New Jersey-2022-A4377-Introduced

An Act concerning common interest communities and supplementing Title 46 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in this act:

"Advisory council" means the Advisory Council on Common Interest Communities established pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Association" means the entity responsible for the administration of a common interest community, which entity may be incorporated or unincorporated.

"Commissioner" means the Commissioner of Community Affairs.

"Common interest community" means real estate described in a declaration with respect to which a person is obligated by virtue of unit ownership to pay for a share of: real estate taxes; insurance premiums; maintenance; or improvement of, or services or other expenses related to, common elements, other units, or other real estate described in the declaration. Common interest community shall include condominiums, cooperatives, and any other real estate development composed of individually owned property units and common property jointly owned and managed by the unit owners as an association.

"Department" means the Department of Community Affairs.

"Office" means the Office of the Ombudsman for Common Interest Communities established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Ombudsman" means the person appointed as head of the office pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Trust fund" means the Common Interest Community Homeowners' Association Trust Fund established pursuant to section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill).

2. a. With respect to common interest communities, the department shall have authority to:

(1) initiate, receive, hear and review complaints, adopt rules, hold hearings, make findings and impose sanctions with regard to any of the following matters:

(a) maintaining and granting access to records required to be maintained by the association and made available to homeowners;

(b) through the auspices of the office the comportment of fair elections for association governing board members and officers and the establishment of voting procedures and forms as the commissioner finds necessary, including, but not limited to, ballots, absentee ballots and proxy ballots;

(c) establishing and implementing a fair and efficient procedure for the resolution of disputes between associations and homeowners;

(d) determining whether a conflict of interest on the part of association trustees, officers and employees exists and whether to impose a sanction;

(2) issue subpoenas for the production of documents and the attendance of witnesses with respect to the investigation of any complaint;

(3) forward to the appropriate governmental officials any information that may indicate violation of any statute, criminal or otherwise, or any rules of court or professional conduct;

(4) render advisory opinions as to whether a given state of facts or circumstances constitutes a violation of any statute or rule applicable to common interest community associations;

(5) enforce all statutes and regulations imposing any duty upon common interest community associations;

(6) remove from office, after notice and the opportunity for a hearing, any governing board member or officer who shall fail to comply with any order issued by the commissioner to cease and desist from violating any statute, rule, court order or proper vote of the owners. Following any such removal, the department shall provide such assistance as may be required by the association of a common interest community in scheduling and holding elections or in managing the association until such time as the governing board is able to function properly. Notice, which shall include the underlying basis therefore, of any fine imposed upon the association or a board member, or removal of an governing board member or officer by the department shall be provided to all homeowners by the governing board within 30 days of the action and shall be entered upon the minutes of the next meeting of the governing board or of the association;

(7) set standards and procedures for dispute resolution at the association level in conjunction with the office in accordance with section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(8) select, assign and provide trained and impartial volunteer mediators for the purpose of resolving disputes in conjunction with the office in accordance with section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(9) promulgate all rules and regulations necessary to effectuate P.L. , c. (C. ) (pending before the Legislature as this bill) in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).

b. (1) If the department determines, after notice, that an officer, governing board member, or property manager of an association has:

(a) violated the "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B-1 et seq.), "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), or any other statute or regulation governing homeowners' associations hereinafter enacted;

(b) directly or through an agent or employee, knowingly engaged in any violation of the governing documents of the association; or

then the department may issue an order requiring the person to cease and desist from the unlawful practice or to take such other affirmative action as in the judgment of the department will carry out the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill).

(2) If the department makes a finding of fact in writing that the public interest will be irreparably harmed by delay in issuing an order, it may issue a temporary cease and desist order. Every temporary cease and desist order shall include in its terms a provision that upon request a hearing shall be held within 10 days of such request to determine whether it becomes permanent. Such temporary cease and desist order shall be forwarded by certified mail.

