
g. Unless the declaration otherwise provides, if the holders of a first security interest on 80 percent of the units which are subject to security interests on the day the unit owners' agreement under subsection c. is recorded, consent in writing:
(1) A conveyance of common elements pursuant to this section shall terminate both the undivided interests in those common elements allocated to the units and the security interests in those undivided interests held by all persons holding security interests in the units; and
(2) An encumbrance of common elements pursuant to this section shall have priority over all preexisting encumbrances on the undivided interest in those common elements held by all persons holding security interests in the units.
h. The consent by holders of first security interests on units described in subsection g. of this section, or a certificate of the secretary affirming that those consents have been received by the association, may be recorded at any time before the date on which the agreement under subsection c. becomes void. Consents or certificates so recorded shall be valid from the date they are recorded for purposes of calculating the percentage of consenting first security interest holders, regardless of late sales or encumbrances on those units. Regardless of the consent of the required percentage of first security interest holders, a conveyance or encumbrance of common elements shall not affect interests having priority over the declaration, or created by the association after the declaration was recorded.
i. In a cooperative, the association may acquire, hold, encumber, or convey a proprietary lease without complying with this section.
j. The effects of foreclosure of security interests granted pursuant to this section shall be governed by section 46:8E-219.
46:8E-313. Insurance.
a. Commencing not later than the date of the first conveyance of a unit to a person other than a declarant, the association shall maintain, to the extent reasonably available:
(1) Property insurance on the common elements and, in a planned community, also on property that must become common elements and all structural portions of the common interest community, insuring against all risks of direct physical loss commonly insured against or, in the case of a conversion building, against fire and extended coverage perils. Unless the association's declaration provides otherwise, the coverages under the property insurance shall be based upon replacement cost. If the declaration or bylaws do not provide for replacement cost insurance, the total amount of insurance after application of any deductibles shall not be less than 80 percent of the actual cash value of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations, and other items normally excluded from property policies;
(2) Liability insurance, including medical payments insurance, in an amount determined by the executive board but not less than any amount specified in the declaration, covering all occurrences commonly insured against for death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements and, in cooperatives, also of all units; and
(3) Any other insurance required by the declaration, association's bylaws, or applicable law.
b. In the case of a building that is part of a cooperative or that contains units having horizontal boundaries described in the declaration, the insurance maintained under paragraph (1) of subsection a., to the extent reasonably available, 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 section 46:8E-219 applies, (2) repair or replacement would be illegal under any State or local statute or ordinance governing health or safety, or (3) 80 percent of the unit owners, including any owner of a unit or assigned limited common element that will not be rebuilt, vote not to rebuild. The cost of repair or replacement in excess of insurance proceeds and reserves shall be a common expense. If the entire common interest community is not repaired or replaced, (4) the insurance proceeds attributable to the damaged common elements 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 persons will be distributed under subparagraph (b) of paragraph 11 of subsection a. of section 46:8E-205, (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 not to rebuild any unit, that unit's allocated interests shall be automatically reallocated upon the vote as if the unit had been condemned under subsection a. of section 46:8E-106, and the association promptly shall prepare, execute, and record an amendment to the declaration reflecting the reallocations.
i. The provisions of this section may be varied or waived in the case of a common interest community in which all units are restricted to non-residential use.
46:8E-314. Surplus funds.
Unless otherwise provided in the declaration, any surplus funds of an association remaining from common receipts after payment of or provision for common expenses and any prepayment of reserves shall be paid to the unit owners in proportion to their common expense liabilities or credited to them to reduce their future common expense assessments.
46:8E-315. Assessments for common expenses.
a. Until an association makes a common expense assessment, the declarant shall pay all common expenses. After an assessment has been made by an association, assessments shall be made at least annually, based on a budget which shall be adopted at least annually by the association.
b. Except for assessments under subsections c., d. and e. of this section, all common expenses shall be assessed against all the units in accordance with the allocations set forth in the declaration pursuant to subsections a. and b. of section 46:8E-207. Any past due common expense assessment or installment thereof shall bear interest at a rate to be established by the association not exceeding 18 percent per year.
c. Unless the declaration provides otherwise:
(1) Any common expense associated with the maintenance, repair, or replacement of a limited common element shall be assessed against the units to which that limited common element is assigned, equally, or in any other proportion the declaration provides;
(2) Any common expense or portion thereof benefiting fewer than all of the units shall be assessed exclusively against the units benefited; and
(3) The costs of insurance shall be assessed in proportion to risk and, if separately metered, the costs of utilities must be assessed in proportion to usage.
d. Assessments to pay a judgment against the association pursuant to section 46:8E-317 shall be made only against the units in the common interest community conveyed to unit owners other than the declarant at the time the judgment was entered, in proportion to their common expense liabilities.
e. If any common expense is caused by the misconduct of any unit owner, the association may assess that expense exclusively against that owner's unit, provided that alternate dispute resolution as required pursuant to section 46:8E-413 is provided prior to assessment.
f. If common expense liabilities are reallocated, common expense assessments and any installment thereof not yet due shall be recalculated in accordance with the reallocated common expense liabilities.
46:8E-316. Lien for assessments.
The provisions of this section shall have no effect on the priority or enforcement of association liens that were recorded pursuant to laws which are repealed by P.L. , c. (C. )(now before the Legislature as this bill).
a. An association shall have a lien on a unit for any assessment levied against that unit or fines imposed against its unit owner. Unless the declaration otherwise provides, fees, charges, late charges, fines, and interest charged pursuant to paragraphs (10) and (11) of subsection b. of section 46:8E-302 and section 46:8E-302.1 are enforceable as assessments under this section. If an assessment is payable in installments, the full amount of the assessment may be included in the amount of the lien. A lien assessed pursuant to this section shall be effective from the time of its recording in the public records in the county in which the unit is located. A notice of lien shall not be recorded if any of the amounts charged as lien assessments are as the result of fines imposed against a unit owner, and the provisions of section 46:8E-413 have not been met. The notice recorded of the claim of lien shall state the description of the unit, the name of the record owner, the amount of assessment due to the association and the date when the assessment was to have been paid.
b. A lien recorded under subsection a. of this section shall, to the extent it is the result of customary association assessment that became due for the six-month period prior to the recording of the lien, in the absence of any provision permitting the acceleration of common expense fees, shall have a priority over prior recorded mortgages and other liens, except for liens for unpaid property taxes or federal taxes, in accordance with this subsection.
(1) 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;
(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 any other type of common interest unit, other than a cooperative, recorded prior to the effective date of this act;
(3) 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 recorded prior to:
(a) the filing with the proper county recording office of a lis pendens giving notice of an action to foreclose a mortgage on that unit; or
(b) receipt by the association of a summons and complaint in an action to foreclose a mortgage on that unit, if no lis pendens has been filed;
(4) Whenever more than one association lien has been filed, either because an association files more than one lien or more than one association having the right to do so, files liens, the total lien priority for each association shall not be greater than the six-month priority described in this subsection. Priority between associations whenever more than one association files a lien, shall be determined by the date of recording of the lien, with the earlier recorded lien having priority over later recorded liens;
(5) The priority granted to a lien under this section shall expire on the first day of the sixtieth 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 section upon the expiration of any prior lien filing, subject to the expiration period set forth in this subsection.
(6) When recording a lien that may be granted priority pursuant to this subsection, 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 that exercises a good faith effort, but which is unable to ascertain the identity of a holder of a prior recorded mortgage on a unit, shall be deemed in substantial compliance with this paragraph. The notice required herein shall be deemed to have been properly made if mailed, 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.
(7) 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.
c. 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.
d. 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 declaration 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.
46:8E-317. Other liens.
a. In a condominium or planned community:
(1) Except as provided in paragraph (2) of this subsection, a judgment for money against the association if docketed shall not be a lien on the common elements, but shall be a lien in favor of the judgment lien holder against all of the units in the common interest community at the time the judgment was entered. No other property of a unit owner shall be subject to the claims of creditors of the association.
(2) If the association has granted a security interest in the common elements to a creditor of the association pursuant to section 46:8E-312, 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 must be proportionate to the ratio which that unit owner's common expense liability bears to the common expense liabilities of all unit owners whose units are subject to the lien. After payment, the association may not assess or have a lien against that unit owner's unit for any portion of the common expenses incurred in connection with the released lien.
(4) A judgment against an association shall be indexed in the name of the common interest community and the association and, when so indexed, is notice of the lien against the units.
b. In a cooperative:
(1) If an association receives notice of an impending foreclosure on all or any portion of the association's real estate, the association shall promptly transmit a copy of that notice to each unit owner of a unit located within the real estate to be foreclosed. Failure of the association to transmit the notice shall not affect the validity of the foreclosure.
