Capital Contribution Legislation Awaiting Governor's Approval
It has been almost a year since we first reported on a proposal working its way through the Legislature that would protect by statute an additional source of revenue for many condominium associations in New Jersey. You can find our original blog on this subject here. Now, this proposed legislation is on the Governor’s desk and, if approved, will become effective immediately.
On June 21, 2007, this bill – which had previously passed in the Assembly – easily passed in the Senate by a vote of 36-0. The legislation would permit a condominium association – if authorized by its master deed or by-laws – to levy and collect a capital contribution, membership fee or other charge upon the sale or transfer of a unit for the purpose of defraying the association’s common expenses. As amended by the Senate, the legislation now allows for the collection of such a fee by an association not to exceed nine (9) times the amount of the most recent monthly common expense assessment for that unit – reduced from the original proposal of eighteen (18) times. You can view the most recent version of this legislation here.
The legislation would also settle the dispute 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), which invalidated a condominium working capital contribution authorized solely by the condominium’s board-enacted resolution. More importantly, however, the legislation would authorize condominium associations who do not have provisions for working capital or membership fees in their master deed and by-laws to validly enact such amendments requiring new buyers to pay such a fee upon the purchase of their units.
Stark & Stark will continue to monitor this legislation and provide updates as to its progress. If you would like to discuss this legislation or how it affects your association in more detail, please contact David J. Byrne or Jonathan H. Katz.
