New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

A Montclair, New Jersey Condominium lost its bid to force Montclair to maintain and otherwise care for the water lines between the public right of way along the public roads inside the condominium, and the relevant shut off valves.  A 'curb box' is the housing of an underground shut-off valve linking the main water lien to the service lines which, in turn, are linked to each dwelling.  Typically, curb boxes are located on a public right-of-way or as close to it as possible.  Traditionally, a municipality is responsible for the lines from the water main to the box and the property owner is responsible from the curb box to the dwelling.  As is far too often the case, this condominium's developer made a mistake, and placed the curb boxes away from the right-of-way and within the property of the owner.  Montclair permitted this error during the development stage and had no inspection reports relating to same.
 

Years after the condominium's development Montclair agreed to assume responsibility for the mains, sewer main and the fire hydrants on the condominium's property.  The water service lines were neither discussed nor addressed in the resulting agreement between Montclair and the condominium.  The relevant Montclair ordinance provided that the "consumer is responsible for the service from the shut off valve at the street to the structure, except for the meter, and that "such sanitary and water lines and service" were incorporated into Montclair's "overall municipal delivery system of such utilities."  Montclair argued that this ordinance was not intended to make itself responsible for the residential service lines.
 

The court first rejected the condominium's assertion that the ordinance required Montclair to maintain pipes running between the main line and the curb box, regardless of where the curb box is.  The most reasonable interpretation of the ordinance though was that Montclair's delineation is not curb box location, etc. but public and private land.  The ordinance did not require that Montclair maintain its service lines up the curb box without regard for the curb box's location. 
 

Lastly, the court rejected the condominium's argument that public policy demanded Montclair be responsible for the Association's water lines and that Montclair's failure to do constituted unlawful discrimination.  The Association argued that Montclair provides water service and maintains water lines throughout Montclair and that it cannot deny the condominium.  The condominium believed "services" included maintenance of water lines to the curb box.  The court, however, found that Montclair had never been inconsistent.  Its consistent service policy and maintaining water lines up to the public/private property line, whereupon homeowners are responsible for any maintenance on their own land.  While, the court felt, this "normally coincides with the curb box" where "it does not, Montclair's obligation terminates at the private property line."
 

This case helps to further reiterate to New Jersey's condominiums that municipalities are afforded broad discretion in their treatment of a private community's infrastructure - and that the standard "public land versus private land" distinction is often validated by our courts.

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As noted in relevant community association-related publications, like Community Association Management Insider, federal law mandates the posting of various signs setting forth information to their employees.  The necessary signs are available free of charge from the federal government.  Failure to post the signs can cost as much as $10,000 per violation.

The versions often change so it is important that the current sign be posted.  Your state’s Department of Labor will have the current version.

FEDERAL MINIMUM WAGE SIGN

Who must post sign.  Anyone who has one or more employees.
Content.  The content of the notice is prescribed by the Wage and Hour Division of the Department of Labor (DOL).  The sign exhibits the current federal minium wage and explains wh is eligible for it.  The sign must also include language explaining federal child labor laws and the overtime provisions of the federal Fair Labor Standards Act.  Under the act, employers are required to pay covered nonexempt employees a minimum wage of not less than $7.25 per hour.  This rate became effective July 24, 2009.
Location.  You must post the sign in a conspicuous place where employees are likely to see it.
How to get sign.  For a copy, contact the DOL at (866) 487-9243 or to go www.dol.govlelawslposters.htm.
Most recent version.  The latest version of this sign was issued in July, 2007.

EQUAL EMPLOYMENT OPPORTUNITY SIGN

Who must post sign.  Anyone with 15 or more employees.
Content.  The sign explains the various federal anti-discrimination employment laws, including the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the Equal Pay Act.
Location.  You must post the sign in a conspicuous place where notices for employees and job applicants are generally posted.
Penalty.  The Equal Employment Opportunity Commission (EEOC) can fine you up to $100 per violation for not properly posting the sign.
How to get sign.  For a copy, contact the DOL at the above telephone number.
Most recent version.  The latest version of this sign was issued in August, 2008.

