Court Invalidates Condo's Non-Refundable Working Capital Contribution
In a reported decision, a New Jersey Appellate Court recently invalidated a $750.00 non-refundable working capital contribution created by a condominium by board vote and resolution. The Board's resolution provided, "[u]pon acquisition of title to a unit, the unit owner shall pay to the Association a one time non-refundable working capital contribution of $750.00". That resolution also created a "one time processing fee of $125.00" upon acquisition of title.
Parties to a unit's sale in 2003 challenged the working capital contribution fee. Those parties did not challenge the $125.00 processing fee. In invalidating the $750.00 fee, the court found that New Jersey's Condominium Act mandates that all of the condominium's expenses be charged to owners in accordance with their percentage interests, or as otherwise set forth in the master deed or bylaws. Thus, since the disputed fee was intended to offset common expenses, it was a discriminatory fee, not assessed against all owners.
Additionally, since the condominium's master deed contained identical language regarding the allocation of common expenses, the fee was not protected by the business judgment rule. The court found that the "business judgment rule, which governs judicial review of decisions within the scope of a" condominium's "discretionary authority", was not applicable.
First, this case leaves untouched any closing-related or processing fees charged by management companies or condominiums for insurance information, certificates of sale, copies of public offering statements, etc. Second, this case leaves untouched any and all working capital contribution-type fees in the context of cooperatives or homeowners associations. Third, this case leaves untouched any and all working capital contribution fees authorized by either a condominium's master deed or its bylaws. Even if this decision stands ( i.e., it is not reversed by the New Jersey Supreme Court), its prohibition against fees due upon the acquisition of title is limited strictly to those fees that are created by board vote and resolution.
Technorati Tag: New Jersey
