Cape May Harbor And Yacht Club Association, Inc. (the “Yacht Club”) adopted an amendment to its governing documents that prohibited homeowners from leasing their homes to third parties.  Deborah Sbraga (“Sbraga”) sued, and at trial, the trial court ruled in favor of the Association and its enforcement of the leasing restriction.  Sbraga appealed.
 

The Yacht Club is a very exclusive enclave consisting of twenty-four single family homes, common areas and a marina.  The homes range from $2.5 Million to $2.7 Million.  Sbraga and her husband purchased a lot and built a home in 2005; however, because of a divorce the property was placed in Sbraga’s name only in 2007.  Subsequent to this, Sbraga, although intending to occupy the home full-time, decided to sell the home.
 

The documents in its original form allowed the leasing of homes and boat slips.  However, the governing documents were amended to prohibit leasing of homes shortly after Sbraga inquired with the Board about her ability to lease her home.  The Board President testified that none of the other members ever leased their home and that Sbraga would be the first.  As a consequence of Sbraga bringing this issue up, the Association presented before its membership an amendment prohibiting the leasing of homes.  The amendment was approved by a vote of 20 in favor and 3 opposed.  The meeting minutes reflected that members were concerned with  living in a homeowners association where rentals were permitted, the potential of a negative impact on home values, potential problems with renters, parking problems, the lack of responsibility and ownership for noise, and infractions of the Association’s rules and regulations.
 

While the amendment did not affect the leasing provision of the boat slips, the Board President did testify that previous experience with renters of the boat slips resulted in numerous occasions where the Association had to advise people not to live on their boats, children misbehaving in the marina area and children going onto other boats.  The police were called on a couple of occasions due to the inappropriate behavior of the children.  The Association used these incidents as evidence that there existed the potential for these types, or more serious types, of problems if homes were allowed to be leased.  
 

The trial judge needed to consider a number of factors,  the restrictions under review that were the result of an amendment and not the original governing documents, the restriction occurred after Sbraga bought into the community, that there were no prior restrictions on renting the homes, and that it affects property right.  Thus, a determination that the amendment needed to be given less credibility than it might otherwise.  Using this more stringent standard, the trial judge did determine that the amendment was a reasonable amendment.  The trial judge noted that the community was a small, exclusive community with no history of prior home rentals.  The trial judge also found that it was a legitimate concern that having tenants in such a community could impact the neighborhood and its image, and that the members were reasonable in not wanting a “transient” community.  The trial judge did concede that the analysis may be different if there were a history of homeowners renting, and/or if the Association were larger and not a small, exclusive community.  Thus, the trial judge found in favor of the Association and the amendment.
 

Although the Appellate Court did agree that the restriction is a significant one and that it does affect the fundamental right to utilize one’s real estate as one sees fit, the Appellate Division needed to go through the various factors to determine whether or not the “alienation” of Sbraga’s right to lease the home was so significant that the Court should overturn the trial judge’s decision to uphold the amendment.  The Appellate Division decided that a restraint on the leasing provision accomplishes a worthwhile purpose by preserving the residential nature of the community.  Since the nature of the community has never before been affected by rentals, the members of the Association had a reasonable basis to believe that the community would not be disrupted by the leasing of homes.  Further, the Appellate Division opined that leasing to homeowners had not occurred in the past and that some of the members did not even know that they were allowed to lease under the Declaration.  Because Sbraga only intended to lease the unit for a short time until she was able to sell, the duration of this restraint against her ability to rent would be limited in scope.
 

Further, the Appellate Division set forth that Sbraga cannot claim that she had a vested right that could never be affected.  Since Sbraga conceded that she took title to the property in accordance with the terms of the Declaration, she was presumed to have known that the governing documents could be amended. 
 

The Appellate Division, in its conclusion, opined that the trial judge’s use of the “reasonableness standard” was valid, and that the trial judge found appropriate reasons why the amendment was to be considered to be reasonable and enforceable based upon the facts presented at trial.
 

While at first glance this case may appear to provide the authority community associations need to prohibit leasing of homes or condominium units, I believe the law of this case will be narrow in its scope.  That is, great pains were taken to make specific mention that the outcome may be different if the history of leasing of homes is present, and stating that the size of the community is important.  Thus, I believe that a very narrow set of facts needs to be present in order for any leasing restrictions to be upheld.

If you would like to discuss this client alert in more detail or how it may affect your community association, please contact Chris Florio at 609-895-7335 or by email at cflorio@stark-stark.com

For example, some discussion was centered around service animals in light of an association rule that prohibits animals of any type. The attendees were advised that even though actual notice was given to the members those animals were prohibited by virtue of receipt of the governing documents, Federal law allows service animals to live within associations if various parameters are met. As this runs counter to the association’s rules, the attendees were advised that Federal statute would prime the association prohibition.

You can listen to the full presentation online here. 
 

The Expo highlights members of CAI and provides visitors with an opportunity to visit vendors’ booths, and more importantly, attend various educational seminars.