JOB SAFETY AND HEALTH PROTECTION SIGN

Who must post sign.  Anyone with one or more employees.
Content.  The sign explains that employers must provide their employees with a safe work environment, free from recognized hazards, and they must comply with Occupational Safety and health Administration (OSHA) regulations.
Location.  You must post the sign in a conspicuous place where notices for employees are generally posted.
Penalty.  The law sets no fine for not posting the sign.
How to get sign.  For a copy, visit the OSHA website, or call the local OSHA office - (800) 321-6742.
Most recent version.  The latest version of the sign says “OSHA 3165-12-06R” in the lower right-hand corner.

EMPLOYEE POLYGRAPH PROTECTION ACT SIGN

Who must post sign.  Anyone with one or more employees.
Content.  The sign explains that under most circumstances employers cannot require their employees to take a lie detector test.  In rare and controlled circumstances, the act permits polygraph testing of certain employees who are reasonably suspected of involvement in a workplace incident such as theft or embezzlement that resulted in specific economic loss or injury to the employer.  In these instances, the lie detector tests are subject to strict standards for the conduct of the test, including the pretest, testing, and post-testing phases.  An examiner must be licensed and bonded or have professional liability coverage.  And the act strictly limits the disclosure of information obtained during a polygraph test.
Location.  You must post the sign in a conspicuous place where employees are likely to see it.
Penalty.  The Secretary of Labor can bring court action to restrain violators and assess civil money penalties up to $10,000 per violation, including failure to post the sign.
How to get sign.  A copy of the sign can be obtained from the DOL.
Most recent version.  The sign was last updated in June, 2003; “WH Publication 1462" appears in the lower right-hand corner.

FAMILY AND MEDICAL LEAVE ACT SIGN

Who must post sign.  Anyone with 50 or more employees.
Content.  The sign must explain that covered employers are required to provide up to 12 weeks of unpaid, job-protected leave to certain employees for certain family and medical reasons.
Location.  You must post the sign in a conspicuous place where notices for employees and job applicants are generally posted.
Penalty.  The Wage and Hour Division of the DOL can fine you up to $100 per violation for not posting the sign.
How to get sign.  A copy of the sign can be obtained from the DOL.
Most recent version.  The latest version was revised in January, 2009; “WHD Publication 1420" appears in the bottom right-hand corner.  This latest version incorporates a rule that became effective on January 16, 2009.  The rule provides for special military family leave for employees to care for a related service member or employees who need to manage their affairs while the family member is on active duty in support of a contingency operation.

UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT SIGN

Who must post sign.  Employers of service members returning from a period of uniformed service, including those called up by the reserves or National Guard.
Content.  The sign explains the reemployment rights of individuals who voluntarily or involuntarily leave employment positions to undertake military service or certain types of service in the National Disaster Medical System.
Location.  You must provide the notice by posting it where employee notices are typically placed.
Penalty.  There are no citations or penalties for failure to post the sign.  However, an individual could ask the DOL to investigate and seek compliance, or file a private enforcement action to require you to provide the notice to employees.
How to get sign.  View online here, or call the DOL at (866) 487-2365.
Most recent version.  The latest version was published in October, 2008.

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Many, many years ago the developer of a New Jersey HOA secured township approval of a development plan by which market rate single family homes would be constructed along streets intended to be public.  Thereafter, this developer obtained approval from the township to change the community into an active adult community.  Notwithstanding the change to an active adult community, the roads remained designated as public as no amended site plan or revised developer’s agreement or otherwise was made, filed or recorded.  This developer did however amend its subdivision and site plan to include a gatehouse and gate arm control devices at the community's main entrance and rear entrances.  The developer advised the township at the planning stage that the roads would be public, with this controlled access, but that the public would not be denied access.  The developer eventually represented in the Public Offering Statement that all streets would be municipal roads to be owned and maintained by the township.  It also included in the POS a statement that it made no representations as to the public's right of access.  Despite the township's approval of this, and despite the developer's completion of the roads and the community overall, the township refused to accept the roads for dedication.  More specifically, the township advised the community that so long as the gatehouse and gate arms were present, it would never accept the roads for dedication; that is, make them public.
 