(2) Whether or not a unit owner's unit is subject to the claims of the association's creditors, no other property of a unit owner shall be subject to those claims.
46:8E-318. Association records; audits.
a. All records, including financial records, that an association maintains shall be made reasonably available for examination or for copying by any unit owner and his authorized agents at a location reasonably convenient to both the common interest community and the requesting unit owner, on 14 business days', prior written notice, except any records:
(1) Disclosure of which would constitute an unwarranted invasion of individual privacy;
(2) Concerning pending or anticipated litigation or contract negotiations;
(3) Falling within the attorney-client privilege, to the extent that confidentiality is required in order for the attorney to exercise his or her ethical duties as a lawyer; or
(4) Involving the employment, promotion, discipline or dismissal of a specific officer or employee of the association, if the disclosure of the records would constitute an unwarranted invasion of individual privacy; however, increases in amounts of compensation awarded to an employee of or under contract with the board shall not be deemed a matter of personal privacy.
If a unit owner requests copies of any of the documents required to be made available under this section, the association shall make a copy for the unit owner at a reasonable cost to the unit owner, or may permit the unit owner to make copies, at the discretion of the association. Notwithstanding the 14 business days’ notice requirement of this subsection, an association shall be entitled to respond within a reasonable time period for requests for records spanning more than one year, or for requests which will require the copying of voluminous documents.
A unit owner may appeal a denial of a request to review records pursuant to this section to the Commissioner of Community Affairs. b. An association shall keep financial and business records sufficiently detailed to enable the association to comply with section 46:8E-405 and shall also maintain copies of all business records as may be required to comply with any law, and for a period which complies with customary business standards and procedures, but in no event shall an association maintain its business records for a period of less than two years prior to the current fiscal year, except those associations that have been organized for less than two years.
c. In addition to the association’s obligation to make available financial and business records under subsection a. of this section, an association shall, within 14 days following receipt of written request from a unit owner, provide a copy of the most recently compiled annual financial statement of the association, at no expense to the unit owner.
d. Every association having gross annual receipts in excess of $75,000.00 shall have a certified annual audit prepared of its financial books and records, which financial audit shall be available within 120 days of the expiration of the prior fiscal year. Any association having gross annual income in excess of $25,000.00 shall have a certified audit prepared following the expiration of each third fiscal year, which audit shall be available within 120 days following the expiration of each third fiscal year. The audits required by this section shall be prepared in accordance with generally accepted accounting principles by a certified public accountant licensed to do business in this State.
46:8E-319. Association as trustee.
With respect to a third person dealing with the association in the association's capacity as a trustee, the existence of trust powers and their proper exercise by the association shall be assumed without inquiry. A third person shall not be bound to inquire whether the association has power to act as trustee or is properly exercising trust powers. A third person, without actual knowledge that the association is exceeding or improperly exercising its powers, shall be fully protected in dealing with the association as if it possessed and properly exercised the powers it purports to exercise. A third person shall not be bound to assure the proper application of trust assets paid or delivered to the association in its capacity as trustee.
46:8E-320. Assignment of rents.
a. Subject to the rights of holders of first security interests, an association may collect, from rent due from a tenant to a delinquent unit owner, an amount not more than any unpaid common expenses, late fees, interest, and costs of collection, including reasonable attorneys fees which have been duly assessed against the unit owner. "Delinquent unit owner" means a unit owner who owes common expense fees which are 30 or more days past due.
b. Prior to taking any action permitted by this section, an association shall give written notice to the delinquent unit owner at the unit owner's last known address of its intent to collect the rent by certified mail, return receipt requested. The notice shall set forth the exact amount the association claims is due and shall indicate the intent of the association to collect the amount due from rent, along with any other amounts which become due in the future and which remain unpaid for 30 days after becoming due, including any common expense fees lawfully accelerated pursuant to the declaration or bylaws. A copy of the notice shall be sent to the holder of the unit's first security interest of record. Any cost incurred by the association to ascertain the identity of the holder of the first security interest, including the cost of the preparation of a title search, shall constitute additional common expense fees due with respect to the unit.
c. A delinquent unit owner shall have 10 days from receipt of the notice required to be sent pursuant to subsection b. of this section to provide proof of payment or a statement of the grounds upon which the assessment is disputed. Upon the failure of the unit owner to respond within 10 days after receipt of the notice, or within 15 days of mailing if no receipt is obtained, and provided that no notice is received from the holder of the first security interest that it is exercising its right of assignment of rental proceeds, the association shall be entitled to notify and direct each tenant renting a unit from the delinquent unit owner to pay to the association all or a portion of the rent otherwise due the delinquent unit owner. The amount to be applied from the rent shall be limited to the lesser of: (1) the amount as stated in the notice to the delinquent unit owner or, (2) an amount adjusted to reflect any calculation errors sought to be corrected by the unit owner, as stated in the response to the association, if timely sent. No offset shall be allowed for amounts which are unrelated to claims of calculation errors. The association shall have a continuing right to collect the rent from the tenant or tenants until the delinquent sum is satisfied in full.
d. Nothing in this section shall prevent a unit owner or association from seeking a judicial remedy in a court of competent jurisdiction. If a court determines that a unit owner intentionally misrepresented or misstated a material fact, then the association shall be entitled to recover from that unit owner an amount equal to three times the unpaid assessment, in addition to any association fees accruing and remaining unpaid after the date of filing of the action, and reasonable attorney's fees.
e. A holder of a first security interest which is entitled to an assignment of rents and which has exercised its rights by written notice recorded at the county recording office in the county in which the property is located, and by written notice sent by certified mail to the association from which it received notice pursuant to subsection b. of this section, may collect such rents in accordance with an assignment of rents under which it is an assignee.
ARTICLE 4
PROTECTION OF PURCHASERS
46:8E-401. Applicability; waiver.
a. This Article applies to all units subject to P.L. , c. (C. )(now before the Legislature as this bill), except as provided in subsection b. of this section.
b. A resale certificate need not be prepared or delivered in the case of:
(1) A gratuitous disposition of a unit;
(2) A disposition pursuant to court order;
(3) A disposition by a government or governmental agency;
(4) A disposition by foreclosure or deed in lieu of foreclosure;
(5) A disposition to a dealer;
(6) A disposition that may be canceled at any time and for any reason by the purchaser without penalty; or
(7) A disposition of a unit restricted to nonresidential use, unless a majority of the voting interests in a common interest community devoted to nonresidential use determines that this Article shall apply, in full or part.
46:8E-402. Liability for public offering statement requirements.
a. Except as provided in subsection b. of this section, a declarant, before offering any interest in a unit to the public, shall prepare a public offering statement conforming to the requirements of section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28).
b. A declarant may transfer responsibility for preparation of all or a part of the public offering statement to a successor declarant pursuant to section 46:8E-304 or to a dealer who intends to offer units in the common interest community. In the event of any such transfer, the transferor shall provide the transferee with any information necessary to enable the transferee to fulfill the requirements of subsection a. of this section.
c. Any declarant or dealer who offers a unit to a purchaser shall deliver a public offering statement in the manner prescribed by subsection a. of this section and shall be liable for any untrue statement or omission of material fact in the public offering statement as provided under section 17 of P.L. 1977, c. 419 (c. 45:22A-37). A person who prepares all or a part of the public offering statement shall be liable under "The Planned Real Estate Development Full Disclosure Act, P.L.1977, c.419 (C.45:22A-21 et seq.)" for any false or misleading statement set forth therein that he knew to be false or misleading or for any omission of a material fact known to the preparer with respect to that portion of the public offering statement which that person prepared.
d. If a unit is part of a common interest community and is part of any other real estate regime in connection with the sale of which the delivery of a public offering statement is required under the laws of this State, a single public offering statement conforming to the requirements of "The Planned Real Estate Development Full Disclosure Act, P.L.1977, c.419 (C.45:22A-21 et seq.)" as those requirements relate to each regime in which the unit is located, and to any other requirements imposed under the laws of this State, may be prepared and delivered in lieu of providing two or more public offering statements.
46:8E-403. Effect of act on the public offering statement - The Planned Real Estate Development Full Disclosure Act.
Except as expressly set forth in section 46:8E-402 and section 46:8E-404, and section 3 of P.L.1977, c.419 (C.45:22A-23), this act shall not affect or amend the terms or applicability of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.).
46:8E-404. Time shares subject to development rights.
