Holbert v. Great Gorge Village South Condominium Council, Inc.

• Court: New Jersey Superior Court
• Citation: Holbert v. Great Gorge Village South Condominium Council, Inc., 656 A.2d 1315, 281 N.J.Super. 222 (N.J. Super. 1994)
• Decision Date: 14 November 1994
• Parties: Arlene HOLBERT, Plaintiff, v. GREAT GORGE VILLAGE SOUTH CONDOMINIUM COUNCIL, INC., Stonehill Property Owners Association, Inc., Great Mountain Development Corporation, Successor by Merger to Stonehill of Vernon, Inc., Stonehill Management Company, Roscommon Corporation, John Does 1 through 20 and XYZ Corporations 1 through 5, Defendants. STONEHILL PROPERTY OWNERS ASSOCIATION, INC., a non-profit New Jersey Corporation, and Great Gorge Village South Condominium Council, Inc., a non-profit New Jersey Corporation, Plaintiffs, v. Jefferson HOLBERT and Arlene Holbert, Defendants.

Page 222

281 N.J.Super. 222

656 A.2d 1315

Arlene HOLBERT, Plaintiff, v. GREAT GORGE VILLAGE SOUTH CONDOMINIUM COUNCIL, INC.,

Stonehill Property Owners Association, Inc., Great Mountain

Development Corporation, Successor by Merger to Stonehill of

Vernon, Inc., Stonehill Management Company, Roscommon

Corporation, John Does 1 through 20 and XYZ Corporations 1

through 5, Defendants.

STONEHILL PROPERTY OWNERS ASSOCIATION, INC., a non-profit

New Jersey Corporation, and Great Gorge Village

South Condominium Council, Inc., a

non-profit New Jersey

Corporation, Plaintiffs, v. Jefferson HOLBERT and Arlene Holbert, Defendants.

Superior Court of New Jersey, Chancery Division Sussex County.

Decided Nov. 14, 1994.

Patrick O'Neil, for plaintiff Arlene Holbert.

John J. Lamb, for defendants Great Gorge Village South Condominium Council, Inc. and Stonehill Property Owners Ass'n, Inc.

MacKENZIE, P.J.Ch.

Arlene Holbert (the plaintiff) is the record owner of unit G10-7 at the condominium development known as Great Gorge Village. The development is located in Vernon Township, Sussex County New Jersey. There are six condominium sections in Great Gorge Village. The section in which plaintiff's unit is located is known as Great Gorge Village South Condominium Council, Inc. (the Council). The Council is charged with maintaining the common elements in its condominium section. However, the Council, along with the other five sections of the development, has delegated that authority to the Stone Hill Property Owners Association (the Association), which consequently is responsible for the operation, management, and administration of the common elements throughout the complex. As an owner at Great Gorge Village, the plaintiff is a member of both the Council and the Association.

On January 24, 1994, the plaintiff filed suit against the Council and the Association, hereinafter collectively referred to as the defendants, in the Chancery Division, Sussex County, alleging, among other things, misfeasance and/or malfeasance in the management of the affairs of the condominium. On April 20, 1994, the defendants filed a separate suit against the plaintiff in the Law Division, Sussex County, seeking collection of overdue common expenses, including maintenance fees and special assessments. These two actions were later consolidated in the Chancery Division.

This motion for partial summary judgment has been brought by the defendants to recover the unpaid common expenses from the plaintiff. The arrearages at issue date back to December 1988. Demand for full payment has been made, but the plaintiff has not complied.

The plaintiff does not deny her obligation to pay the common expense assessments. Rather, she disputes the amount of the assessments owed to the defendants. Specifically, the plaintiff challenges the right of the defendants to impose fines or penalties for the failure to pay the common expense assessments. Neither the Master Deed nor the By-Laws of the Association permit such an imposition. Instead, the defendants rely upon language in a Unification Agreement which took effect in 1991, amending the By-Laws of the Association. The Unification Agreement provides in pertinent part:

The Board [of Trustees of the Association] at its option shall have the right in connection with the collection of any common expense charges, special assessments, or other charges, to impose a late charge of any reasonable amount, if such payment is made after a certain date stated in such notice or after the date required in the Master Deed and By-Laws for payment of such amounts.

The plaintiff argues that this language cannot provide the defendants with the authority to impose a late charge, because under New Jersey law, condominium associations are not empowered to exact fines or penalties from unit owners.

I.

Among the powers assigned by law to a condominium association is the authority to assess and collect funds for the payment of common expenses. N.J.S.A. 46:8B-14. The New Jersey Legislature has defined "common expenses" as follows:

[E]xpenses for which the unit owners are proportionately liable, including but not limited to:

(i) all expenses of administration, maintenance, repair and replacement of the common elements;

(ii) expenses agreed upon as common by all unit owners; and

(iii) expenses declared common by provisions of this act or by the master deed or by the by-laws. N.J.S.A. 46:8B-3(e).

A unit owner's obligation to pay common expenses is unconditional. N.J.S.A. 46:8B-17. Each unit owner must pay a percentage of the common expenses proportionate to his or her undivided interest in the common elements. Id. However, the liability of a unit owner for common expenses is limited to those amounts duly assessed by the association in accordance with the New Jersey Condominium Act, N.J.S.A. 46:8B-1 to -38, the master deed, and the by-laws.

Failure to pay assessed common expenses automatically gives rise to a lien against the owner's unit in favor of the association. Ibid. The lien may be foreclosed following its recordation in the office of the Clerk of the county in which the unit is situated. N.J.S.A. 46:8B-21. The amount of the lien against the unit may lawfully include the unpaid common expenses, interest on the common expenses calculated at the legal rate and, if authorized by the master deed or the by-laws, reasonable attorneys fees. N.J.S.A. 46:8B-17 and -21. Whether an association may also assess late charges against the unit owner appears to be an issue of first impression in this state.

The only New Jersey decisional authority which arguably bears upon the resolution of this issue is the Appellate Division's ruling in Walker v. Briarwood Condo. Ass'n, 274 N.J.Super. 422, 644 A.2d 634 (App.Div.1994). The condominium association in Walker assessed fines against the unit owner for violations of association rules and regulations. These violations occurred while the owner was in the process of moving furniture out of her unit, which she had just sold. In order to facilitate the move, the owner's son-in-law had parked his truck on the lawn in front of the unit. Additionally, the son-in-law brought his puppy with him and permitted it to run free on the property for some time. Each of these events constituted a violation of the association's rules and regulations. For these violations, the association fined the owner $50 and placed a lien on her unit in that amount.

In analyzing the propriety of the fines, the Appellate Division noted that decisions made by the Board of Directors of a condominium association are generally protected by the business judgment rule. Walker, supra, 274 N.J.Super. at 426, 644 A.2d 634. The court, however, observed that in order to enjoy the benefit of the business judgment rule, an association's actions must be "authorized." Ibid. An association's acts are authorized only if permitted by its by-laws and the New Jersey Condominium Act (the Act). Ibid. (citing Thanasoulis v. Winston Tower 200 Ass'n, 214 N.J.Super. 408, 411, 519 A.2d 911 (App.Div.1986), rev'd on other grounds, 110 N.J. 650, 542 A.2d 900 (1988)).

The Walker court held that the Act does not give the association the power to enforce its rules and regulations by administering fines or penalties. Id. at 427, 644 A.2d 634. In so doing, the Appellate Division cited with approval a Virginia case in...