I will be speaking on a topic that is always timely when it comes to dealing with living in close quarters. The seminar is entitled “Community Rule Book - Avoiding Fouls & Costly Penalties”. The seminar will deal with how managers and attorneys need to work together in formulating rules and policies for associations. I will discuss my role as general corporate counsel to community associations. Another panelist is an attorney who is engaged by insurance companies to provide a defense during those times when associations are being sued by members as it relates to rules and regulations.

Be sure to visit us at booth #701 Saturday!

Most association by-laws require that the association’s insurance policy include  a waiver of subrogation.  This waiver of subrogation within the insurance policy will prohibit the insurance company from  seeking reimbursement of monies paid to the association from any party, as that party is defined within the insurance policy.  However, in this recent case,  the association’s insurance policy did not have the wavier of subrogation anywhere and therefore the insurance carrier was able to proceed against certain parties.

Association managers needed to make certain the insurance professional provides the association a writing, after the policy has been obtained, indicating where exactly within the policy the appropriate waiver of subrogation language is set forth.  Knowing this information will provide the association with the level of comfort it is entitled to under the terms of the insurance policy.
 

From my point of view, one of the more beneficial facets of the Law Seminar is the morning sessions for case updates.  Two speakers provide a synopsis of reported cases in various areas of community associations (such as restrictive covenant issues, assessment collections, etc.).  These are always good to hear (and have copies of the cases) as it provides a reference for those issues that I may have to deal with in New Jersey.  It certainly provides a starting point for issue recognition in certain cases.
 

Of course, there are always cases discussed that leaves one shaking one’s head and saying to oneself, “Are you kidding me?”  One thing community association living does not have is a shortage of good stories that makes one smile.  A sample of the best of 2009 (none of these are from New Jersey, proving sanity did rule for the most part  in New Jersey this past year):
 

Lake Charleston Maintenance Association, Inc. v. Farrell, 16 So. 3d 182 (Fla. App., 2009.  A homeowner submitted an application to the development review board of the homeowner’s association requesting permission to repaint her house.  She received a letter stating that her application was pending and requested additional information.  She then attended a meeting of the development review board where she was advised that her application had been denied.  A couple of weeks later, the homeowner painted her house in the color she originally submitted in her application.  The association filed suit.  The court found that the defendant had violated the declaration by painting her house without first obtaining approval of the design review board.  The court found that she was informed of the denial of her application when she attended the meeting of the design review board which was held within the 30 day period within which the design review board was to approve or disapprove an application.
 

Schwartz v. Banbury Woods Homeowners Association, Inc., 675 S.E. 2d382 (N.C. App., 2009).  A homeowner’s association assessed fines against a lot owner for violating the parking restrictions in the recorded covenants.  The covenants stated that owners of lots shall not be permitted to park boats, trailers, campers and all similar property on the streets in the development.  The homeowner claimed that his motor home did not fall within the definition of “campers and all similar property” as stated in the covenants.  The court held that although the term “motor home” was not expressly listed in the covenants, based on the natural meaning of the term “camper” at the time the covenants were drafted and recorded, the court concluded that it would defeat the plain and obvious purposes of the restriction to exclude plaintiff’s motor home.

Both the STSA and VRRA were amended and re-codified in 1994 and became known as the Uniform Services Employment and Re-Employment Rights Act of 1994 (38 U.S.C. 4301 - USERRA).  The main purpose of USERRA was: 1) to make certain that persons serving in the armed forces, reserves, national  guard or other “uniformed  services” are  not disadvantaged in their civilian careers as a result of their military service; and 2) to make certain service members were promptly re-employed upon their military service conclusion; and 3) to make certain service members were not discriminated against in their civilian jobs as a result of their military service.
 

In order for USERRA to apply,  an employer only needs one employee.  See  Cole v. Swint, 961 F2nd 58, 60(5th Cir. 1992).
   

In construing USERRA and prior laws, Courts have followed the Supreme Court’s admonition that “This legislation is to be liberally construed for the benefit of those who left private life to serve their country in its hour of great need.”  Re-employment rights extend to persons who have been absent  from employment because of “service in the uniformed services.”  “Uniformed Services” consists of the following:

• Army
• Navy
• Marine Corp.
• Air Force
• Coast Guard
• Army Reserve
• Naval Reserve
• Marine Corp. Reserve
• Air Force Reserve
• Coast Guard Reserve
• Army National Guard or Air National Guard
• Commission Corps of the Public Health Service
• Any other category of persons designated by the President in time of war or emergency

In order for an employee to give notice to an employer of military service, all notice may be written or oral.  Notice will not be required if:

• Military necessity prevents the giving of notice; and/or
• The giving of notice is otherwise impossible or unreasonable.

Upon return to work after military service, the employee has certain time frames to report back to work depending upon the length of service  (assuming the military member is not injured during military service).  Ninety days after military service is the longest time line upon a service member’s return to make an application for re-employment with the employer.  This ninety-day period is for those members who have served in excess of 181 days or more.
   