If the declaration provides that ownership or occupancy of any units is or may be in time shares, the public offering statement shall disclose, in addition to the information required by section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28):
a. The number and identity of units in which time shares may be created;
b. The total number of time shares that may be created;
c. The minimum duration of any time shares that may be created; and
d. The extent to which the creation of time shares will or may affect the enforceability of the association's lien for assessments provided in section 46:8E-316.
46:8E-405. Resale of units.
a. Except in the case of a sale in which delivery of a public offering statement is required pursuant to section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28) or unless exempt under subsection b. of section 46:8E-401, a unit owner shall furnish to a purchaser before the earlier of the date of conveyance or transfer of the right to possession of a unit, a copy of the declaration (other than any plats and plans), the bylaws, the rules or regulations of the association, and a certificate containing:
(1) A statement disclosing the effect on the proposed disposition of any right of first refusal or other restraint on the free alienability of the unit held by the association;
(2) A statement setting forth the amount of the periodic common expense assessment currently due and payable from the selling unit owner;
(3) A statement of any other fees payable by the owner of the unit being sold;
(4) A statement of any capital expenditures approved by the association for the current and two next succeeding fiscal years;
(5) A statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects;
(6) The most recently prepared balance sheet and income and expense statement, if any, of the association;
(7) The current operating budget of the association;
(8) A statement of any unsatisfied judgments against the association and the status of any pending suits in which the association is a defendant;
(9) A statement describing any insurance coverage maintained by the association;
(10) A statement as to whether the executive board has given or received written notice that any existing uses, occupancies, alterations or improvements in or to the unit or to the limited common elements assigned thereto violate any provision of the declaration;
(11) A statement as to whether the executive board has received written notice from a governmental agency of any violation of environmental, health, or building code with respect to the unit, the limited common elements assigned thereto, or any other portion of the common interest community which have not been cured;
(12) A statement of the remaining term of any leasehold estate affecting the common interest community and the provisions governing any extension or renewal thereof;
(13) A statement of any restrictions in the declaration affecting the amount that may be received by a unit owner upon sale, condemnation, casualty loss to the unit or the common interest community, or termination of the common interest community;
(14) In a cooperative, an accountant's statement, if any was prepared, as to the deductibility for federal income tax purposes by the unit owner of real estate taxes and interest paid by the association;
(15) A statement describing any pending sale or encumbrance of common elements; and
(16) A statement disclosing the effect on the unit to be conveyed of any restrictions on the owner's right to use or occupy the unit or to lease the unit to another person.
b. The association, within 10 days after a request by a unit owner, shall furnish a certificate containing the information necessary to enable the unit owner to comply with this section. A unit owner providing a certificate pursuant to subsection a. of this section, and any real estate broker or sales agent who provides brokerage services to the unit owner or purchaser shall not be liable to the purchaser for:
(1) any erroneous information provided by the association and included in the certificate, or
(2) any matter related to the common interest community except, with respect to liability between the unit owner and a purchaser, as may otherwise be agreed in writing.
c. A purchaser, other than a purchaser through a foreclosure, shall not be liable for any unpaid assessment or fee greater than the amount set forth in the certificate prepared by the association. A unit owner shall not be liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner, but the purchase contract shall be voidable by the purchaser until the certificate has been provided and for five days thereafter or until conveyance, whichever first occurs.
46:8E-406. Release of liens prior to conveyance of unit.
a. In the case of a sale of a unit where delivery of a public offering statement is required pursuant to "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), a seller:
(1) Before conveying a unit, shall record or furnish to the purchaser releases of all liens, except: (a) liens on real estate that a declarant has the right to withdraw from the common interest community, or (b) that the purchaser expressly agrees to take subject to or assume and that encumber:
(i) in a condominium, that unit and its common element interest, and
(ii) in a cooperative or planned community, that unit and any limited common elements assigned thereto.
(2) Shall provide a surety bond or substitute collateral for or insurance against the lien as provided for liens on real estate in the "Construction Lien Law," P.L.1993, c.318 (C.2A:44A-1 et seq.).
b. Before conveying real estate to the association, the declarant shall have that real estate released from:
(1) all liens the foreclosure of which would deprive unit owners of any right of access to or easement of support of their units, and
(2) all other liens on that real estate unless the public offering statement describes certain real estate that may be conveyed subject to liens in specified amounts.
46:8E-406.1 Effect of sheriff's sale
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 or by-laws, the association may bid in 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 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.
46:8E-407. Express warranties of quality.
a. Express warranties made by any seller to a purchaser of a unit, if relied upon by the purchaser, shall be created as follows:
(1) Any affirmation of fact or promise which relates to the unit, its use, or rights appurtenant thereto, area improvements to the common interest community that would directly benefit the unit, or the right to use or have the benefit of facilities not located in the common interest community, shall create an express warranty that the unit and related rights and uses will conform to the affirmation or promise;
(2) Any model or description of the physical characteristics of the common interest community, including plans and specifications of or for improvements, shall create an express warranty that the common interest community will conform to the model or description, unless express disclaimers in language in common understanding calling the purchaser's attention to the exclusion of this warranty are displayed on the plans and specifications or in the model and are explicitly referenced in the sales contract;
(3) Any description of the quantity or extent of the real estate comprising the common interest community, including plats or surveys, shall create an express warranty that the common interest community will conform to the description, subject to customary tolerances; and
(4) A provision that a purchaser may put a unit to a specified use is an express warranty that the specified use is lawful.
b. Neither formal words, such as "warranty" or "guarantee," nor a specific intention to make a warranty, shall be necessary to create an express warranty of quality, but a statement purporting to be merely an opinion or commendation of the real estate or its value shall not create a warranty.
c. Any conveyance of a unit transfers to the purchaser all express warranties of quality made by previous sellers.
d. Nothing in this section shall be construed to impair or negate any warranties which may have been created pursuant to any other law or regulation, including those warranties provided pursuant to "The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.).
46:8E-408. Statute of limitations for warranties.
a. Unless the limitation period is tolled under section 46:8E-311 or affected by subsection d. of this section, a judicial proceeding for breach of any obligation arising under section 46:8E-404, shall be commenced within six years after the cause of action accrues.
b. Subject to subsection c. of this section, a cause of action for breach of warranty of quality, regardless of the purchaser's lack of knowledge of the breach, shall accrue:
(1) As to a unit, at the time the purchaser to whom the warranty is first made enters into possession if a possessory interest was conveyed or at the time of acceptance of the instrument of conveyance if a non-possessory interest was conveyed; and
(2) As to each common element, at the time the common element is completed or, if later, as to (a) a common element that is added to the common interest community by exercise of development rights, at the time the first unit which was added to the condominium by the same exercise of development rights is conveyed to a bona fide purchaser, or (b) a common element within any other portion of the common interest community, at a time the first unit is conveyed to a bona fide purchaser.
c. If a warranty of quality explicitly extends to future performance or duration of any improvement or component of the common interest community, the cause of action shall accrue at the time the breach is discovered or at the end of the period for which the warranty explicitly extends, whichever is earlier.
d. During the period of declarant control, the association may, pursuant to section 46:8E-414, authorize an independent committee of the executive board to evaluate and enforce by any lawful means warranty claims involving the common elements, and to compromise those claims. If the committee is so created, the limitation period for claims for these warranties shall begin to run from the date of the first meeting of the committee, regardless of when the period of declarant control terminates.
46:8E-409. Effect of violations on rights of action; attorney's fees.
a. If a declarant or any other person subject to P.L. , c. (C. )(now before the Legislature as this bill) fails to comply with any of its provisions or any provision of the declaration or bylaws, any person or class of persons adversely affected by the failure to comply shall have a claim for appropriate relief. Punitive damages may be awarded for a willful failure to comply with P.L. , c. (C. )(now before the Legislature as this bill). The court, as appropriate, may award court costs and reasonable attorney's fees.
b. Parties to a dispute arising under P.L. , c. (C. )(now before the Legislature as this bill), the declaration, or the bylaws may agree to resolve the dispute by any form of binding or non-binding alternative dispute resolution, but;
(1) A declarant may agree with the association to do so only after the period of declarant control passes, unless the agreement is made with an independent committee of the executive board elected pursuant to section 46:8E-414; and
(2) An agreement to submit to alternative dispute resolution other than that provided under section 46:8E-413 shall be in a writing signed by the parties.
Nothing in this section shall affect the right of a unit owner to submit a matter to alternative dispute resolution pursuant to section 46:8E-413.
46:8E-410. Labeling of promotional material.
No promotional material shall be displayed or delivered to a prospective purchaser which describes or portrays an improvement that is not in existence unless the description or portrayal of the improvement in the promotional material is conspicuously labeled or identified either as "MUST BE BUILT" or as "NEED NOT BE BUILT."
