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

Further evidence that coverage under D&O policies is extremely narrow, the 11th Circuit determined once again that a D&O carrier did not have an obligation to defend an Association that was sued for, among other things, breaching its fiduciary duty to the unit owners.  The Eastpointe Condominium Association was sued by one of its unit owners for failing to maintain and repair the roof and the air conditioning system.  The unit owner complained of water intrusion, interior damage and mold growth, and sued the Association for negligence and breach of its fiduciary duties.
 

The Association notified both its general liability carrier as well as its directors and officers carrier ("D&O") of the claim.  The liability carrier accepted defense of the Association but the D&O carrier denied defense and indemnity, claiming that the policy contained a "property damage" exclusion.  After a trial and verdict in favor of the Association, the Association filed a declaratory judgment action against the D&O carrier.  The Association argued that the claim is a breach of fiduciary duty, which should result in coverage, regardless of whether or not that breach resulted in some property damage.  Further, the Association argued that nearly every claim against the Association would in some way involve property damage, as maintenance and repair of the common property is the main purpose of the Association. 
 

The 11th Circuit disagreed.  The court stated that the language contained in the exclusion that excluded all coverage for any loss arising out of damage to any property, precluded coverage under this policy because the breaches of the Association's fiduciary duty ultimately caused property damage.  Further, the court rejected the Association's argument that coverage under the D&O policy was illusory, because it would cover claims that did not arise out of property damage, however, limited.  For example, the court referenced claim of slander of title, breach of the covenants, or restraint of trade, that may be covered under a D&O policy as those claims do not arise out of property damage.  As such, the Association's claims against its D&O carrier were dismissed.

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Florida law now permits homeowner associations to do what Stark & Stark has been encouraging its associations to do for years.  The Florida legislature recently passed a law that allows homeowner association's to go after renters for association fees when the homeowners fail to pay their monthly maintenance fees.  Interestingly enough, Stark & Stark has been obtaining similar recovery for its clients for several years now, without the help of New Jersey's legislature.
 

Associations are feeling the effects of the recession just like everyone else, and most Associations have at least a few owners who have not paid their dues in several months.  Amazingly enough, some owners have failed to pay their regular dues, but continue to accept rent from tenants who are living in the unit.  The Florida law permits homeowner associations to formally notify renters that their payments should be paid directly to the association, not to a landlord who has failed to pay the organization.  If the tenant is ordered to make a payment to the association, it counts as rent credit. The tenant pays the remaining balance to the landlord and can not be evicted for failure to pay rent. 
 

The process isn't as simple and straightforward in New Jersey, but nonetheless, lawyers in Stark & Stark have successfully argued to the court the inherent unfairness of a unit owner who refuses to pay his maintenance fees, but continues to collect rent from a tenant.  In many of these situations, the court has appointed a "rent receiver", typically the property management company, to accept the rent from the tenant each month, pay the outstanding associations fees, and give any balance of those fees to the unit owner/landlord.  This benefits not only the Association, but the tenant as well, who arguably should not be evicted or foreclosed upon when they are complying with the terms of their lease agreement.  Stark & Stark's New York clients have the benefit of a New York statute which permits the Association to collect rent from tenants, however, if the tenants do not pay, the statute does not give the Association the right to sue the tenant directly, which all but eliminates the Association's ability to enforce the statute.

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The issue of second hand smoke in a condominium setting has been brought to the forefront recently in several significant ways. 
 

Recently, a lawsuit related to second hand smoke claims in a condominium setting was decided in Massachusetts.  In Burrage v. DeAngelo, et al., a condominium unit owner sued her neighbor, the condominium association and her real estate agent for causing or allowing a hazardous or noxious activity, namely smoking in an adjacent unit.  All but the agent settled with her before trial.  At trial, the Plaintiff claimed that her real estate agent knew that her neighbor was a smoker, but failed to disclose that to her before closing.  The second hand smoke allegedly exacerbated her asthma, causing her significant personal injuries.  The jury found in favor of the agent in less than an hour, and awarded the Plaintiff nothing.  Obviously, real estate brokers and agents must disclose known hazards such as toxic waste sites, flood or fire danger or local industry that may be considered dangerous.  The question here was whether the agent should have disclosed smoking as a hazard, given that the Plaintiff could have easily determined during any of the visits to the home that either the prior owners or a neighbor was a smoker.  In fact, the Plaintiff specifically asked the realtor about the smoke smell during one of the visits.  The jury here chose not to add another layer of disclosure to already burdened Realtors, and instead charged the Plaintiff with discovering this "hazard" on her own.  It is unknown at this time if the Plaintiff plans on appealing the decision.
 