(3) The department shall provide an opportunity for a hearing for any association of a common interest community prior to the imposition of any sanction, including monetary fines. Associations shall be subject to fines only after they have failed or refused to comply with an order of the department. The maximum fine that may be levied against an association for failure to comply with an order to cease and desist from continuing to violate an order of the department shall be the greater of $2,500 or one percent of the total annual expenditures as listed on the most recently adopted budget, per order. The department may impose a monetary fine on a board member or members, not to exceed $5,000, if it is determined that the board member or members are solely responsible for the continued failure of the board to comply with an order or orders issued pursuant to this section, and the assessment of a fine against the association would be unfair under the circumstances. In such a case, the offending board member may not use the association attorney, but may obtain private counsel at the member's own expense. Appeal from a department determination pursuant to this section may be made to the Office of Administrative Law.

(4) The penalties pursuant to this section may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). Jurisdiction to enforce such penalties is hereby conferred upon the courts specified by section 2 of P.L.1999, c.274 (C.2A:58-11). Suit may be brought by the State of New Jersey; payment of a money judgment pursuant hereto shall be remitted to the State Treasurer, for deposit into the trust fund;

c. The authority provided to the department pursuant to P.L. c, (C. ) (pending before the Legislature as this bill) shall only apply to common interest communities with over 100 units and are intended to supplement, not replace, existing oversight authority provided under the "Common Interest Community and Homeowners' Association Act," P.L.1969, c.257 (C.46:8B-1 et seq.), "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), or any other statute or regulation governing homeowners' associations.

3. a. There is established in, but not of, the Department of Community Affairs, the Advisory Council on Common Interest Communities. The council shall consist of nine members appointed by the Governor, and shall include two representatives of the New Jersey Common-Interest Homeowners Coalition, one representative from the League of Women Voters of New Jersey, and one representative of the Center for Government Studies, Rutgers University. The other five members shall be persons who own units in common interest communities, not more than two of whom serve, or have served within the immediately preceding 48 months, on the governing boards of their respective associations. The ombudsman appointed pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall serve as an ex officio, nonvoting member of the advisory council.

Within 60 days of the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), and at least one month prior to the expiration of the term of a member nominated by an organization listed above, that organization shall submit to the Governor three nominees for consideration, from which the Governor may choose. If any organization does not submit three nominees for consideration at any time required, the Governor may appoint a member of the Governor's choice.

Members shall be appointed to two-year terms; however, of the five unit owner members first appointed, four shall be appointed initially to a one year term.

b. The functions of the advisory council shall be to:

(1) receive, from the public and self-initiated, input regarding issues of concern with respect to common interest communities and recommendations for changes in the law concerning common interest communities. The issues that the advisory council shall consider include, but are not limited to, the rights and responsibilities of the unit owners in relation to the rights and responsibilities of the association;

(2) review, evaluate, and advise the department concerning revisions and adoption of rules affecting common interest communities; and

(3) recommend improvements, if needed, to the education or other current programs impacting common interest communities.

4. a. There is established in the Department of Community Affairs the Office of the Ombudsman for Common Interest Communities, which, for purposes of separation from activities related to enforcement powers granted to the commissioner over developers, and over owner-controlled governing boards, shall be separate and apart from any other division within the department.

b. The office shall be headed by the ombudsman, who shall be appointed by the commissioner and shall not function in the department in any other capacity other than to carry out the purposes of this section. The ombudsman shall be an attorney in good standing admitted to the bar of New Jersey and qualified by experience in the areas of planned real estate developments and alternative dispute resolution procedures. No person who shall have been a unit owner or an employee of, or provider of professional or business services to, any homeowners' association of a common interest community or organization representing homeowners' associations within the preceding 36 month period shall be eligible for appointment as ombudsman. An officer or full-time employee of the office may not actively engage in any other business or profession; serve as the representative of any political party, executive committee, or other governing body of a political party; serve as an executive, officer, or employee of a political party; receive remuneration for activities on behalf of any candidate for public office; or engage in soliciting votes or other activities on behalf of a candidate for public office. The ombudsman or any employee of the office may not become a candidate for election to public office unless the ombudsman or employee first resigns office or employment, as applicable. The office shall be funded from moneys deposited into the trust fund. The ombudsman shall have the powers that are necessary to carry out the duties of the office, including the following specific powers:

(1) maintain access to and use of all files and records of the department;

(2) employ professional and clerical staff as necessary for the efficient operation of the office;

(3) issue reports and recommendations to the department, its divisions, and the advisory council. The ombudsman shall make such recommendations as deemed appropriate for legislation relative to departmental rules, jurisdiction, personnel, and functions;

(4) act as liaison between the department, unit owners, governing board members, community association property managers, and other affected parties. The ombudsman shall develop policies and procedures to assist unit owners, governing board members, community association property managers, and other affected parties to understand their rights and responsibilities as set forth in the statutes and the governing documents governing their respective association;

(5) coordinate and assist in the preparation and adoption of educational and reference material, and endeavor to coordinate with private or volunteer providers of these services, so that the availability of these resources is made known to the largest possible audience;

(6) monitor and review procedures and disputes concerning common interest community elections or meetings, including, but not limited to, recommending that the department pursue enforcement action in any manner where there is reasonable cause to believe that election misconduct has occurred;

(7) monitor and mediate claims for "repair and deduct" made pursuant to section 16 of P.L.1969, c.257 (C.46:8B-16);

(8) recommend changes to the department for changes in rules and procedures for the filing, investigation, and resolution of complaints filed by unit owners, associations, and managers;

(9) provide resources to assist members of governing boards and officers of associations to carry out their powers and duties consistent with the statutes, department rules, and the common interest community governing documents; this activity shall be coordinated with the Center for Government Services, Rutgers University and shall include listings of appropriate reference and educational materials and general budgetary and financial guidance. The ombudsman and the Center for Government Services may make contractual arrangements to provide authorized training and materials with recognized trade organizations currently providing such services to board members;

(10) (a) encourage and facilitate voluntary meetings with and between unit owners, governing boards, community association property managers, and other affected parties when the meetings may assist in resolving a dispute within a community association before a person submits a dispute for a formal or administrative remedy. The ombudsman shall act as a neutral resource for both the rights and responsibilities of unit owners, associations, and board members;

(b) develop and maintain, in consultation with the Association Regulation Unit in the Department of Community Affairs, a pool and list of volunteers throughout the State who have been trained in dispute resolution and to establish procedures and a system of training for such volunteers;

(c) obtain and compile information concerning alternative dispute resolution proceedings throughout the State that may serve as a resource on the methods used to resolve disputes, for the benefit of associations, homeowners and volunteer dispute resolvers;

(d) coordinate the selection and agreement by the parties to a mediator and the dates agreed upon for mediation;

(e) conduct dispute resolution workshops for governing board members and homeowners;

(11) assist associations in their dealings with municipalities and with other State and local regulatory agencies;

(12) assist owners of low and moderate income units in inclusionary common interest communities and their governing boards in developing methods to ensure the continued affordability of those units, including grants or loans through the Council on Affordable Housing; and

(13) assist homeowners in common interest communities in which there are shared utility bills to pay those bills when the association has fallen into arrears and the continued habitability of the units is at stake. The commissioner may issue an order to a governing board to enter into a payment agreement in such an instance, and may remove a governing board member who fails to comply with such an order.