46:8E-411. Declarant's obligation to complete and restore.
a. Except for improvements labeled "NEED NOT BE BUILT" the declarant shall complete all recreational and parking facilities or amenities depicted on any site plan or other graphic representation, including any plats or plans prepared pursuant to section 46:8E-209, whether or not that site plan or other graphic representation is contained in the public offering statement or in any promotional material distributed by or for the declarant.
b. The declarant is subject to liability for the prompt repair and restoration, to a condition compatible with the remainder of the common interest community affected by the exercise of rights reserved pursuant to or created by sections 46:8E-210 to 46:8E-214, 46:8E-216 and 46:8E-217.
46:8E-412. Substantial completion of units.
In the case of a sale of a unit in which delivery of a public offering statement is required, a contract of sale may be executed, but no interest in that unit may be conveyed, until the declaration is recorded and the unit is substantially completed, as evidenced by an independent licensed architect, surveyor or engineer, or by issuance of a certificate of occupancy authorized by law.
46:8E-413 Alternative Dispute Resolution.
An association shall provide a fair and efficient procedure for the resolution of disputes between individual unit owners and the association, and between unit owners, which shall be readily available as an alternative to litigation. A person other than an officer of the association, a member of the governing board or a unit owner involved in the dispute shall be made available to resolve the dispute. A unit owner may notify the Commissioner of Community Affairs if an association does not comply with this subsection. The commissioner shall have the power to order the association to provide a fair and efficient procedure for the resolution of disputes.
46:8E-413.1 Construction Defect Litigation; Alternative Dispute Resolution.
Except for applications for emergent relief, prior to the commencement of any form of construction defects litigation on behalf of an association against a declarant or any members of the executive board appointed by the declarant, the following alternative dispute procedure shall be followed:
a. The association shall give written notice to the declarant, by certified mail, return receipt requested, hereinafter referred to as “Notice,” specifying all known causes of action. The Notice shall be accompanied by the association’s version of the facts involved and copies of any reports or documents supporting the association’s claim.
b. Within 30 days of the receipt of the Notice from the association, declarant or its agent may send a written request to investigate the association’s claim, hereinafter referred to as “Declarant’s Reply.” Declarant’s Reply shall include a stipulation by the declarant that all statutes of limitation applicable to any claim by the association against the declarant shall be tolled for 180 days or such shorter period of time as set forth in the cancellation notice delivered pursuant to subsection c. this section. The tolling of the statutes of limitation shall be effective as of the date of Declarant’s Reply. If declarant fails to send Declarant’s Reply within 30 days or fails to stipulate to the required tolling of all applicable statutes of limitation, the association may institute an action without satisfying any other condition of this section.
c. Upon receipt of Declarant’s Reply, the association shall, to the extent practicable, make available for inspection and testing by declarant or its agents, all common areas, interiors of applicable individual units and the documents identified in the Notice. All inspections and testing, including testing that may cause physical damage to the subject property, shall be at declarant’s sole cost and expense, shall be performed during the business week unless the association and declarant agree otherwise, and shall be completed within 60 days from the date of Declarant’s Reply. The declarant may conduct destructive testing if the association has conducted prior destructive testing related to the defects specified in the association’s Notice or the parties mutually agree to destructive testing. “Destructive testing” shall mean any act causing substantial physical change in the condition of the premises which would necessitate a repair to restore the premises to the condition that existed prior to the testing. The testing shall be performed to determine the existence, type, extent, or cause of a defect in the design or construction of the development. Acts of repair or maintenance by the association will not constitute destructive testing. Upon completion of any testing, declarant shall restore the property to the condition that existed immediately prior to the testing.
d. Within 60 days after completion of its inspections and testing, declarant shall submit a written statement to the association setting forth declarant’s proposed settlement of the claim, hereinafter referred to as “Settlement Offer.” If the declarant does not deliver the Settlement Offer within the 60-day period, the association may institute an action without satisfying any other condition of this section.
e. Within 30 days of receipt of the Settlement Offer, the association shall notify the declarant of two business dates during the 45-day period following the date of the association’s notice, the first of which will not be earlier than 10 days following the date of the association’s notice, on which a majority of the executive board will be prepared to meet with the declarant to discuss the association’s claims and the Settlement Offer. The association and the declarant may be represented at the meeting by attorneys and independent consultants.
f. If no settlement of the association’s claim, or any part thereof, has been agreed upon, then either the association or the declarant may deliver a written demand within 15 days from the date of the meeting held pursuant to subsection e. of this section, for arbitration of the association’s claims. The party filing the demand for arbitration shall be responsible for paying any filing fees or escrow deposits related thereto. The arbitration shall be undertaken by and in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, unless the declarant and the association agree to another form of alternative dispute resolution in lieu of the provisions of this paragraph. The arbitration shall be non-binding. Arbitration hearings shall be conducted in the county in which the property is located unless the parties agree otherwise. The declarant and the association shall be responsible for their own costs in connection with presenting their respective cases. The cost of the arbitrator shall be equally shared by the parties unless the arbitrator determines otherwise. If neither the declarant nor the association delivers a written demand for arbitration as provided herein, compliance with the terms of this subsection shall not be a precondition to the association’s institution of litigation.
g. At any time subsequent to the tolling of the statute of limitations, as set forth in Declarant’s Reply, the declarant may give written notice terminating the tolling of the statute of limitations. Upon delivery of the termination notice, the association shall be relieved of its obligation to arbitrate under subsection f. of this section, but, provided declarant has satisfied its obligations under subsection b. and d. of this subsection, the association shall be required to satisfy its obligations under subsections h. and i. of this section. The tolling of any applicable statutes of limitation shall terminate 180 days following the commencement of the tolling, unless extended by mutual written agreement.
h. If the association does not accept declarant’s Settlement Offer or if either the association or the declarant does not accept the arbitrator’s determination, the association may commence any legal action the association deems appropriate provided that prior to the filing of any complaint commencing a legal action against the declarant a majority of the association’s non-declarant members present, in person or by proxy at a meeting of the association where a quorum is present, shall approve the commencement of a lawsuit. The quorum for a meeting of the members of the association for the purposes set forth in this paragraph shall be 33 percent of all members of the association qualified to vote, unless the declaration or by-laws shall provide for a lesser quorum requirement. For purposes of determining a quorum, membership interests allocated to declarant units will not be considered in determining a quorum.
i. The executive board shall, at least 10 days prior to the meeting referenced in subsection h. of this section, distribute to each member of the association the following written materials:
(1) A statement of the association’s claim against the declarant, specifying all construction defects and other claims which comprise the cause of action;
(2) A copy of the Settlement Offer and any other written responses to the claim provided by the declarant;
(3) If the declarant and association participated in an arbitration procedure pursuant to subsection f. of this section, a copy of the arbitrator’s findings along with the association’s and declarant’s response to such findings, if any;
(4) A statement that the recovery of damages through litigation may not result in the receipt of sufficient funds to pay all damages or repair costs as estimated by the association’s experts;
(5) An estimate of the minimum and maximum costs to the association to prosecute the litigation and a statement that such costs may not be recovered in the litigation;
(6) A description of the agreement with the attorney whom the association contemplates retaining to prosecute the litigation; and
(7) Such other information as the association deems appropriate or as the declarant may have provided to the association in connection with its distribution to its members.
j. All written materials provided to the association’s members will be privileged communications, unless the association agrees otherwise, and shall not be admissible in evidence in any action unless such materials would, notwithstanding their distribution to the association’s members, otherwise be admissible but for their distribution to the association’s members.
k. If the association fails to comply with any of the provisions of this section, such failure may be asserted by declarant as a procedural deficiency. Upon a judicial determination that the association failed to comply with the provisions set forth in this section, the association’s complaint shall be stayed for an appropriate period of time to permit the association to cure any non-compliance.
l. Neither the failure to state a particular cause of action in the Notice provided for in subsection a. of this section nor the failure to state a particular claim under paragraph (1) of subsection i. of this section will be deemed a procedural deficiency, nor prevent the association from stating such other causes of action as it deems necessary or appropriate in connection with any litigation against the declarant.