In Manhattan, two unit owners sued their neighbor for creating a "nuisance" in their luxury Tribeca condominium.  The suit alleges that even though the condominium bylaws permit smoking in the units, "objectionable odors" are prohibited.  Further, the smoking has caused health problems for both unit owners and their young daughter.  Recently, a Manhattan Civil Court Judge permitted the suit to go forward, denying a motion to dismiss by the smoker.
 

In British Colombia, Canada, a smoker moved in below two non-smoking unit owners.  The non-smoking owners, claiming that their health was being affected, appealed to their condominium association to adopt a no-smoking policy.  The association refused, claiming that smoking didn't violate the bylaws, and thus it had no authority to respond to the complaint and force the smoker to stop.   The unit-owners in response are taking a novel approach. They claim that their sensitivity to smoke is a "disability" and the fact that the association failed to accommodate their disability violates Canada's Human Rights Statutes.  The matter is set for a hearing in the next several months and if the non-smokers are victorious, it could force every condominium in Canada to become a non-smoking building, for fear of future litigation.  This will not only preclude smokers from buying condominiums, but will severely impact the Association's ability to sell units, as their pool from which to attract potential buyers would be significantly reduced. 
 

However, this hardly settles the issue of whether condominium associations in New Jersey can be held liable for unit owners participation in a legal activity in the privacy of their own home.  In the absence of a ban on smoking altogether, a condo association has a duty to protect the safety and welfare of its unit owners and to act in best interests of those owners.  It is an open question if that power extends to prohibiting lawful activities that take place within the four walls of a unit.  The Association may only have to provide alternative dispute resolution to the two owners in order to comply with the New Jersey Condominium Act and the Planned Real Estate Development Full Disclosure Act (PREDFDA), but no New Jersey court has decided this issue as of the date of this article.

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A law pending in the New Jersey State Assembly would, if adopted, regulate condominium and homeowner association's hiring of vendors and would also address how to deal with potential conflicts of interest. 

Assemblyman Peter Biondi introduced a bill in January 2010 in which he stated that with the quasi governmental powers provided to associations should come standards of "fairness and due process."  The bill provides that associations should be held to similar standards of transparency and fairness.

As to the bidding requirements, Assemblyman Biondi is proposing to enact rules which would force associations to:
 

1. Obtain three quotes for any contract for services or materials whenever the amount payable by the association is over $10,000 in any 12 month period.
2. Use sealed bids with required specifications , to be opened only a publicly announced meeting for any contract that exceeds $25,000.
3. Award all contracts to the vendor that provided the lowest quote or bid, unless the board determines, for good cause, that accepting the bid would be detrimental to the best interests of the residents. 

Interestingly, any association with fewer than 30 units can, by resolution, waive any of these provisions. 

 

Although community associations are similar in many ways to government, the last thing any association wants to do is model itself after any level of government.  Government agencies are often marred by corruption, red tape, cost overruns and unnecessary levels of bureaucracy; things that most associations in New Jersey try to avoid.  On its face, obtaining three bids sounds like a reasonable and prudent business practice.  However, Board members are entirely capable of determining how many bids to obtain for a particular project or service, and obtaining three is hardly a panacea for problems that result from hiring the wrong contractor.  Moreover, obtaining three quotes may be impossible, for example, for an association that pursuant to the master deed must hire a property management company within 5 miles of the association, and only 2 fit that description.

 

However, when you get to section 3, the real problem is revealed.  Forcing associations to hire the cheapest vendor guarantees problems.  The old axiom, "you get what you pay for" has proven true over and over again.  Think about how well this formula has worked for the government.  The least expensive contractor has given us shoddily built schools, bridges and government buildings.  Why should associations model this behavior?  In fact, some governments have completely scrapped this program.  New York City and Camden both ended their lowest bidder programs (allowing for consideration of experience, completeness of the quotation, references, etc.) with shocking results: construction quality got better. 

 

If an individual association wants to enact such a rule, it is obviously free to do so, but the mechanism to prevent problems is already in place.  First, the governing documents of many associations require the approval of 2/3 of the homeowners to approve assessments related to work in a certain dollar amount.  Second, the system of goverenence itself ensures that if the Board makes a habit of hiring the first contractor to provide a bid, or is hiring friends and relatives who do shoddy work, then the unit owners have the right to vote them out of office during the next election.  Like most legislation, this proposed law is likely a reaction to one or two troublesome boards who made poor decisions, prompting an Assemblyman to react in such a way that will saddle all associations with unnecessary requirements which are likely to cause more problems than they cure.