5. a. Within 90 days of the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), and annually on the same date thereafter, all homeowners associations shall register with the commissioner, on such form as the commissioner shall prescribe, and shall pay an annual registration fee, which the commissioner shall establish by rule, which fee shall not exceed the sum of three dollars for each unit to which a vote as a member of the association is allocated within the common interest community in accordance with P.L. , c. (C. ) (pending before the Legislature as this bill). This fee shall not be adjusted annually by the commissioner. Associations shall collect the fee on a per voting unit basis and report the fee paid in their financial documents separate from any other assessment or association charges. An association may file a lien on a unit if the owner thereof refuses to pay the registration fee as required by this section, and may also impose fines therefor and avail itself of the procedure outlined in section b. of this section. Associations formed subsequent to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) shall register within 30 days of the formation of the association; provided, however, that any association required to be registered with the department shall be registered not later than the date of registration of the common interest community. Any association registration fee not paid in full by the date due shall be subject to penalty charges in the amount of one and one half percent per month or portion thereof on the unpaid balance. An association that has not paid in full all outstanding fees, together with any penalty thereon, shall not have the authority, notwithstanding any other law to the contrary, to impose fines, record liens, or restrict privileges until the balance is paid in full, or, in flagrant cases, and upon proper notice and due process allowing for a hearing, may have its officers removed from office or its corporation status voided, pursuant to an order of the commissioner.

b. In cases of extreme delinquency in the payment of common expenses of at least 6 months or more, or in the case of delinquency of payment of common fees, late fees, or fines totaling more than $2,500, an association shall be eligible to apply to the office for formal arbitration to reduce the outstanding charges to a judgment for a writ of attachment against the delinquent owner or owners. Upon a finding by the arbitrator that the outstanding assessments, charges, or fines were properly imposed by an association upon the owner, and are duly owed, and the delinquency is not based on severe financial inability to pay, such as illness or loss of employment, a lien may be recorded on the defaulting owners' unit if not previously filed, and the arbitrator may apply, upon the approval of the ombudsman, for a judgment for a writ of attachment from a court of competent jurisdiction in the name of the association against the personal assets of the owner of the unit. If such a writ is obtained by an arbitrator, the arbitrator may cause a levy to be issued on behalf of the association upon any bank accounts or other known assets of an owner and shall turn over any proceeds obtained to the association to which such amounts are due and owing.

c. All registration fees and penalties received by the department pursuant to this section shall be deposited as specified in the paragraphs below in an interest bearing, non-lapsing revolving fund, entitled the "Common Interest Community Homeowners' Association Trust Fund," to be held by the State Treasurer. Moneys held in this non-lapsing revolving fund shall be continuously appropriated to the department for the following purposes and in the proportions specified:

(1) those amounts as available from the funds deposited into the fund in accordance with section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill), for the purposes of making grants to associations comprised, in part or in whole, of low and moderate income households for assistance to those households in the payment of the common maintenance expenses;

(2) those amounts as available from the registration fees collected pursuant to this section as necessary in the discretion of the commissioner for:

(a) the Center for Government Services, Rutgers University for the purposes of providing educational training or training materials for board members;

(b) the Center for Negotiation and Conflict Resolution, Rutgers University for the purposes of providing conflict resolution training for board members, property managers and owners;

(c) the Association Regulation Unit in the Department of Community Affairs, for the purpose of providing arbitration services and for training of volunteer mediators; and

(d) the purposes of defraying administrative costs of the department in the enforcement and effectuation of P.L. , c. (C. ) (pending before the Legislature as this bill) and P.L.1969, c.257, which shall include funding for the booklet and advisory council expenses, if any, as required by P.L. , c. (C. ) (pending before the Legislature as this bill).

d. All funds collected shall be dedicated and expended solely for the purposes provided in this section. In the event funds are appropriated or transferred from this fund for any other purpose in contradiction of this section, then the obligation of associations to pay the annual registration fee pursuant to this section shall be suspended until such time as the full amount of the funds transferred or appropriated is reinstated to the fund, and all costs which cannot be paid from the fund due to insufficiencies thereafter shall be paid from the General Fund of the State. Any claims that transfers have been made outside of the purposes of this section may be submitted to the Joint Budget Oversight Committee of the State Legislature, or its successor committee for its review.

e. All associations which register shall also file annually thereafter an annual report, which shall include:

(1) the names of the current officers or trustees of the governing board, employees names, and salaries and bonuses paid, if any;

(2) a copy of the most recent bylaws and rules, if any were changed since the previous report;

(3) a copy of the most recent budget adopted and financial statement;

(4) the number and nature of complaints and ADR proceedings entered into by the board as a result of the complaints;

(5) the amounts and nature of fines imposed; and

(6) any information deemed to be pertinent by the commissioner.