46:8E-414. Phased resolution of claims involving common elements and other improvements to be maintained by association.
a. During the period of declarant control after the initial election of unit owner board members other than the declarant, the executive board of the association may, upon the request of any board member, authorize an independent committee of at least five unit owners other than the declarant to evaluate, compromise and enforce by any lawful means as provided in this section any claims involving the common elements or any other improvements in the common interest community which the association is obligated to maintain. Only members of the executive board elected by the unit owners other than the declarant and other unit owners appointed by those independent members shall serve on the committee, and the committee's decisions shall be free of any control by the declarant or any member of the executive board or officer appointed by the declarant. Any vacancies on the committee shall be filled by the independent board members within 30 days, and in the case of any tie votes by such board members, by the vote of the unit owners other than the declarant within 60 days after the vacancy occurs.
b. If the committee is established and there has been substantial completion of the common elements and public improvements in any phase of the common interest community which are not covered by the performance or maintenance guarantees posted with any governmental agencies having jurisdiction, the committee shall, at the declarant's request, cause such common elements and improvements to be inspected and evaluated for compliance with the declarant's warranty and construction obligations with the assistance of qualified independent engineering and legal consultants selected by the committee. The fees for such consultants shall be paid from funds contributed at closing for such purposes by unit owners other than the declarant or by regular or special common expense assessments or by both; provided, however, that the declarant shall have the option to supplement such funds to the extent that it deems appropriate.
c. Public improvements to be dedicated to any governmental entity shall be exempt from any direct warranty or construction defect claims by the association or the unit owners other than the declarant. Acceptance of any such public improvements by the governmental entity to which they are to be dedicated shall be deemed conclusive evidence that such improvements have been satisfactorily completed and the declarant shall have no further obligation with respect to same to the association, to any unit owners other than the declarant, or to any governmental agency having jurisdiction.
d. Within 120 days after the association's receipt of any request for inspection of any phase of the completed common elements or other improvements, the committee shall cause its engineering consultant to inspect the particular completed improvements and render a written evaluation of same to the committee. A copy of the final report, following the committee's review of the initial evaluation, shall be furnished to the declarant within 30 days after the committee's receipt of same. Thereafter, the committee or its designated representatives and the declarant shall conduct one or more joint inspections of the common elements and other improvements covered by the declarant's request and pursue good faith negotiations to resolve any warranty or construction defect claims against the declarant. All fees and related expenses incurred by the committee for engineering and legal consultants shall be paid promptly by the association from available designated funds upon receipt of the committee's written authorization to make such payments.
e. If a settlement agreement is finalized between the committee and the declarant, the declarant controlled executive board shall have the authority to execute such an agreement and to release the declarant from all liability with respect to the completed common elements and improvements, subject to such terms and conditions as may be acceptable to the committee. Any such settlement agreement and release shall be legally binding upon the association and the unit owners, provided that its form is approved by the independent legal counsel retained by the committee on behalf of the association.
f. If no settlement agreement is approved by the committee within 180 days after the committee's receipt of the declarant's request for inspection, the parties shall be obligated to proceed to mediation within 30 days thereafter in accordance with the rules of the American Arbitration Association. If no settlement is reached through mediation within 15 days after commencement of same, then the parties shall promptly proceed to non-binding arbitration of any remaining issues in accordance with the rules of the American Arbitration Association, and such mediation and non-binding arbitration shall be conditions precedent to any litigation of the warranty and construction defect claims against the declarant, which shall also require the approval of a majority of the unit owners other than the declarant. All professional fees and expenses reasonably incurred by the association with regard to the mediation or arbitration or both shall be borne by the non-declarant unit owners and paid by the association promptly upon the receipt of written authorization of the committee.
g. In the event that no settlement agreement and releases are executed with respect to any phase of completed common elements or improvements during the period of declarant control of the executive board of the association, any statutes of limitation or repose applicable to such phase shall be extended for a period of one year after the assumption of control of the executive board by unit owners other than the declarant. In addition, the declarant controlled board shall not be obligated to commence suit for any such claims during its period of control.
h. The procedures set forth in this section shall also apply to and be binding upon the declarant and the association after the unit owners other than the declarant assume control of the executive board of the association; provided, however, that the independent unit owner controlled executive board of the association shall not be bound by the recommendations of the committee.
ARTICLE V
STATE OVERSIGHT OF ASSOCIATION BOARDS
46:8E-501 Legislative Findings (Reserved).
46:8E-502. (Reserved).
46:8E-503. (Reserved).
46:8E-504. Registration of associations.
Within 90 days of the effective date of this act, all common interest unit owners' associations as defined under and subject to the provisions of P.L. , c. (C. )(now before the Legislature as this bill) shall register with the Commissioner of Community Affairs on such form as may be prescribed by the commissioner for that purpose and pay a fee not to exceed $60. Thereafter, all associations shall register annually on the same date, or within 30 days of the creation of the association, whichever is earlier.
46:8E-505. The Ombudsman for Common Interest Community Unit Owners' Associations.
There is hereby established an office within the Department of Community Affairs which shall be known as The Ombudsman for Common Interest Community Unit Owners' Associations. This office shall be separate and apart from any other division currently established within the department. The duties of this office shall be:
a. to provide assistance to executive board members or officers of an association in receiving appropriate training to enable them to execute their duties in an independent, efficient and productive manner, including the provision of a list of reference and educational materials appropriate for executive board members of unit owners' associations, and general budgetary guidance, including training in appropriate accounting and financial methods customarily employed in managing budgets;
b. to provide general guidance to associations, professionals with whom associations contract to provide services, and unit owners residing in common interest communities;
c. to function as a liaison between associations and municipal code officials, the Division of Codes and Standards in the Department of Community Affairs, or any other State or local agency to resolve disputes regarding compliance with any applicable construction or housing codes or inspections required in order to effect repairs or improvements or to comply with the "Hotel and Multiple Dwelling Law," P.L.1967, c.76 (C.55:13A-1 et seq.);
d. to attend alternative dispute resolution meetings if requested to do so by the provider of those services; and
e. to review complaints received from community associations concerning noncompliance with the provisions of P.L.1989, c.299. Upon a determination that a municipality is not in compliance with that law, the office shall, when appropriate, request the commissioner to direct the Director of the Division of Local Government Services to provide budgetary guidance to those municipalities not in compliance with the act. When circumstances warrant, the office may request that the director deny budget certification to or withhold State aid from a municipality. The office may take any other appropriate steps to encourage compliance with the law, including, but not limited to, facilitating alternative dispute resolution between an association and a municipality.
46:8E-506. Enforcement authority of the Department of Community Affairs.
The Commissioner of Community Affairs shall have the following authority in relation to common interest community unit owners' associations as defined pursuant to section 46:8E-102:
a. to hear complaints and make final determinations in reported cases of violations of statutory requirements for common interest community unit owners' associations or executive board members of an association, in the following matters:
(1) the furnishing of information requested pursuant to section 46:8E-318;
(2) the determination as to whether a person is unqualified pursuant to subsection a. of section 46:8E-303 to be or remain an executive board member;
(3) the provision of alternative dispute resolution as required by section 46:8E-413;
(4) the holding of meetings in accordance with section 46:8E-308; and
(5) the review of claims of noncompliance with regulations promulgated pursuant to P.L. , c. (C. )(now before the Legislature as this bill).
b. The commissioner shall have the authority under this section to remove a board member for flagrant, continuing violations of statutes or regulations.
The commissioner shall provide the opportunity for a hearing to any executive board member prior to the removal of the executive board member from office.
c. A claim filed with the commissioner pursuant to subsection a. of this section shall not be submitted for alternative dispute resolution pursuant to section 46:8E-413.
d. The commissioner, in carrying out the commissioner's responsibilities under this section, shall not be bound by any determination made or settlement reached pursuant to an alternative dispute resolution proceeding.
46:8E-507. Disclosure of sanctions imposed.
An executive board from which a board member has been removed by the commissioner pursuant to section 46:8E-506 shall disclose that fact within 30 days at a meeting of the executive board of the association which shall be open to all of the members of the association as required pursuant to section 46:8E-308.
46:8E-508. Authority to Commissioner of Community Affairs to promulgate regulations. The Commissioner of Community Affairs shall promulgate, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) the rules and regulations necessary to effectuate P.L. , c. (C. )(now before the Legislature as this bill).
46:8E-509. Requirements for associations concerning bidding procedures, conflict of interests and fair elections.
