Haffert appealed.  On appeal, the court reiterated the dictates of Finderne Heights, an appellate court decision from 2007.  In Finderne Heights, the appellate court ruled that – because of the Act and its section 14(k) – all ‘qualifying disputes must be sent to arbitration if after suit is filed, either party chooses to invoke the alternative dispute remedy that must be made available under the Act.

It has been commonly understood that disputes involving unpaid assessments and/or maintenance fees were not ‘housing-related’ for the purposes of Finderne Heights and 14(k).  The court in Bell Tower disagreed.  This does not mean however that a condominium cannot commence a collection action at law and/or at equity without first offering and/or participating in, ADR.  It means only that once a debtor – after suit is filed – pleads and/or seeks through formal court papers that the delinquency be the subject of ADR, the condominium must oblige.  Since almost all disputes involving unpaid assessments and/or maintenance fees are uncontested, there should be no significant impact to the condominium’s assessment management and recovery program.  Additionally, I assume that efforts will be made to amend the Act to overturn that decision.  Before changing any process or program in light of the Bell Tower case, feel free to contact me to discuss and/or to clarify.

If you would like to discuss this client alert in more detail or how it may affect your community association, please contact David Byrne at 609-895-7365 or by email at dbyrne@stark-stark.com

The existence of affordable housing-related rules, and how they are administered and/or enforced, is heavily connected with the extent and nature of New Jersey’s residential development.

If you would like to discuss this client alert in more detail or how it may affect your community association, please contact David Byrne at 609-895-7365 or by email at dbyrne@stark-stark.com

To resolve an ECB Violation, a building may agree to cure the violation or contest the violation: 

1. Cure the Violation. If you choose to cure the violation, you must admit the violation and certify correction by the “cure” date listed on the Notice of Violation.  This will require you to complete an “AEU2: Certificate of Correction” form, provide photographs and receipts to serve as proof of the correction and provide a notarized statement attesting to how the violation is corrected. 
2. Contest the Violation. If you choose to contest the violation, you must appear at a hearing before the ECB. You may bring witnesses or other evidence to substantiate a defense against an ECB Violation. After the hearing, the ECB Administrative Law Judge will make a decision with one of the following outcomes: (a) Dismissal – No Penalty Imposed

If you prevail in contesting your violation, you will not owe any penalties and your violation will be dismissed. However, the Department of Buildings may re-inspect, reissue a violation or appeal the decision; (b) In Violation – Standard Penalty Imposed. If you are found in violation, a penalty will be imposed. You have the right to appeal this decision. The appeal process is conducted entirely in writing, and therefore no further appearances are necessary; (c) Mitigation – Reduced Penalty Imposed For certain violations, if you attend the hearing, admit guilt and demonstrate that the condition has been corrected, the ECB Administrative Law Judge may impose a mitigated (reduced) penalty (½ the standard penalty); (d) Stipulation at Hearing – Standard Penalty Imposed Depending on the violation, you may have the option to enter into a stipulation with the Department during the first hearing. By entering into a stipulation, you admit guilt and agree to correct violating condition within 75 days; (e) Default – Five Times Standard Penalty Imposed

Hence, if guilt is admitted and the ECB Violation is cured, a hearing, as well as any penalties which may result from the hearing will be avoided. If the ECB Violation is contested and a hearing takes places, any one of the foregoing outcomes may occur.

Before deciding whether to cure an ECB Violation or to contest an ECB Violation, one must consider the type and class of ECB Violation because the monetary fines will differ depending on the type and class of ECB Violation . The ECB Penalty Schedule can be found under the ECB section of the website for the City of New York.  One must also consider whether a defense can be substantiated at a hearing before the ECB.  An ECB Violation should not be contested unless a defense, through witnesses and other credible evidence, can be substantiated at a hearing before the ECB Board. 