As for dealing with conflicts of interest, Assemblyman Biondi is proposing that:

1. No member of the board or management can have an interest in any business which is in conflict with the proper discharge of their duties, including having a direct interest in any contracts for work or materials used by the association or any fees paid to a broker, architect, etc.;
2. No board members or managers can use their position to obtain any unwarranted privileges for any person;
3. No board members or managers can act in his or her capacity in any matter in which he or she, a related person, or any other person residing in his or her household or the household of a related person, or any business organization in which any of such persons has an interest, has a direct or indirect financial or personal involvement that might reasonably be expected to impair the objectivity or independence of judgment of the board member, employee or property manager.
    

Like most legislation, these may be obvious and proper rules to have.... until they are applied to the real world.  As with any law or rule, there are always unintended consequences.  If a Board Member's brother owns a painting business and can do a quality job for 15% less than the competition, shouldn't the Association be permitted to hire that person, provided the Board Member in question discloses this fact to his fellow board members?  Arguably, under section 3 of the proposed legislation, the board wouldn't even be permitted to consider hiring this contractor.  But under the existing Nonprofit Corporations Act, which applies to associations, such a contract would not be void solely due to the fact that a trustee has an interest in the contract or transaction, as long as the interest is fully disclosed to the entire board before they vote on the issue. N.J.S.A. 15A:6-7.  The proposed legislation would obviously conflict with the Nonprofit Corporations Act, causing further confusion for board members and homeowners. 
 

The legislature is trying to get boards and associations to act in a proper and more efficient manner, but the real way to accomplish this is to become active in your association.  Vote, attend meetings, provide feedback and be involved.  If the majority of unit owners are involved in the process, then the Board will be responsible for their decisions, they will consider multiple points of view and incompetent or untrustworthy board members will be voted out of office.   That way, each Association can make decisions that best fit their particular situation and are less likely to have unnecessary rules forced upon them.

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Community Association Property Managers ("CAPM") are much different than their "property manager" brethren.  In general, real estate property managers are responsible for ensuring that the apartment or condo building that they are charged with is functioning properly, much like a superintendent.  CAPM's on the other hand are fiduciaries of the properties that they manage.  They act on behalf of the Board on a myriad of issues.  They are the first line of defense and in some cases are the face of the community.  CAPM's contact, interview and bid contractors.   They enter into contracts on behalf of the Association.  They are responsible for the Association's finances, from tracking delinquent owners to paying vendors.  They are sometimes thrust into the role of mediator in attempting to settle homeowner disputes.  They are generally responsible for guiding volunteer board members in the procedures of the Association, and they are sometimes called on to interpret or explain the Association's governing documents or the law under which the Association is governed.  And yet, with all of this responsibility, community association property managers in New Jersey are not required to be licensed or certified.  There is no state-wide standard required for managers, no required training, no background checks, and no governing body charged with ensuring that managers have a minium amount of knowledge and/or experience.

In 2008 Senator Christopher Bateman sponsored a bill (S-759) that would certify Community Association Managers (anyone managing a condo, co-op or homeowners association), and would require anyone in the business of property management for common interest communities to be certified under standards created by the Department of Community Affairs consistent with already existing national standards.  The bill would not require certification, but would prohibit those without the certification from holding themselves out as being "certified" in the field of property management. The act would also require all Associations in New Jersey to hire only certified managers, and would require that the contract between the Association and the manager include the insurance, bonding and certification requirements.

 
The two year certification would require a mix of schooling and experience, and would then require that the applicant pass a written examination. Each certified manger would have to be bonded in the amount of $3,000. 

 
The requirements of the training and exam are likely to be similar to the National Board of Certification for Community Association Managers (NBC-CAM) which has created a certification for community association property managers.  This certification requires classroom study and an exam involving subjects such as governance and legal matters, budgets, reserves and assessments, risk management and insurance, maintenance, contracting and human resource management.  This certification, while obviously not a guarantee of superior service or compliance with each and every standard, at least sets a minium standard for those who enter this field. The certification also requires that managers:

• Be knowledgeable, act, and encourage clients to act in accordance with any and all federal, state, and local laws applicable to community association management and operations.
• Be knowledgeable, comply and encourage clients to comply with the applicable governing documents, policies and procedures of the Client Association(s) to the extent permitted by that Client.
• Not knowingly misrepresent materials facts, make inaccurate statements or act in any fraudulent manner while representing Client Association(s) or acting as a CMCA.
• Not provide legal advice to Client Association(s) or any of its members, or otherwise engage in the unlicenced practice of law.
• Promptly disclose to Client Association(s) any actual or potential conflicts of interest that may involve the manager.
• Refuse to accept any form of gratuity or other remuneration from individuals or companies that could be viewed as an improper inducement to influence the manager.
• Participate in continuing professional education and satisfy all requirements to maintain the certification.