One of the more interesting provisions of USERRA is a provision that is colloquially known as the  “escalator position”.  That is, USERRA requires that an employee returning from military service be placed back into a position, with limited exception, to a level of employment that the person would have enjoyed if the individual had been continuously employed.  For example, if an employee left for three years of military service, if all of his or her colleagues in similar jobs and pay scale were given promotions and pay raises based on length of service, the returning service member would  also be entitled to the same promotion and pay raises as if he or she had never left continuous employment. 

   

Hand in hand with the “escalator” clause is the returning service member’s right to all seniority rights and benefits a service member would have obtained had the service member been continuously employed.  The test to determine whether or not rights are seniority rights is whether or not those seniority rights are determined by the length of service.  If it is not, the employer is not required to provide the returning service member with the particular seniority right. 
   

Since the beginning of the “First Gulf War”, the Country’s National Guard has been called upon time and time again.  The question that frequently  arises is if  these “week-end warriors” are covered by USERRA when these National Guardsmen must report for the one week-end a month and two-week training in the summer.  The “week-end warrior” is covered under USERRA,  and any employer prohibition against National Guardsmen performing his or her duties is prohibited under USERRA (this is not to say that the Guardsman is allowed to abuse the rights afforded to Guardsmen under USERRA. If an employer feels an employee is abusing the USERRA rights, the employer is well within his or her right to contact the employee's commanding officer to discuss the situation. Further, there is a national organization called the ESGR (Employer Support for the Garden Reserves), including its local chapter here in New Jersey to assist both employers and employees regarding USERRA rights). While service members may use vacation time to fulfill the service member’s obligation to the military, an employer is prohibited from requiring a service member to utilize vacation to do so. 
 

An aggrieved service member may bring an action against an employer privately, or utilize an attorney in the Department of Justice if VETS refers a matter to the Department of Justice.  Once a service member chooses the path he or she wishes to take, the service member is barred from using the declined option if the chosen path is unsuccessful.  While the Department of Labor  is charged with overseeing the law and implementing its requirements (The Department of Labor has a specific sub-group within the Department called the "Veterans Employment and Training Services (VETSS)" which investigates complaints and attempts to resolve these complaints. If a complaint cannot be resolved in an amicable fashion, VETS can refer the matter to the Department of Justice).   
   

While this article has dealt with the service member once employed, employers should be aware that it is also unlawful to deny an employee-candidate based solely on his or her involvement in the Uniform Services.  The burden of proof to prove other factors resulted in denial of employment is rested squarely on the employer.   
   

While USERRA is a law that may be difficult to navigate and understand, the rationale for its implementation certainly is very clear.  Individuals who are willing to leave their safety nets for higher service to the country need to be valued and protected upon his or her return to civilian life.  While the law does recognize the sacrifice employers make to allow service-member employees to perform his or her duties, it is very difficult to argue against the safety net that USERRA provides.

 
The Bill, initially introduced by Senator Christopher J. Connors, Assemblyman Brian E. Rumpf and Assemblyman Daniel M. Van Pelt in January of this year, requires the purchaser of a property in an age-restricted community to certify that the person occupying the residence meets the age requirements of the community. This would assist adult communities in complying with quotas established for the "housing for older persons" exception from the federal "Fair Housing Amendments Act of 1988."

Currently, federal law states that 100% of the resident in a community built for occupants 62-years of age or older must be 62-years of age or older. Whereas, communities intended for residents 55-years of age or older, only need to have 80 % of the residents and one person per household be 55-years of age or older.
 

I am pleased to announce that SB 88 has been signed into law. This Bill will assist in creating a method of ensuring compliance by age-restricted communities with federal law. You can read more on the passage of Senate Bill 88/Assembly Bill 305 here.

Technorati Tags: New Jersey : Podcast :  Community Associations : Brandon Farms : Condo : Surplus Funds

You can download the New Jersey Legal Update Podcast # 33 here.(8MB)

Technorati Tags: New Jersey : Podcast : Condo : Community Association

Technorati Tags: New Jersey : Community Associations

The Fair Housing Act, and its amendments, are vehicles used by senior housing developments so that they may "legally discriminate" based upon age. This is acceptable so long as the association maintains its established rules and procedures set forth in the Fair Housing Act. While this post is not intended to go through that procedure, it is intended to advise community associations that they may enforce age restrictions set forth in their own governing documents.

Recently, a town in New Jersey concluded that its ordinance pertaining to senior housing (or age restricted communities) mandated that anyone under the age of 19 may not live in any age restricted community within its township boundaries, with limited exception. The association's governing documents set minimum age requirements which were enforceable. In this situation I believe the Township's ordinance was to narrow and the Township should have been required to broaden its acceptance of age limitations for restricted communities.

Technorati Tags: New Jersey : Condo : Community Association

The Appellate Court recently struck down an associations ability to raise monies through a capital contribution paid at closing by the seller(Micheve v. Wyndham Place at Freehold Condominium Association).

This particular Board adopted its capital contribution by way of a Board resolution. In ruling that the capital contribution was discriminatory, the Court stated that the resolution violated the New Jersey Condominium Statute, and the association's own Master deed and By-Laws.

Associations are urged to discuss this issue with its counsel, particularly if the association charges a capital contribution by an adopted resolution.

Technorati Tags: New Jersey