If you would like to discuss this client alert in more detail or how it may affect your community association, please contact David Byrne at 609-895-7365 or by email at dbyrne@stark-stark.com

By virtue of the stipulation, mortgage services had until April 1, 2011 to convince Retired Appellate Division Judge Richard Williams that they had remedied all improper practices. These six banks are responsible for a majority of the state's current foreclosures. Also, evidence had surfaced that each had engaged in what has become known as "robo-signing". "Robo-signing" is the term used to describe a bank's assembly-line foreclosure process by which foreclosure supporting affidavits are signed even though the signer lacks personal knowledge that the contents of the affidavit being signed are true and correct.

By virtue of the stipulation, each bank must show that they now have procedures in place to eliminate robo-signing and that those procedures will be followed. Additionally, the banks must address their authority to act when they are not the actual mortgagee, their record-keeping practices, their procedures for assuring that whatever is filed with the court is correct and the procedures used to facilitate communication with their own lawyers. Under the terms of the agreement, once foreclosures restart, the Judiciary or its appointed representative will have the power to review random foreclosures to test compliance.

The delay connected with foreclosures - whether resulting from the backlogged foreclosure unit or from the Judiciary order to show cause - continues to burden our community associations with delinquent units and/or homes that are not 'turned over' to the bank via that bank's foreclosure. New Jersey law provides that upon the conveyance of a unit and/or home via sheriff's sale, the purchaser of that unit and/or home at the sheriff's sale must begin the payment of regular assessments and fees going forward. Hence, the speedy and proper foreclosure of a unit and/or home is often crucial to a community's financial status.

Per the rule, community associations could use revenue raised by new transfer fees for very narrow purposes, and would be regulated in how those with new transfer fees manage non-resident use of common property or elements. The rule has not yet been finalized or put in place, such that the public can still comment on it. This proposed rule, to the extent that it restricts how funds from new transfer fees can be used, does not likely adhere to established property law. Generally speaking, community associations have the right to raise revenue and use this revenue the way their owners and leadership determine. Until April 11, 2011, citizens are permitted to submit comments to the Federal Housing Finance Agency as follows:

- E-mail: Use the address, regcomments@fhfa.gov, and include the following in the subject line of the e-mail: FHFA Proposed Rule on Certain Private Transfer Fee Covenants, (RIN) 2590-AA41
- U.S. Mail: Use the following address to send comments by U.S. Mail:
     Mr. Alfred Pollard
     General Counsel
     Federal Housing Finance Agency
     1700 G Street, NW
     Washington DC 20552
     ATTN: Public Comments: FHFA Proposed Rule on Certain Private Transfer Fee Covenants, (RIN) 2590-AA41
- Federal E-Rulemaking Portal: Go to www.regulations.gov and follow the instructions provided to submit your comments electronically.

With the tremendous backlog of foreclosures currently impacting the State, the foreclosure process in New Jersey can take as long as two years before an Association can even conduct a sheriff’s sale and be in a position to take title to the unit. Moreover, if and when title is acquired, the Association’s work is not done.

Unless the property is vacant, the Association must seek the former unit owner’s eviction. Unlike a mortgage foreclosure in which a bank is contractually and automatically entitled to possession upon a debtor’s default, Associations must affirmatively seek possession through the courts. This is a lengthy process in itself and can take up to a year before the Association can ultimately take possession of the unit. While the route to possession is a long one, the hope is that with possession of a unit, the Association can install a tenant and convert the unit into an income-generating property.

If these banks meet these government demands, they would be prohibited from commencing a foreclosure while a borrower was actively trying to lower the interest rate or alter other mortgage terms (i.e., 'mortgage modification'). Additionally, per the demands, any borrower that made three payments pursuant to a trial mortgage modification would then receive a 'permanent modification'. Further, any bank denial of a borrower's modification request would trigger a 'review' by an 'ombudsman' or independent review panel. These demands appear to rise from the federal government's new Consumer Financial Protection Bureau. The banks would have to alter internal processes, potentially slow new lending and employees would have to provide the government with formulas and reports documenting all efforts related to modifications. Employees would be rewarded for pushing modifications and not foreclosures. 
 