The association thereafter sued the township seeking an order compelling the township to accept the roads for dedication.  The developer was joined as a party in the case and ultimately joined the association in its attempt to force the township to accept the roads for dedication.  In challenging the township, the association relied upon several documents relating to the community's creation and approval by the township including, township resolutions, the memos of township-hired professionals and minutes of various township meetings.  During the planning stage, township officials had even commented how this controlled access would be helpful to stem public attempts to avoid traffic lights and 'cut through' the community to access the high school, etc.   Over the township's objection, the court ruled that the association's maintenance of these gate arm control devices and retention of the gatehouse would still constitute 'public access'.   The court did not even object to the association's contemplation of a surveillance system intended to capture the license plates of vehicles entering the community.  In the end, the judge ordered the township to accept the roads for dedication.

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In 2009, a Stark & Stark condominium client entered a foreclosure judgment against an owner.  After foreclosure unit delays and a breached payment plan, the unit was scheduled for sheriff's sale.  Prior to that sheriff's sale, the unit owner paid the full amount of that judgment plus all sheriff's fees.  Instead of canceling the sheriff's sale and dismissing the foreclosure, we filed a motion before the court seeking to amend the 2009 foreclosure judgment so it would include all of the legal fees, late fees and assessments that accrued since 2009.  During the pendency of the motion, we continually adjourned the sheriff's sale.  The court granted our motion adding $11,000 to the previously paid foreclosure judgment.  The sheriff's sale was then fixed and scheduled with respect to the new and increased foreclosure judgment.

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Almost everyday we go online, read the newspaper or watch the news without hearing about our recession, declining real estate values, lending institutions in trouble and the rise in residential foreclosures.  During times like these, it is essential that every community create and maintain an effective, efficient and aggressive collection policy.  Any such collection policy must account for an owner’s bankruptcy.


For a bankruptcy filed after October 17, 2005, an owner must pay post-petition fees and assessments due to condominium associations, homeowners associations and cooperative corporations (collectively “Associations”) after that bankruptcy is filed.  If the debtor’s bankruptcy was filed before October 17, 2005, the post-petition assessments must be paid by that debtor only if he either occupies the unit or rents it.  In October of 2005, Congress extensively amended the Bankruptcy Code via a law that was known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the “2005 Amendments”).   
   

Prior to the 2005 Amendments, assessments due to the Associations were non-dischargeable, so long as the debtor physically occupied a dwelling unit in the condominium or cooperative project; or the debtor rented the dwelling unit to a tenant and received payments from the tenant for such period.  The 2005 Amendments eliminated these two provisions entirely and added language that clearly provides that mere ownership of a unit creates the non-dischargeability of the assessments.  In the end, so long as the debtor has a mere ownership interest in the property, he must pay post-petition assessments with respect to any bankruptcy filed after October 17, 2005.

   
An individual owner can file either a chapter 13 or chapter 7 bankruptcy.  Associations generally face the chapter 13, as it is this type of bankruptcy that allows an owner to preserve home ownership.   Via a chapter 13, an owner has a "time out" so to speak, during which his creditors, including the mortgage company and association, cannot act to collect unpaid amounts.  So long as the debtor adheres to the requirements of United States Bankruptcy law, he can maintain his home and pay the, presumably, delinquent mortgage over time.
   

While this discussion is certainly overly simplistic given the numerous issues related to bankruptcy, and the specific facts of each particular case, a "secured" debt is likely to be paid via a chapter 13 bankruptcy, and an "unsecured" debt is not.  A mortgage is a “secured” debt.  An association lien makes unpaid assessments into "secured" debt, and thus likely to be paid.  In fact, the bankruptcy, by allowing the owner to free himself from certain debts, makes it more likely that there will be funds available to pay the association’s secured claim.  In turn, and in relation to the obligation to pay post-petition assessments, it is imperative that associations file the appropriate papers in connection with a bankruptcy.  Otherwise, the association may lose the ability to recover, in bankruptcy, an otherwise recoverable debt.  An owner's bankruptcy is not a death sentence with respect to an association's debt, but is instead an opportunity, to be seized upon by associations that are prepared and represented by skilled and creative legal counsel.

