Recently our firm McNally & Bellino, LLC has been inundated with calls from frustrated homeowners involved in disputes with homeowners’ associations and condominium boards. In some instances, it may be individual board directors who are creating headaches for homeowners. The complaints range from disagreements over outdoor furniture to aluminum siding. Usually, the homeowner claims the board or director is treating him/her unfairly relative to the other homeowners. In other instances, the homeowners claim the directors are acting in a self-serving fashion, i.e., placing the interest of the board over that of the homeowners. Unquestionably the association board has an obligation to look out for the interest of the homeowners (i.e., they owe a fiduciary duty to them). That does not mean the board has litigation exposure arising from errors in their decision making. Rather, the board is required to act in compliance with the Association’s governing documents, e.g., the by-laws as well as regulatory statutes. The board is also bound not to act fraudulently, self-serving and/or unconscionably.
In considering what duties a homeowners’ association owes to its members (i.e., the homeowners), a good starting point is the Association By-Laws. This is the large document you received at the closing either from the board or the sellers, likely did not read and threw in a drawer. The by-laws set forth the powers and restrictions of the board. It also explains how homeowners become directors and under what circumstances directors can be removed. While the by-laws usually grant broad powers to a board to act on behalf of the homeowners there are limits and directors cannot act if the by-laws do not grant them the authority.
In addition to the by-laws themselves, there exist statutes and regulations which detail such things as, for example, how directors may be removed by homeowners. Generally, the removal of directors can be initiated by submitting a petition to the board, signed by fifty-one percent (51%) of the association members. A special election is then to be held within sixty (60) days of receipt of the petition.
In May of 2020, the New Jersey Department of Community Affairs (“DCA”) published new regulations for community associations to follow pertaining to membership voting, election procedures and by-law amendment, among other things, to implement the legislative initiatives set forth in the Radburn Amendment to the Planned Real Estate Development Full Disclosure Act. The new regulations also provide a process for unit owners to file a complaint with the DCA for an Association’s non-compliance with the regulations and empowers the DCA with discretion to levy fines and issue penalties for continued non-compliance. However, change is often a slow process, and as such, if you or someone you know are having problems with an Association, a good first step would be to have an attorney review the Association’s governing documents to determine if it is up to date with current law.
Knowing your rights as a member of an association is an important aspect of homeownership. The attorneys at McNally & Bellino LLC stand ready to answer your questions when dealing with association disputes.