The report required by this section shall be distributed annually to all of the members of the association by the association. This report may contain a copy of the association's most recent bylaws and rules, but it is not required to contain such information.

6. The department shall prepare and publish a booklet, which shall be made available at cost to the general public, to associations and to unit owners in common interest communities to serve as a general guide to common interest community associations. The booklet shall be distributed by the association to each unit owner free of charge initially, and at cost as required for distribution to purchasers; it shall be the duty of each selling unit owner to provide a copy of the booklet to a purchaser of the unit at or before the time of signing of the sales contract. The booklet shall include, at a minimum, the following:

a. an explanation of the nature of home ownership in a common interest community and a glossary of relevant terms, including, but not limited to, "master declaration," "bylaws," "master deed," "covenants and restrictions," and "common elements";

b. a description of the rights and responsibilities of unit owners, including reference to applicable statutes and rules;

c. a description of the duties and powers of, and restrictions on, executive boards, including reference to applicable statutes and rules. The booklet shall include information concerning conflict of interest requirements applicable to executive board members and officers and to professionals hired by associations and shall also include reference to any other sources of information that may be recommended by the commissioner as being of assistance to executive board members and officers in the discharge of their duties and to the public and professional bodies having authority to investigate allegations of statutory or rule violations by board members and officers or by managers, attorneys, accountants, or other professionals;

d. a description of the statutory and regulatory requirements for association bylaws or rules and such other material as the commissioner shall deem useful; and

e. a listing of documents and other information that a potential purchaser of a unit in a common interest community should obtain before entering into a contract to purchase a unit, including, but not limited to: copies of the association's governing documents; a copy of the latest capital reserve study, if any, showing the condition, life expectancy and replacement costs of major mechanical systems and other common elements; any litigation pending against the association; any pending notices or orders issued by the department or any other governmental entity; the association's procedures for alternate dispute resolution, adopting rules and regulations, providing access to records, approval of budgets, and review of unit owners' applications to do work on their units; delinquency and foreclosure rates; the association's insurance coverages; and governmental and non-governmental remedies available in the event of violation of the rights of unit owners. These documents and this information shall be made available to prospective purchasers upon written request and copies shall be provided, for a charge not exceeding the reasonable cost of copying or printing, to any person who has contracted to purchase a unit within the jurisdiction of the association.

7. There shall be set aside from the registration fees collected from developers pursuant to section 7 of P.L.1977, c.419 (C.45:22A-27) and the regulations promulgated pursuant thereto, an amount equal to $10 per lot, parcel, unit or interest, which amount shall be deposited into trust fund for the purposes of making loans to common interest community associations which are formed to manage communities in which are included units restricted to occupancy by low and moderate income households.

8. This act shall take effect on the first day of the sixth month after enactment, except that the Commissioner of Community Affairs shall immediately take such administrative action as necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

STATEMENT

This bill enhances the Department of Community Affairs (DCA) regulatory powers over owner-controlled governing boards found within common interest communities; creates an Advisory Council on Common Interest Communities; establishes the Office of Ombudsman for Common Interest Communities; and creates Common Interest Community Homeowners' Association Trust Fund. Additionally this bill requires DCA to prepare and publish and distribute a booklet that serves a general guide to community associations to owners in common interest communities. Lastly, the bill provides funding for grants and loans to homeowner associations maintaining common property in inclusionary common interest communities containing units reserved for low and moderate income families.