None of the banks involved (including Bank of America and JP Morgan Chase) have publicly stated whether they will meet these demands.  
 

Currently, it is estimated over 2 million American households are in active foreclosure, with another 2.2 million households considered 'severely delinquent' vis a vis their mortgages. Experts fear that a plan like this would further slow the overall foreclosure process, burdening their communities and neighbors with the consequences. Many experts believe that the faster all of these foreclosures are finished, the faster the properties will 'turnover', stabilize the market and then eventually lead the real estate market back to normalcy. Foreclosures already take, on average, approximately 400 days from start to sheriffs/judicial sale. We all know that community association units and homes in 'foreclosure' almost always fail to pay assessments and/or maintenance fees, with the completion of the foreclosure (i.e., sheriffs sale/judicial sale) resulting in the first regular payments from that particular unit for perhaps years.
 

Hopefully the federal government and/or the state attorneys general will consider the needs and interests of our communities suffering from bank foreclosures when pressing demands like these.

The related federal regulations can be found at 16 C.F.R. Sec. 681.  This "Red Flag" rule applies to "Financial Institutions" and "Creditors" (defined as "Covered Entities").  A "creditor" is one that "regularly and ordinarily in the course of business (as relevant to community associations and those who manage them) advances funds on behalf of a person, based on the obligation to repay (does not include a creditor that advances funds on behalf of a person for expenses incidental to a service provided by the creditor to the person.  A "creditor" also includes any other type of creditor as the agency (FTC) may determine appropriate based on a determination that such creditor offers or maintains accounts that are subject to a reasonably foreseeable risk of identity theft.  It is likely that the FTC would consider a community association, and a community association management company, to be a "creditor" for the purpose of the Red Flag rule. 
 

A creditor must develop a written program intended to prevent or mitigate identity theft.  This program must identify the red flags related to the accounts and/or information the creditor maintains.  It must detect the red flags within the program, respond appropriately to any red flags identified and/or detected and ensure the program is updated periodically to reflect changes in risks to customers, members and to protect them from identity theft.  "Red Flags" include:  (1) alerts, notifications and credit reporting agency warnings; (2) suspicious documents; (3) suspicious personal identifying information; (4) suspicious account activity; and (5) notice from other sources (i.e., law enforcement).  Management companies and their community association clients must consider the need for a "Red Flag" privacy officer.  They must review and analyze their dishonesty, errors & omissions, directors and officers and liability policies in relation to this.  Management companies should consider how their existing boilerplate contracts protect them, if at all.  Management companies should also ensure that their compliance with this - and their warnings/directions to boards - are documented. 

The new, applicable deadline depends upon the date the condominium was originally approved for funding.  In the FHA's letter it wrote that the "extensions were granted to reduce the impact of processing and reviewing the number of project approvals expiring at the same time while recognizing current housing market conditions."  The deadlines are as follows:

• Condominiums approved between 1972 and 1980 must be re-certified by Dec. 31.
• Condominiums approved between 1981 and 1985 must be re-certified by Dec. 31.
• Condominiums approved between 1986 and 1990 must be re-certified by May 31, 2011.
• Condominiums approved between 1991 and 1995 must be re-certified by July 31, 2011.
• Condominiums approved between 1996 and 2000 must be re-certified by Aug. 31, 2011.
• Condominiums approved between 2001 and 2005 must be re-certified by Sept. 30, 2011.
• Condominiums approved between 2006 and September of 2008 must be re-certified by March 31, 2011.

