New Jersey Condominium Transition Agreements, from the Association's view point

Transition Agreements for Condominiums:   Let the Association BeWare

Transition is every association’s independence day.   It marks leaving home, growing up, being “on your own.”

Transition turns responsibility for the common elements and for running the project over to the Association.  The Developer bids you farewell  and leaves the project.

A transition agreement is often signed which in formal terms depicts this separation.  Often the first draft presented to the Association comes from the Developer.  Probably the Association should not sign it but make changes.

  No question, the Associations needs its lawyer to review the document.  Do not try to save money here.

The big issue in the agreement is the release the  builder wants to obtain  from the

Association.  From the Developers’ standpoint, it wants to fix whatever needs to be fixed and leave for good.

The Association may want the Developer to remain liable for repairs for a given time period.  In other words, not only does the developer have to fix whats broken,  but enough time must pass to show that everything was properly fixed.

The builder may also want the association to defend and indemnify it from third party claims.  Really?  When did the Association become an insurance company?   Trick question.   It never did and this issue needs to be looked at and negotiated.

The Association may have to certify it received all transition related documents from the developer.  If so, the Developer must first certify this is true.

The Association may be asked to represent that it is confident all of the books and affairs are in order when transition occurs.   If so,   the Association needs to independently verify this is so.

And who will identify all common elements and verify they were properly installed and functioning.  Some common elements are missed all together in transition.  An expert must be retained to make sure this does not happen at your complex.

Yes, this really is a multifaceted project.  It does not have to cost a small fortune.   But no, doubt,  from the Associations standpoint it must be properly done.

Lieberman & Blecher represents community associations within the State of New Jersey.            www.liebermanblecher.com

Condominium Decks Collapse -- Who is Responsible

Wildwood Missouri residents who reside at the Sandalwood Creek Condominium Community need to look up at all times, especially to avoid  collapsing decks.  A deck attached to a residential unit collapsed this past Memorial Day when four people were standing on it.  All four are now in the hospital.

County officials came to the scene to evaluate all of the decks in the community and the news is not good.  It appears they may not meet current code requirements and some news reports report findings that other deck collapses in the community are foreseeable.

The decks are 30 years old and it appears many have not been properly maintained.  Some appear to be rotting.   One news crew found a decks that was visibly sagging, suggesting that it may be next in line.

So --who is responsible to repair these decks?    Of course it depends on state law and the association documents.  But in many instances, the homeowner will be responsible.

The reason is that these decks are often called "limited" common elements.  They are common elements because they fall beyond the "finished walls in."  But they are "limited," because only the adjoining unit owner can enjoy them, or in this case fall from them.  In these cases often it is the unit owner who must maintain, and if need be replace, the deck structure.

Some news reports suggest that this is the case in Wildwood Missouri.  But everyone may not agree and ultimately a Court may have to interpret the documents in question.

Who ever is responsible aside, decks must routinely inspected and maintained.  And they must be replaced when they are no longer safe.  Even if common funds will not be used to do this, the Association usually has the inherent right to ensure that this work is undertaken on a regular basis.

Stuart Lieberman Is an attorney with Princeton's Lieberman & Blecher.    The firm represents community associations in New Jersey and New York.  www.liebermanblecher.com

Associations May Challenge Wrongful Insurance Claim Denials

Homeowner Associations and Condominiums often ask their insurance companies to pay for needed claims. This can include environmental issues,  fire damage claims, thefts and claims relating to employee misconduct. 

While some claims may not be covered, you should know that some insuance companies do deny claims in cases where at least some coverage SHOULD be provided.

When insurance companies deny claims, they must do so for reasons that relate to the insurance policy. Insurance policies are written contracts between the insurance company, also known as the insurer, and the policyholder, also called the insured. If a claim occurs that is covered under the terms of the insurance policy, the carrier must provide coverage.

It is always wrong for an insurance company to deny coverage when no reason exists for denying coverage. When you feel that your insurance company has wrongfully denied your claim, you may have to sue your insurance company. This type of lawsuit is called a declaratory judgment action. You are asking the Court to declare that there is coverage and to order the carrier to pay all necessary costs.

In certain instances, if an insurance company really misbehaves, Courts will allow cases to proceed seeking punitive damages against the insurer even when it ultimately is determined that there is no right to coverage. In these cases, Courts have generally held that insurance companies have a duty to deal with their insureds fairly and in good faith.

This duty of good faith and fair dealing comes from a recognition that insurance companies have a special relationship with their policyholders. Policyholders purchase insurance so that they know that in a time of need, an insurance carrier will be standing next to them. When an insurance company intentionally avoids its obligations by acting in bad faith, this leaves the policyholder in an even worse situation then he/she should be in.