Under this bill common interest communities would include condominiums, cooperatives, and any other real estate development composed of individually owned property units and common property jointly owned and managed by the unit owners as an association.

Under the bill DCA would have the power to initiate, receive, hear and review complaints, adopt rules, hold hearings, make findings and impose sanctions. Additionally, DCA would have the power to issue subpoenas for the production of documents and the attendance of witnesses with respect to the investigation of any complaint; to forward to the appropriate governmental officials any information that may indicate violation of any statute, criminal or otherwise, or any rules of court or professional conduct; to render advisory opinions as to whether a given state of facts or circumstances would constitute a violation of any statute or rule applicable to associations; to enforce all statutes and regulations imposing any duty upon associations; to remove from office, after notice and the opportunity for a hearing, any governing board member or officer who fails to comply with any order issued by the commissioner to cease and desist from violating any statute, rule, court order or proper vote of the owners; to set standards and procedures for dispute resolution at the association level; and to select, assign and provide trained and impartial volunteer mediators for the purpose of resolving disputes in conjunction with the Office of the Ombudsman of Common Interest Communities. These new authorities provided to DCA would only apply to common interest communities with over 100 units.

The bill also creates an Advisory Council on Common Interest Communities to assist DCA in formulating and revising its regulations and policies regarding common interest communities. Additionally, the advisory council would recommend improvements to DCA, if needed, in the education or other current programs impacting common interest communities. The advisory council would consist of nine members appointed by the Governor, and would contain representative members for owners, board members, governmental entities and a nonpartisan voting rights group.

This bill creates a new entity within DCA, known as the Office of the Ombudsman for Common Interest Communities. This office would assist homeowners in understanding their rights and responsibilities and the remedies available to them, as well as assist governing board members and officers of associations in receiving appropriate training to allow them to properly discharge their functions and duties. Additionally, this office would function as a liaison between associations and any entity concerning disputes regarding code compliance or inspections. The costs associated with the Office of the Ombudsman for Common Interest Communities under the bill would be met by a registration fee required to be paid annually by each unit owner assigned a vote as a member of a common interest community. The fee is not subject to being increased by the commissioner.

Under the bill, 90 days after enactment all homeowners associations are required to register with DCA, and pay an annual registration fee. The fee would not exceed three dollars for each unit to which a vote as a member of the association is allocated within the common interest community. This fee would not be adjusted annually by the commissioner. Associations would collect the fee on a per voting unit basis and report the fee paid in their financial documents separate from any other assessment or association charges. All registration fees and penalty moneys received by DCA would be deposited in an interest bearing, non lapsing revolving fund, entitled the "Common Interest Community Homeowners' Association Trust Fund," to be held by the State Treasurer. Moneys held in this non-lapsing revolving fund would be continuously appropriated to DCA for the purposes of making grants to associations comprised, in part or in whole, of low and moderate income households for assistance to those households in the payment of the common maintenance expenses. As well as, used by the Center for Government Services, Rutgers University; for the purposes of providing educational training or training materials for board members; the Center for Negotiation and Conflict Resolution, Rutgers University for the purposes of providing conflict resolution training for board members, property managers and owners; the Association Regulation Unit in DCA for the purpose of providing arbitration services and for training of volunteer mediators; and the purposes of defraying administrative costs of the department for the booklet and Advisory Council expenses, if any.

Under the bill, DCA is required to prepare and publish a booklet, which is to be made available at cost to the general public, to associations and to unit owners in common interest communities to serve as a general guide to community associations. The booklet would be distributed by the association to each unit owner free of charge initially, and at cost as required for distribution to purchasers; it will be the duty of each selling unit owner to provide a copy of the booklet to a purchaser of the unit at or before the time of signing of the sales contract.

Under the bill, funding for grants and loans to homeowner associations maintaining common property in inclusionary common interest communities containing units reserved for low and moderate income families, would be supported by a set-aside of a portion of the registration fees now charged developers of such communities.