For a variety of reasons, much of New Jersey’s growth in housing over the past decades has come in the form of planned unit, or common interest, developments. In a common interest development, every owner enjoys exclusive control over some defined space, or land, on the one hand, and shared control of common land and/or improvements through an association of owners, on the other hand. Three (3) types of common interest developments: homeowners associations (HOAs), condominiums and cooperatives.
Condominiums
New Jersey’s Condominium Act, N.J.S.A. 46:8B-1 et seq. (the “Act”) is applicable to condominiums. Additionally, applicable are New Jersey’s Planned Real Estate Development Full Disclosure Act, N.J.S.A. 45:22A-21 et seq. (“PREDFDA”), and New Jersey’s Non-Profit Corporations Act, N.J.S.A. 15A:1-1 et seq. (“15A”). Pursuant to the condominium form of ownership, title to each part of the property intended for use of an owner, to the exclusion of other owners, vests in that owner, together with a proportionate interest in the remainder of the property. The “common elements” are not technically owned by the condominium association, a distinction from the HOA form of ownership. The condominium is created by virtue of a master deed, by which the owner becomes a member of that condominium. The condominium association is created to maintain the common areas and elements, and to manage community affairs.”
Homeowners Associations
New Jersey’s Condominium Act, N.J.S.A. 46:8B-1 et seq. (the “Act”) is not applicable to HOAs. Currently, the only statutes applicable to HOAs are New Jersey’s Planned Real Estate Development Full Disclosure Act, N.J.S.A. 45:22A-21 et seq. (“PREDFDA”), and New Jersey’s Non-Profit Corporations Act, N.J.S.A. 15A:1-1 et seq. (“15A”). Here, the “defined space or land” discussed above (owner’s exclusive control) is a separate, subdivided lot (not necessarily a single family home). HOAs have recreational, open space and other common facilities situated on other lots. These lots are owned by the HOA created by that community’s developer. The HOA is created by virtue of a declaration of covenants, in which one will find language subjecting each owner’s lot to it, and by which each owner is automatically a member in it.
Created in conjunction with that declaration will be a set of bylaws. The bylaws will generally govern the HOA’s governance, the duties of its board members and officers and other things typically associated with operating, administering and managing a non-profit corporation. The declaration will generally set the rules by which each owner must live, the obligations of both owners and the HOA, and the property rights enjoyed by both owners and the HOA. HOAs often, but need not, regulate the external appearance of homes and/or lots, and either the declaration or the bylaws, or both, will address it.
Cooperatives
The Act is not applicable to Cooperatives. PREDFDA is applicable to cooperatives. New Jersey’s Cooperative Recording Act, N.J.S.A. 46:8D-1 et seq. as well as New Jersey’s Corporations statute, N.J.S.A. 14A:1-1 et seq. Here, ownership of real property on which the cooperative sits and any personal property belonging to the cooperative is enjoyed by, generally, a for-profit corporation. Individuals purchase shares of stock in that corporation. Those shares carry with them the right to occupy a dwelling with the cooperative pursuant to a “proprietary lease”. By virtue of the Cooperative Recording Act, each share purchaser acquires an undivided percentage interest in the cooperative’s common elements (this makes cooperatives created after May, 1988 more akin to condominiums). In a cooperative, legal title to the lands, building, dwelling space and improvements remains in the hands of the cooperative corporation.