In the instant Florida case, the owner purchased the unit in January 2006 and executed a mortgage for $184,400.  By April, 2009, the owner had fallen behind in the payment of maintenance fees by 11 months, owing about $5,500 in regular and special assessments.  At that point, the association filed a foreclosure, taking title to the unit in January, 2010.  By then the owner owed more than $9,000 in unpaid maintenance fees.  Had Wells Fargo filed a foreclosure against the original owner and completed the process, it would have owed about $5,800 for its share of unpaid maintenance fees on the unit as required by state law.  In Florida, lenders are liable for up to 12 months of unpaid maintenance fees or 1 percent of the original loan amount, whichever is less.  Here, the value of the unit is about $32,500 - about $150,000 less than what is owed on the original mortgage.  The association strategized that Wells Fargo would either foreclose on the loan and pay its share of unpaid maintenance fees or, instead, agree to release its mortgage. 
 

This approach is just another example of the need for associations to strategize and be creative when trying to ensure their financial health in the face of a troubled economy and real estate market.

Foreclosures in these states are processed via the court system.  They are otherwise known as "judicial foreclosure states".  The moratorium stems from pending foreclosures, and other litigation, in which GMAC employees have been found to have executed foreclosure judgment affidavits without having actual knowledge of the facts of that mortgage and/or foreclosure, despite stating under oath that they did.  GMAC is now even investigating the nature and facts of foreclosures - and evictions - that have already ended and/or taken place (where there may actually be new owners).  The GMAC moratorium even applies to the 'short sale' of distressed properties.  Even lenders with no known problems - Wells Fargo and Citigroup - are expected to approach defaulting homeowners more cautiously and look more aggressively for resolutions short of outright eviction.  The turmoil and fear is so great that if completed foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners.  In turn, one of the country's largest title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC.  Attorneys general in half a dozen states are demanding action or opening investigations. The Treasury Department recently said that it was asking regulators to look into “these troubling developments.”   In depositions taken by lawyers for homeowners, executives at GMAC and Chase said they or their teams signed 10,000 or more foreclosure-related affidavits and related documents a month.  They all admitted that at such a pace their employees could not have had time to actually review the cases.
 

As everyone knows, we are seeing an unprecedented number of foreclosures.  According to LPS Applied Analytics, a mortgage data firm, 2 million households are in foreclosure. Another 2.37 million households are seriously delinquent and waiting for their lender to take action.  Sometimes these loans are still owned by the lender but often, the banks are merely the loan servicer acting on behalf of the owner. Many of the loans are owned by Fannie Mae and Freddie Mac, the mortgage holding companies now controlled by the federal government. In other cases the loans have been sold to private investment pools.  Confronted with so many cases, the lenders tried to process them on a wholesale basis, with the goal of avoiding the expense of a full trial and instead getting summary judgments.  The tool for doing this was the so-called rob-signers, in which mid-level bank executives would sign thousands of affidavits a month attesting that they had personal knowledge that the facts of the case were as presented. The affidavits were prepared by lawyers who were paid a flat fee, which also placed a premium on volume.   When defense lawyers started deposing these rob-signers, they acknowledged that they could not possibly have knowledge of all the cases.
 

Typically, an owner delinquent in the payment of his mortgage is delinquent in the payment of his assessments and/or maintenance fees.  Also, the lenders connected with those units typically become responsible for ongoing assessments and/or maintenance fees following their foreclosures and sheriff's sales.  Hence, condominiums and HOAs often eagerly await the end of a lender's foreclosure so that regular - and needed - assessments and/or maintenance fees begin flowing from a delinquent unit into that association's coffers.  The pace of foreclosures across the country has already slowed to a crawl, often resulting in empty units throughout condominiums and HOAs, from which no revenue is received on the one hand, while on the other hand that condominium and/or HOA provides services, insurance, etc. with respect to it.  This 'moratorium' issued by three (3) of the country's largest lenders will only exacerbate this problem, further threatening the already weak financial position of our condominiums and HOAs.  It is imperative that every condominium and HOA develop a collection strategy that does not depend on the rapid 'turnover' of delinquent units, and the payment thereafter of ongoing assessments by the lender.  There are several available collection strategies that can employed to lessen the blow of this delay and/or moratorium; and some that even take advantage of it, to the condominium's, and HOA's, benefit. 

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.

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.

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.

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. 

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.