The Commissioner of Community Affairs shall establish, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), requirements and guidelines for common interest communities subject to the "New Jersey Uniform Common Interest Ownership Act," P.L. , c. (C. )(now before the Legislature as Assembly Committee Substitute for Assembly Bill No. 2865 of 1999) in the following matters:
a. Bidding requirements. Every contract or agreement for the performance of any work not included within the terms of paragraph (4) of this subsection, shall be made or awarded only by the executive board after public advertising for bids and bidding therefor, except as provided otherwise in this section. For the purposes of this subsection, public advertising means an advertisement placed in at least one newspaper which is published in the general vicinity of or otherwise available to members of the common interest community. An executive board of an association shall solicit written bids for any contract for services whenever the stated amount payable by an association in connection with the services exceeds:
(1) for an association having annual gross receipts greater than or equal to $100,000, the greater of $5,000 or five percent of the total current annual budgeted expenditures; or
(2) for an association having annual gross receipts of less than $100,000, but greater than $50,000, the greater of $2,500 or five percent of the total current annual budgeted expenditures;
(3) for an association having annual gross receipts equal to or less than $50,000, the greater of $1,500 or five percent of the total current annual budgeted expenditures.
(4) This section shall not require the advertising for or submission of written bids for the following:
(a) any contract for which the subject matter is described in section 5 of P.L.1971, c.198 (C.40A:11-5). The services of a community association manager shall be considered a professional service;
(b) the renewal of any contract otherwise required to be bid, provided that the increase in the contract price does not exceed the greater of: (a) five percent; or (b) the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the New York City and Philadelphia areas as compiled by the Bureau of Labor Statistics, United States Department of Labor for the most recently available full-year period between the awarding of the prior year’s contract and the awarding of the current year’s contract; or
(c) The awarding of a contract required to mitigate an emergency, to the extent reasonably required to accomplish such mitigation. For the purposes of this paragraph, “emergency” means any imminent peril to life or property.
(5) All bids must be sealed and opened simultaneously in the presence of the executive board, or a designated committee to whom the awarding of a particular contract has been delegated. Following the opening of the bids, the executive board or its designated committee may: (a) award the contract to any of the bidders; (b) reject all bids, or (c) enter into further negotiations with one or more of the bidders to obtain terms more favorable to the association. If the contract is not awarded to the lowest bidder, the executive board or designated committee must state the basis for not awarding the contract to the lowest bidder in the minutes of the executive board, or designated committee, or adopt a resolution setting forth the basis. The requirements of this subsection shall not give rise to a cause of action by a vendor who provides a quote or bid to an executive board or its designated committee.
b. Conflict of interest requirements. Whenever a contract for services or materials is proposed to be given to (1) a business owned or operated by a member of the executive board of the association or its property manager or management firm; (2) a business owned or operated by a person related to a member of the executive board of the association or its property manager or management firm; or (3) a business having a relationship with a member of the executive board such that, should the contract be awarded to that vendor, the member would receive a direct financial benefit, the guidelines shall require that executive board members or management personnel disclose any conflict and approve any contract in the same manner as provided pursuant to subsection j. of section 46:8E-303 of the "New Jersey Uniform Common Interest Ownership Act," P.L. , c. (C. ) (now before the Legislature as Assembly Bill No. 2865 of 1999).
For the purposes of this subsection, "related" means an individual related by consanguinity within the third degree as determined by the common law, a spouse, or an individual related to a spouse within the third degree as so determined, and includes an individual in an adoptive relationship within the third degree.
c. Responsibility for property management requirements. The guidelines shall advise executive board members of the fact that executive board members are responsible for compliance with all relevant laws, regardless of whether the services of a property management company are utilized in meeting those responsibilities.
d. Fair election safeguards. The guidelines shall provide that the opening and counting of ballots in any election should occur at a meeting open to the members of the association and in front of the members, including at least one member who was neither a candidate in that election nor a board member or employee of the board. The guidelines shall provide procedures for anonymous ballots. The guidelines may provide procedures to be followed in the event electronic ballots are utilized by an association.
46:8E-510. Disclosure booklets.
The Commissioner of Community Affairs shall develop a pamphlet which shall be available at cost to the public to serve as a general guide to common interest property ownership and which shall include, at the minimum, the following:
a. An explanation of the nature of home ownership in a common interest property development and a glossary of relevant terms such as, but not limited to, "master declaration," "bylaws," "rules," or "common elements;"
b. A description of the responsibilities and rights that affix to unit owners purchasing in a common interest property development, such as an agreement to abide by the rules adopted by the association, and the right to inspect certain information concerning the association. Reference shall be made in the pamphlet to all statutes and regulations applicable to unit owners' associations and unit owners of any type of common interest property, whether it consists of single family homes, condominiums or cooperative housing;
c. A description of the rights and responsibilities of unit owners' association executive board members, including any guidelines which may be promulgated by the Commissioner of Community Affairs. The pamphlet shall also include references to any materials of which the commissioner may be aware which would serve to guide an executive board member in fulfilling his or her responsibilities, including materials available through unit owners' association interest groups, such as the Community Associations Institute, or other such associations; and
d. References to minimal statutory requirements for association rules and examples of rules which have been held by the courts to be unreasonable and arbitrary.
46:8E-511. Duty to distribute disclosure booklets.
a. Every seller of a unit in a common interest community shall cause to be distributed to a prospective buyer, during the attorney review period of the contract for sale, the pamphlet required to be prepared pursuant to section 46:8E-510.
b. Every homeowners' association shall distribute a copy of the pamphlet required to be prepared pursuant to section 46:8E-510 to each owner of record in a common interest property community.
2. Section 1 of P.L.1989, c.299 (C.40:67-23.2) is amended to read as follows:
1. For the purposes of this act:
a. "Condominium" means the form of real property ownership provided for under the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.) or any law subsequently enacted providing for such a form of ownership;
b. "Cooperative" means a housing corporation or association wherein the holder of a share or membership interest in the corporation or association is entitled to possess and occupy, for dwelling purposes, a house, apartment, or other unit of housing owned by the corporation or association, or to purchase a unit of housing constructed or erected by the corporation or association;
c. "Fee simple community" means a private community which consists of individually owned lots or units and provides for common or shared elements or interests in real property;
d. "Horizontal property regime" means the form of real property ownership provided for under the "Horizontal Property Act," P.L.1963, c.168 (C.46:8A-1 et seq.) or any law subsequently enacted which provides for such a form of ownership;
e. "Qualified private community" means a residential condominium, cooperative, fee simple community, [or] horizontal property regime, or a common interest community as defined pursuant to section 46:8E-102 of P.L. , c. (now pending before the Legislature as Assembly Bill No. 2865 of 1999), the residents of which do not receive any tax abatement or tax exemption related to its construction, comprised of a community trust or other trust device, condominium association, homeowners' association, or council of co-owners, wherein the cost of maintaining roads and streets and providing essential services is paid for by [a not-for-profit entity consisting exclusively of unit owners within the community] a unit owners' association as defined pursuant to section 46:8E-102 of P.L. , c. (now pending before the Legislature as Assembly Bill No. 2865 of 1999). No apartment building or garden apartment complex owned by an individual or entity that receives monthly rental payments from tenants who occupy the premises shall be considered a qualified private community. No "proprietary campground facility," as defined in section 1 of P.L.1993, c.258 (C.45:22A-49), shall be considered to be a qualified private community.
(cf: P.L.1993, c.258, s.10)
3. Section 3 of P.L.1977, c.419 (C.45:22A-23) is amended to read as follows:
3. As used in this act unless the context clearly indicates otherwise: a. "Disposition" means any sales, contract, lease, assignment, or other transaction concerning a planned real estate development.
b. "Developer" or "subdivider" means any person who disposes or offers to dispose of any lot, parcel, unit, or interest in a planned real estate development.
c. "Offer" means any inducement, solicitation, advertisement, or attempt to encourage a person to acquire a unit, parcel, lot, or interest in a planned real estate development.
d. "Purchaser" or "owner" means any person or persons who acquires a legal or equitable interest in a unit, lot, or parcel in a planned real estate development, and shall be deemed to include a prospective purchaser or owner.
e. "State" means the State of New Jersey.
f. "Commissioner" means the Commissioner of Community Affairs.
g. "Person" shall be defined as in R.S.1:1-2.
h. "Planned real estate development" or "development" means any real property situated within the State, whether contiguous or not, which consists of or will consist of, separately owned areas, irrespective of form, be it lots, parcels, units, or interest, and which are offered or disposed of pursuant to a common promotional plan, and providing for common or shared elements or interests in real property. This definition shall specifically include, but shall not be limited to, property subject at any time to the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.), any form of homeowners' association, any housing cooperative or to any community trust or other trust device or any property subject to "the New Jersey Uniform Common Interest Ownership Act," P.L. ,c. (C. ) (now before the Legislature as this bill).