It is incumbent upon the insurance carrier to act fairly and in good faith. The carrier must make a decision based on the language in the contract and the carrier needs to remember that it enjoys a special relationship with the policyholder, one based on trust, and sold on this notion of trust. We all know that we are told that we are in "good hands" with one insurance company and another acts like a "good neighbor."

In fact, many companies are responsible. But when policyholders are mistreated, they need to remember that a statute of limitations may require that litigation be filed by a certain date or the right will be lost. In such cases, policyholders should promptly seek out the services of experienced legal counsel.
Insurance companies have many lawyers who work for them and protect them. More often than not, they treat their policyholders fairly and with dignity. But in the rare instance when a carrier act badly, you should even the sides by retaining competent professional assistance to fight back and protect your rights.

Righting a Wrong Condo Board

Representing several home owners associations and condo boards, as well as sitting on three of them as a Board member (President once!) , I have heard a lot of complaints from all sides.

Board members think that no one appreciates them (which is generally true). Unit owners worry that some Boards have gone too far, asserting too much power. Or that they don�t care. Or that they are "letting things go."

Clearly, there are pros and cons to living in a condo form community. While you surrender some independence, on the one hand, on the other you share costs and responsibilities, which in a way lightens the load for everyone.

This form of home ownership has many benefits and it works very well most of the time. Yes, everyone gripes at one time or another, but for the most part this is a system that meets everyone�s needs.

Unfortunately, there are some exceptions. There are some, really just a few, Boards that are out of control. Or that are not doing their job.

And worse yet, there are some Boards that are more interested in what will best serve the interests of the Board members rather than the community as a whole. Of bad Boards, this is the worst kind of offender by far. Because here we are not talking about sloppiness or nonfeasance, here we are actually talking about Board involvement in self dealing.

As I said, these "bad Boards" are by far the exception. If you encounter one, you need to know the rules, and your legal rights.

The rules are that Board members have a special legal duty to the unit owners. This is called a fiduciary duty.

This means that they must put the interests of the entire Association ahead of their own interests. And when there exists any kind of conflict of interest that might preclude this kind of mind set, they must step aside and not participate in a vote or a particular Board action. Simply put, a Board member can never make a decision that promotes his or her own interest over the interests of the unit owners.

Board members must make decisions that follow the following: state laws, local laws, and the association governing documents. Usually Boards have lawyers who help ensure that they follow these requirements and act accordingly.

Boards must protect the Association assets, often called common grounds or common elements. This means that they must be properly maintained, they must meet legal requirements for safety, they must be insured, and replaced when necessary.

And as part of this, Boards must ensure that everyone pays their Association fees and special assessments. Without this money, the Association simply cannot function and the Board must ensure that people pay, and pay on time.

Some Boards ignore their responsibilities either as to applicable laws or association documents. When this happens the first thing an affected owner should do is raise the violation to the Board�s attention.

Most likely, the mistake was accidental and by politely pointing it out, it will be fixed. Many Board members really do not understand their individual obligations. Sometimes they forget or become confused. Calm and appropriate mannered discussion will usually fix this kind of error.

Every once in a while a Board acts improperly and does so deliberately, or refuses to correct a legal defect even after it is pointed out and documented. When this occurs, unit owners may seek recourse in the Courts. This is not a good situation and should not be taken lightly.

In addition, various States regulate associations through some kind of agency process. If that applies where you live, you may be able to contact the agency and ask for an investigation and relief.

Sometimes, but rarely, Board members make decisions that favor themselves personally, and are not in the interests of the Association as a whole. This is a serious breach of trust that may be remedied by serious litigation� litigation that may impact the wrongdoing Board members personally in the form of a legal judgment for monetary damages. Again, this is an extreme any very rare situation, that must never be taken lightly by Board members or unit owners.

Associations usually are insured, and these policies will often cover legal expenses when an Association has been sued, even by a unit owner.

But allegations as serious as fraud and self dealing may likely not be covered by insurance �leaving a wrongdoing Board member in a very bad position of having to hire his or her own lawyer to defend against a lawsuit.

Condo forms of government generally work well and meet a lot of necessary needs. When Boards make errors, they are most often addressed through civil discourse. Boards usually want to do the right thing.

But in the rare event that civility fails, State agencies may be able to assist unit owners. If that is not available as recourse, and the fight is over an important issue, litigation may be considered as a final choice of action.

I represent  Condominiums and Homeowner Associations throughout New Jersey. I can be reached at 732-355-1311.