A new proposal working its way through the Legislature would protect by statute an additional source of revenue for many condominium associations in New Jersey. Without much media attention or fanfare, Bill A-2822 was introduced in the New Jersey Assembly on March 9, 2006, sponsored by Assemblymen Frederick Scalera (D – Nutley) and Peter J. Biondi (R – Somerville). This legislation would permit a common interest community association – if authorized by its master deed or by-laws – to levy and collect a capital contribution, membership fee, HOA transfer fee, or other charge upon the sale or transfer of a unit for the purpose of defraying the association’s common expenses.
This bill would also settle the disputes caused by the Appellate Division’s decision in Micheve, L.L.C. v. Wyndham Place at Freehold Condo. Ass’n, 381 N.J. Super. 148 (App. Div. 2005). Decided in October 2005, Micheve invalidated a condominium working capital contribution authorized solely by the condominium’s board-enacted resolution. The Court found that such a resolution could not be enforced because it violated the provisions of the New Jersey Condominium Act requiring common expenses and monthly maintenance fees to be charged to all unit owners based on their proportionate interests in the common elements. Additionally, the Court’s decision called into question the validity of collecting such a capital contribution or membership fee – even if authorized by an association’s master deed or by-laws – suggesting that such a charge may also be violative of the Condominium Act.
Bill A-2822 – as proposed – would amend the Condominium Act, N.J.S.A. 46:8B-15(e), to address the Court’s concerns in Micheve, and specifically allow for an association to collect such a fee if authorized by its master deed or by-laws. The proposed language of the Bill states “[i]f authorized by the master deed or bylaws, the association may levy and collect a capital contribution, membership fee or other charge upon the initial sale or subsequent resale of a unit, for the purpose of defraying common expenses, or otherwise provided that such charge shall not exceed 18 times the amount of the most recent monthly common expense assessment for that unit.” After coming out of the Assembly’s Housing and Local Government Committee, this version of Bill A-2822 was overwhelmingly passed by the Assembly on June 22, 2006, by a vote of 68-5, and then promptly referred to the Senate Community and Urban Affairs Committee. It is expected to be voted on by the Senate and may end up before the Governor within the coming months.
While this legislation would not provide any greater rights to condominium associations that currently charge capital contributions or HOA transfer fees and membership fees pursuant to their master deed and by-laws, it would specifically authorize by statute the issue left undecided by Micheve – namely whether capital contributions in general violate the Condominium Act. Moreover, the legislation would authorize condominium associations who do not have such provisions in their master deed and by-laws to validly enact such amendments requiring new buyers to pay certain capital contributions and membership fees upon the purchase of their units. Finally, this Bill would reinforce the Court’s decision in Micheve making it illegal for condominium associations to collect capital contributions enacted solely by Resolution.
Stark & Stark will continue to monitor this significant legislation and provide timely updates as to its progress. If you would like to discuss the contents of this blog or how it affects your association in more detail, please contact one of the attorneys in Stark & Stark’s Community Associations Group.