This definition shall be construed liberally to effectuate the purposes of this act.
i. "Common promotional plan" means any offer for the disposition of lots, parcels, units or interests of real property by a single person or group of persons acting in concert, where such lots, parcels, units or interests are contiguous, or are known, designated or advertised as a common entity or by a common name.
j. "Advertising" means and includes the publication or causing to be published of any information offering for disposition or for the purpose of causing or inducing any other person to purchase an interest in a planned real estate development, including the land sales contract to be used and any photographs or drawings or artist's representations of physical conditions or facilities on the property existing or to exist by means of any:
(1) Newspaper or periodical;
(2) Radio or television broadcast;
(3) Written or printed or photographic matter;
(4) Billboards or signs;
(5) Display of model houses or units;
(6) Material used in connection with the disposition or offer of the development by radio, television, telephone or any other electronic means; or
(7) Material used by developers or their agents to induce prospective purchasers to visit the development, particularly vacation certificates which require the holders of such certificates to attend or submit to a sales presentation by a developer or his agents.
"Advertising" does not mean and shall not be deemed to include: Stockholder communications such as annual reports and interim financial reports, proxy materials, registration statements, securities prospectuses, applications for listing securities on stock exchanges, and the like; all communications addressed to and relating to the account of any person who has previously executed a contract for the purchase of the subdivider's lands except when directed to the sale of additional lands.
k. "Nonbinding reservation agreement" means an agreement between the developer and a purchaser and which may be [cancelled] canceled without penalty by either party upon written notice at any time prior to the formation of a contract for the disposition of any lot, parcel, unit or interest in a planned real estate development.
l. "Blanket encumbrance" means a trust deed, mortgage, judgment, or any other lien or encumbrance, including an option or contract to sell or a trust agreement, affecting a development or affecting more than one lot, unit, parcel, or interest therein, but does not include any lien or other encumbrance arising as the result of the imposition of any tax assessment by any public authority.
m. "Conversion" means any change with respect to a real estate development or subdivision, apartment complex or other entity concerned with the ownership, use or management of real property which would make such entity a planned real estate development.
n. "Association" means an association organized for the management of common elements and facilities [, organized pursuant to section 1 of P.L.1993, c.30 (C.45:22A-43)].
o. "Executive board" means the [executive board of an association, as provided for in section 3 of P.L.1993, c.30 (C.45:22A-45)] body, regardless of name, designated in the declaration to act on behalf of the association.
p. "Unit" means any lot, parcel, unit or interest in a planned real estate development that is, or is intended to be, a separately owned area thereof.
q. "Declarant" means any person or group of persons acting in concert who (1) as a part of a common promotional plan, offers to dispose of any interest in a unit not previously disposed of or (2) reserves or succeeds to any special declarant right.
(cf: P.L.1993, c.30, s.7)
4. Section 8 of P.L.1977, c.419 (C.45:22A-28) is amended to read as follows:
8. a. A public offering statement shall disclose fully and accurately the characteristics of the development and the lots, parcels, units, or interests therein offered, and shall make known to prospective purchasers all unusual or material circumstances or features affecting the development. The proposed public offering statement submitted to the agency shall be in a form prescribed by its rules and regulations and shall include the following:
(1) The name and principal address of the developer;
(2) A general narrative description of the development stating the total number of lots, units, parcels, or interests in the offering, and the total number of such interests planned to be sold, leased or otherwise transferred;
(3) Copies of any management contract, lease of recreational areas, or similar contract or agreement affecting the use, maintenance, or access of all or any part of the development, with a brief and simple narrative statement of the effect of each such agreement upon a purchaser, and a statement of the relationship, if any, between the developer and the managing agent or firm;
(4) (a) The significant terms of any encumbrances, easements, liens, and restrictions, including zoning and other regulations, affecting such lands and each unit, lot, parcel, or interest, and a statement of all existing taxes and existing or proposed special taxes or assessments which affect such lands; and
(b) In the case of a conversion subject to the provisions of the "Tenant Protection Act of 1992," P.L.1991, c.509 (C.2A:18-61.40 et al.), the information required pursuant to section 14 of P.L.1991, c.509 (C.2A:18-61.53);
(5) (a) Relevant community information, including hospitals, health and recreational facilities of any kind, streets, water supply, levees, drainage control systems, irrigation systems, sewage disposal facilities and customary utilities; and
(b) The estimated cost, size, date of completion, and responsibility for construction and maintenance of existing and proposed amenities which are referred to in connection with the offering or disposition of any interest in the subdivision or subdivided lands;
(6) A copy of the proposed budget for the operation and maintenance of the common or shared elements or interests;
(7) Additional information required by the agency to assure full and fair disclosure to prospective purchasers.
(8) If any declaration filed pursuant to P.L. , c. (C. ) (now before the Legislature as this bill) provides that a common interest community is subject to any development rights, the public offering statement shall disclose, subject to the limitations set forth in section 46:8E-224 (Master Planned Communities) of P.L. , c. (C. )(now before the Legislature as Assembly Bill No. 2865 of 1999) and, in addition to the information required under paragraphs (1) through (7) of this section, the following:
(a) The maximum number of units, and the maximum number of units per acre, that may be created;
(b) A statement of how many or what percentage of the units that may be created will be restricted exclusively to residential use, or a statement that no representations are made regarding use restrictions;
(c) If any of the units that may be built within real estate subject to development rights are not to be restricted exclusively to residential use, a statement, with respect to each portion of that real estate, of the maximum percentage of the real estate areas, and the maximum percentage of the floor areas of all units that may be created therein, that are not restricted exclusively to residential use;
(d) A brief narrative description of any development rights reserved by a declarant and of any conditions relating to or limitations upon the exercise of development rights;
(e) A statement of the maximum extent to which each unit's allocated interests may be changed by the exercise of any development right described in subsection c. of this section;
(f) A statement of the extent to which any buildings or other improvements that may be erected pursuant to any development right in any part of the common interest community will be compatible with existing buildings and improvements in the common interest community in terms of architectural style, quality of construction, and size, or a statement that no assurances are made in those regards;
(g) General descriptions of all other improvements that may be made and limited common elements that may be created within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;
(h) A statement of any limitations as to the locations of any building or other improvement that may be made within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;
(i) A statement that any limited common elements created pursuant to any development right reserved by the declarant will be of the same general types and sizes as the limited common elements within other parts of the common interest community, or a statement of the types and sizes planned, or a statement that no assurances are made in that regard;
(j) A statement that the proportion of limited common elements to units created pursuant to any development right reserved by the declarant will be approximately equal to the proportion existing within other parts of the common interest community, or a statement of any other assurances in that regard, or a statement that no assurances are made in that regard;
(k) A statement that all restrictions in the declaration affecting use, occupancy, and alienation of units will apply to units created pursuant to any development right reserved by the declarant, or a statement of any differentiations that may be made as to those units, or a statement that no assurances are made in that regard; and
(l) A statement of the extent to which any assurances made pursuant to this section apply or do not apply in the event that any development right is not exercised by the declarant.
b. The public offering statement shall not be used for any promotional purposes before registration of the development and afterwards only if it is used in its entirety. No person may advertise or represent that the agency approves or recommends the development or dispositions therein. No portion of the public offering statement may be underscored, italicized, or printed in larger or heavier or different color type than the remainder of the statement, unless the agency requires or permits it.
c. The agency may require the developer to alter or amend the proposed public offering statement in order to assure full and fair disclosure to prospective purchasers, and no change in the substance of the promotional plan or plan of disposition or development of a planned real estate development may be made after registration without the approval of the agency. A public offering statement shall not be current unless all amendments have been incorporated.
d. The public offering statement shall, to the extent possible, combine simplicity and accuracy of information, in order to facilitate purchaser understanding of the totality of rights, privileges, obligations and restrictions, comprehended under the proposed plan of development. In reviewing such public offering statement, the agency shall pay close attention to the requirements of this subsection, and shall use its discretion to require revision of a public offering statement which is unnecessarily complex, confusing, or is illegible by reason of type size or otherwise.
(cf: P.L.1991, c.509, s.22)
5. N.J.S.12A:9-403 is amended to read as follows:
12A:9-403. (1) Presentation for filing of a financing statement, tender of the filing fee and acceptance of the statement by the filing officer constitute filing under this chapter.
(2) Except as provided in [subsection] subsections (6) and (8), a filed financing statement is effective for a period of five years from the date of filing. The effectiveness of a filed financing statement lapses on the expiration of the five-year period unless a continuation statement is filed prior to the lapse. If a security interest perfected by filing exists at the time insolvency proceedings are commenced by or against the debtor, the security interest remains perfected until termination of the insolvency proceedings and thereafter for a period of 60 days or until expiration of the five-year period, whichever occurs later. Upon lapse the security interest becomes unperfected, unless it is perfected without filing. If the security interest becomes unperfected upon lapse, it is deemed to have been unperfected as against a person who became a purchaser or lien creditor before lapse.