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Undoubtedly, your community and/or building has seen its share of mortgage company foreclosures.  While mortgage foreclosures generally accompany unpaid assessments, and thus may not be welcome, they are in actuality, opportunities for associations.  Knowing what to do, and how to do it, in the face of a mortgage foreclosure is crucial to a community's overall collection policy, and its financial security. 


First, a successful and finished mortgage foreclosure results in exactly what an association needs - a paying owner in the unit.  The mortgage company must pay the assessments attributable to that unit from the date of the judicial sale forward. Thus, depending on the circumstances, a quick and successful mortgage foreclosure and judicial sale is a welcome development.  When an association becomes aware of a mortgage foreclosure in its community, and/or building, it must file a responsive pleading, or a notice of appearance.  Because the judicial sale is such a crucial date, it is imperative that an association be aware of that sale, when it is scheduled.  By filing papers in the mortgage foreclosure, the association will be given notice of the judicial sale, by the mortgage company.  That association can thus calendar the date and demand assessment payments begin immediately thereafter. 


Second, in a situation where a unit has kept its value, or enjoyed increased value, or where the underlying mortgage has been reduced - resulting in "equity" - there may be "surplus funds" as a result of the judicial sale.  Surplus funds consist of amounts paid by a judicial sale's successful bidder above the amount due on the foreclosed mortgage.  Third parties will often bid on units at judicial sales, where they can resell the unit for an amount above what they paid for it, satisfying the underlying mortgage via their successful bid.  Creditors of the unit foreclosed upon, or of the owner of that unit, may petition the court for release of those "surplus funds" to that creditor, which will then be used to satisfy the owner's debt.  So, a unit successfully foreclosed upon could very well yield funds to the association, to satisfy that unit's debt.  The association's claim to these funds is superior to the unit owner's himself. 
   

Third, an association under certain circumstances should consider bidding and even purchasing a unit in foreclosure.  If there's equity in the unit, and the association is owed a sum significant enough to justify additional legal efforts, the association can bid on the unit at the judicial sale.  The association would either be the successful bidder and thus be able to easily install a tenant, from which it can generate revenue, or sell the unit.  By bidding at the sale the association, when there is equity, at the very least, the association may help to increase the eventual purchase price, generating surplus funds that can be sought by the association.  It is only by participating in and/or monitoring that foreclosure that the association will be aware of the judicial sale, and its circumstances, and put into play any or all of these strategies.

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The Merrick Gables Homeowners Association's federal lawsuit against both a wireless and technology company, and the Town of Hempstead, was dismissed recently.  The association challenged the company's installation of DAS (digital antenna system) equipment on existing utility poles in the public right of way under an agreement with the Town of Hempstead.  The association claimed the network had caused property values to drop because of the perceived health risks of radio frequency (RF) emissions associated with the DAS equipment. The suit also alleged that the DAS installations amounted to a "nuisance" and an unconstitutional "taking" of their property and that Hempstead was negligent in allowing the deployment.  In defending itself, NextG Networks argued that there exists an overriding public policy promoting the deployment of broadband, competitive wireless networks such as NextG's DAS networks, which enable wireless carriers to add greater coverage and capacity to their networks.  On motion, the federal court dismissed the entire lawsuit and held that federal law "clearly prohibits" towns from regulating the installation of wireless facilities based on perceptions of health risks associated with RF emissions. The court also rejected claims that the Town was negligent in allowing the installations on utility poles in the public way.  At issue also was a special promise and/or agreement between Hempstead and the association, made in 2000, whereby Hempstead promised to impose a moratorium on wireless installations.  The court explained that the United States Telecommunications Act (the "Act") prohibited the Town from adopting such a moratorium on the installation of wireless facilities in the first place.  Lastly, the court ruled that this equipment could  not be a  "nuisance" in light of the Act which reflected congressional intent to promote and facilitate the deployment and improvement of wireless networks and technology.
 

The outcome of this association's suit reminds us of an association's need to consider federal law when dealing with issues that have been regulated by the federal government, such as telecommunications, fair housing, bankruptcy and mortgages.  Further, the outcome  is also further evidence of the questionable value of agreements made with municipalities to protect community values, in lieu of direct action by those communities themselves. 

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The FHA insures loans made by FHA-approved lenders all across the country.  In fact, 30% of all mortgages in the United States are insured by the FHA.  The availability of this insurance enables lenders to make loans and extend credit to a broader class of borrower, allowing owners within a condominium to market their homes to more potential buyers.  The FHA will insure only certain loans - those that meet FHA requirements.  As of February 1, 2010, the FHA may insure loans made with respect to condominiums only in condominiums that have been certified by the FHA.  These new rules do not relate to homeowners associations.  Condominiums that are currently certified must be recertified every two (2) years.  The new FHA rules apply to condominiums in New Jersey, New York, Pennsylvania together with all of the other 47 states.

 

FHA certification will likely make the sale and purchase of homes within a condominium easier.  There are arguments available to owners by which a condominium may have a fiduciary duty to seek FHA certification.  The condominium's approved status will be published, and FHA will be free to insure loans there.  To the extent that management or your board would like to secure FHA certification, Stark & Stark's Community Association, and Condominium & Co-Op, Groups are ready to discuss the relevant issues, and prepare and file the applications.  If you would like additional information, or to hear more about the FHA, condominiums and/or the certification process, please contact David J. Byrne  or A. Christopher Florio. 

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As we all know, New Jersey continues to be plagued by both a troubled real estate market and economy.  Our real estate market remains awash in homes either in foreclosure, or having gone through a foreclosure and subsequent sheriff's sale.   It also remains awash in unsold new construction, and an essentially non-existent new construction pipeline.  October's figures show a "mixed bag" as they say.  First, construction of new homes in the New Jersey region fell 18.8%.  This included a nearly 10% decline in the construction of single family homes.

 

Second, and on the other hand, for the first time in 2009, the number of residential foreclosure filings was lower than it was over the same period in October 2008.  Lenders started 4,991 foreclosures against New Jersey homeowners in October 2009, down from 5,262 during October 2008.  The October 2009 figures were also less than a height of 6,138 filings, from June 2009.   These two relate via home builders' likely reluctance to erect new homes in the face of the existing inventory of homes, much of which stemming from the availability of foreclosed homes.

 

The extent and progress of these foreclosures appears to be slowing as well via the numerous state and federal programs designed to help owners avoid foreclosure.  More than 2,600 New Jerseyans have received counseling through New Jersey's foreclosure mediation program.  Of the 2,600 that received counseling, about 1,450 cases have been completed and roughly half of those were able to remain in their homes.  The federal government reported recently that approximately 22,100 New Jersey homeowners have reworked their mortgages through the federal loan modification program.

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On Jun 12, 2009, the Federal Housing Administration ("FHA") announced a new, stricter approval process for condominiums to be eligible for FHA financing.  Condominiums, and their managing agents and attorneys, must be aware of the mortgage market and how tightened underwriting standards will affect association operations and property values.  Recent studies show that the FHA alone currently insures approximately 23% of all new mortgage transactions.  It is believed that the FHA, Fannie Mae, Freddie Mac, the Veterans Administration and the Department of Housing and Urban Development account for 90% of the mortgage market.   Under the proposed regulations, all condominiums previously approved for FHA financing would have to be reapproved or FHA financing would not be available.

Some of the proposed regulations are as follows:

1. Projects consisting of three (3) or fewer units will no more than one (1) unit encumbered with FHA insurance.  Projects consisting of four (4) or more units will have no more than 30% of the total units encumbered with FHA insurance.
2. The new regulations require that at least 50% of the total units must be sold prior to endorsement of any mortgage in the project.
3. Transfer of control of the association shall pass to the owners of units no later than:  (i) 120 days after the due date 75% of the units are conveyed to unit purchasers; or (ii) one (1) year after completion of the project evidenced by the first conveyance to a unit purchaser.
4. A final certificate of occupancy is required as a precondition to project approval.  Temporary certificates of occupancy are not permitted.
5. No more than 25% of the property's total floor area in a project can be used for commercial purposes.
6. No more than 15% of the total units can be in arrears (more than 30 days past due) of their assessments.
7. A current reserve study must be no more than 12 months old.
8. Existing condominium project approvals will expire two (2) years from the date placed on the list of approved condominiums.

These lending guidelines were to be effective October 1, 2009.  The effective date has been twice postponed however.  The current effective date is December 7, 2009.

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