(3) A continuation statement may be filed by the secured party within six months prior to the expiration of the five-year period specified in subsection (2). Any such continuation statement must be signed by the secured party, identify the original statement by file number and state that the original statement is still effective. A continuation statement signed by a person other than the secured party of record must be accompanied by a separate written statement of assignment signed by the secured party of record and complying with subsection (2) of 12A:9-405, including payment of the required fee.
Upon timely filing of the continuation statement, the effectiveness of the original statement is continued for five years after the last date to which the filing was effective whereupon it lapses in the same manner as provided in subsection (2) unless another continuation statement is filed prior to such lapse. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the original statement. The filing officer shall so arrange matters by physical annexation of financing statements to continuation statements or other related filings, or by other means, that if he physically destroys the financing statements of a period more than five years past, those which have been continued by a continuation statement or which are still effective under subsection (6) shall be retained.
(4) Except as provided in subsection (7), a filing officer shall mark each statement with a file number and with the date and hour of filing and shall hold the statement or a microfilm or other photographic copy thereof for public inspection. In addition, the filing officer shall index the statements according to the name of the debtor and shall note in the index the file number and the address of the debtor given in the statement. A financing statement covering collateral which is or is to become a fixture or fixtures, or crops growing or to be grown, shall also be indexed in the name of the record owner of the realty.
(5) The uniform fee for filing, indexing and furnishing filing data for an original or a continuation statement or any amendment of either shall be $25.00.
(6) A real estate mortgage which is effective as a fixture filing under subsection (6) of 12A:9-402 remains effective as a fixture filing until the mortgage is released or satisfied of record or its effectiveness otherwise terminates as to the real estate.
(7) When a financing statement covers timber to be cut or covers minerals or the like (including oil and gas) or accounts subject to subsection (5) of 12A:9-103, or is filed as a fixture filing, it shall be filed for record and the filing officer shall index it under the names of the debtor and any owner of record shown on the financing statement in the same fashion as if they were the mortgagors in a mortgage of the real estate described, and, to the extent that the law of this State provides for indexing of mortgages under the name of the mortgagee, under the name of the secured party as if he were the mortgagee thereunder, or where indexing is by description in the same fashion as if the financing statement were a mortgage of the real estate described.
(8) When a financing statement covers shares or other ownership interests evidenced by stock certificates or other instruments, and a leasehold evidenced by a proprietary lease or either of the foregoing issued by an entity formed for the purpose of cooperative ownership of real estate and the financing statement so states, it shall be effective until a termination statement is filed.
(cf: P.L.1987, c.435, s.4)
6. The following are repealed:
Sections 1 through 28 of P.L.1963, c.168 (C.46:8A-1 et seq.);
Section 11 of P.L.1978, c.124 (C.46:8A-3.1);
Sections 1 through 30 of P.L.1969, c.257 (C.46:8B-1 et seq.);
Section 3 of P.L.1973, c.216 (C.46:8B-8.1);
Sections 2 and 3 of P.L.1979, c.157 (C.46:8B-12.1 and 46:8B-12.2)
Section 2 of P.L.1991, c.48 (C.46:8B-13.1);
P.L.1979, c.297 (C.46:8B-31 et seq.);
Section 3 of P.L.1980, c.103 (C.46:8B-38);
Sections 1 through 12 and 14 through 20 of P.L.1987, c.381
(C.46:8D-1 through 46:8D-12 and 46:8D-13 through 46:8D-18); and P.L.1993, c.30 (C.45:22A-43 through 45:22A-48).
7. This act shall take effect on the first day of the third month after enactment, except that the Commissioner of Community Affairs may immediately take such administrative action as necessary to effectuate the provisions of this act.
STATEMENT
This bill is part of a package of bills which seeks to consolidate all of the laws applicable to all types of homeowner's associations, and is based, in part, on the recommendations of the Task Force of the Assembly to Study Homeowners' Associations, which issued its report to the Legislature on January 8, 1998.
The bill is a New Jersey version of the Uniform Common Interest Ownership Act (UCIOA) which has been adopted, in full or substantial part, by 16 states. The UCIOA itself is an act of the National Conference of Commissioners on Uniform State Laws. It provides uniform guidelines for all forms of residential community associations and is applicable to condominiums, fee simple multifamily projects, home owner associations and cooperatives. The model act was modified for New Jersey by a Statewide drafting committee. The bill further combines with the model act many of the recommendations of the Task Force of the Assembly to Study Homeowners' Associations. One major recommendation of the Task Force was that the law on community associations be consolidated and applied evenly to all types of homeowners' associations. Therefore, the bill repeals and replaces many of the laws dealing with these associations, including the "Horizontal Property Act," P.L.1963, c.168 (C.46:8A-1 et seq.), the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.), as well as the "Cooperative Recording Act of New Jersey," P.L.1987, c.381 (C.46:8D-1 et seq.).
The bill consists of five separate articles, each addressing various aspects of common interest property ownership. Article 1 of the bill deals with the applicability of the act in general. Article 2 deals with the creation, alteration and termination of common interest communities. Article 3 provides the framework for the management of a common interest community, including the creation and grant of powers and duties to an executive board formed to manage the common elements of a common interest community. Article 4 concerns the protection of purchasers, and Article 5 deals with the oversight of the executive boards by the State Department of Community Affairs.
Certain provisions of the bill address the problems inherent in phased developments by allowing developers more flexibility in the planning process to meet changed conditions in the marketplace. At the same time, unit purchasers in phased developments must be specifically informed of the potential risks and consequences if there is modification of the development plan.
The bill clarifies that associations have, among other powers, the power to grant easements over common property and pledge assessment income in connection with loans.
In addition, the bill clarifies that all associations have the authority to impose fines and late charges against delinquent unit owners, provided that notice is provided and due process in the form of alternative dispute resolution proceedings are afforded to the unit owner. Although the Legislature granted that power to condominium associations through the passage of P.L.1996, c.79, that law did not include other types of homeowners' associations.
The bill retains the requirement under current law that an association provide a fair and efficient procedure for the resolution of disputes between individual unit owners and the association, and between unit owners, which shall be readily available as an alternative to litigation. The Commissioner of Community Affairs retains oversight over the implementation of these procedures.
In addition, the bill provides specific requirements for open meetings for boards, including working sessions open to unit owners, and specifies comment periods which must be set aside for unit owners wishing to participate in meetings. The bill also provides new guidelines for access to records, a limitation on the use of proxy votes, and new guidelines for the imposition of fines by an association, including a maximum fine amount that may be imposed by an association.
The bill provides governmental oversight of common interest community associations in several areas, in recognition of the quasi-governmental powers granted to them. The bill requires registration of all such associations with the Commissioner of Community Affairs and the payment of a registration fee not to exceed $60. The fees from the registration would be utilized to offset the costs incurred by the department in providing oversight and assistance to boards.
The bill creates an Office of the Ombudsman, within the Department of Community Affairs, for common interest community unit owners' associations. The Ombudsman is to provide assistance to board members or officers of an association in receiving appropriate training to enable them to execute their duties in an independent, efficient and productive manner, including the provision of a list of reference and educational materials appropriate for board members of homeowners' associations. The Ombudsman would also be a source for general budgetary guidance and could function as a liaison between associations and any entity concerning disputes regarding code compliance or inspections.
The bill amends the law commonly known as the Condominium Services Law, P.L.1989, c.299, to clarify the types of communities that are eligible for reimbursement from a municipality for services provided to residents of the community. The act defines a qualified community as one which has certain expenses paid by a not-for-profit entity consisting exclusively of unit owners within the community. Some municipalities have not provided services or reimbursed communities for services provided based on their determination that a homeowner's association executive board that is still controlled by a developer is not an association comprised exclusively of unit owners. The bill clarifies that transition of control to the unit owners of a community is not a factor for eligibility for reimbursement under the Condominium Services Law. The bill also requires the Commissioner of Community Affairs to track compliance by municipalities with the Condominium Services Law, and offer budgetary guidance, if necessary.
The bill grants to the Commissioner of Community Affairs increased authority in the oversight of community associations in recognition of their quasi-governmental functions, regardless of whether "transition" (control of the board by the unit owners) has occurred. The commissioner is specifically authorized to hear complaints and make final determinations in reported cases of violations of statutory or regulatory requirements by community associations or board members of an association. The commissioner is empowered under the bill to remove a board member for flagrant, continuing violations of statutes or regulations.