Manager certification has been an issue since at least 1999 when the Assembly Local Government and Housing Committee discussed the pros and cons of such a certification, related to the proposed Uniform Common Interest Ownership Act. The current bill is presently being debated in committee, and mirrors a similar bill introduced by then Assemblyman Bateman in 2006.  The 2006 bill was abandoned before being put up to a vote of the Assembly.  However, now more than ever, this certification may be a necessary step in the field of community management.  There are new and larger associations cropping up across New Jersey, and more and more management companies being created to service these companies, some of which have no experience with condominiums, townhouses or cooperatives.  While obviously not a panacea, it would be extremely helpful to give the Board of Trustees a comfort level that the manager they wish to hire has studied specific issues and subjects that will enhance their ability to serve the community.  This is essential for volunteer, part-time Board Members who are often times unable to separate the good from the bad in the ever growing property management world.  It may also allow the quality CAPM's out there to further distinguish themselves from those who do not fully understand the full breadth of their position, or who are unable to properly service their community.

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Everyone knows that humans only use 10% of their brains (not true, unless you mistakenly voted for Pat Buchanan in 2000), that Christopher Columbus called Native Americans "Indians" because he thought he landed in India (not possible, that part of the world was called Hindustan at the time) and that being cold will ensure that you actually catch a cold (also not true, sorry Mom).  So when you hear people say that they know mold causes serious personal injuries, you know it has to be true because common knowledge (as well as Dateline and 60 Minutes) tells us so.  Everyone has heard that a couple in Texas got $32 million dollars because their house was filled with so much mold they had to burn it down.  You likely didn't know that the money was paid by their insurance company for acting in bad faith and deceptively failing to cover their claim for property damage, not because they were physically damaged by mold exposure.  Read closely the articles about "toxic mold" and you'll find that most if not all of the money paid to homeowners is for lost personal items that have to be discarded because of mold/water damage, or some underhanded act of an insurance company.  Rarely are the damages directly related to mold exposure and resultant health problems.  Believe it or not, newspaper headlines are not designed to be accurate, they are designed to attract attention.  "Toxic Mold Injures Family" unfortunately just sounds better than "Insurance Company Pays Money on Bad Faith Claim". 

The connection between moldy houses and a particular physical ailment is a difficult one to make.  Mold is everywhere.  And while it is possible for some growths of mold to cause temporary damage to an allergic person, there is little if any proof that exposure to a certain type of mold will cause specific symptoms in anyone.  The effects of mold exposure differ from person to person.  In fact, the Centers for Disease Control web site states that:

Mold exposure does not always present a health problem indoors. However some people are sensitive to molds. These people may experience symptoms such as nasal stuffiness, eye irritation, wheezing, or skin irritation when exposed to molds. Some people may have more severe reactions to molds. Severe reactions may occur among workers exposed to large amounts of molds in occupational settings, such as farmers working around moldy hay. Severe reactions may include fever and shortness of breath. Immunocompromised persons and persons with chronic lung diseases like COPD are at increased risk for opportunistic infections and may develop fungal infections in their lungs.

Everyone knows that placing your hand over a flame will cause a burn.  Not even the scientists at the CDC know if the mold in your house or workplace will harm you. There are no recognized standards for the amount of mold that will cause symptoms, or the length of time you need to be exposed to certain mold to be injured.  Most people who have mold allergies stay away from hay, potpourri and indoor plants.  If they are exposed to mold they may have sneezing, coughing and breathing problems, but those go away as soon as they leave the horse stable or their grandparent's house.  These pesky facts however, have not precluded industrious lawyers and plaintiffs from filing numerous questionable "toxic mold" lawsuits.  Lawsuits based on the "I know it’s true" platform are being filed all the time, accompanied by "I'm a doctor and I'm pretty sure the Plaintiff was injured based on what they told me and that article I read last week" medical reports as proof.

Despite the fact that the CDC is unable to nail down a cause and effect relationship between mold and physical ailments, jurors around the country are asked every day to do just that.  They have become the means by which the courts differentiate the junk science from the real science.  This disturbing trend is, in part, a result of judges abdicating their responsibilities as expert witness gate keepers.  Increasingly, courts are allowing experts to testify, regardless of how they come to their conclusions, their level of mold related illness experience, or the plausibility of their conclusions.  The playoff football, "let them decide it on the field", approach is one that is leaving the final decisions to jurors, who inevitably bring their own "knowledge" to the courtroom.  Regardless of what "School House Rock" says, knowledge is not always power.  Sometimes "knowledge" isn't even accurate.  Take this example: 

Mr. Jones sues ABC Apartments for keeping his apartment too cold which, he claims, resulted in him having a runny nose, cough and that "achy feeling".  Mr. Jones produces a report from his family doctor that says "Mr. Jones told me it was cold in his apartment in November, so given the fact that his symptoms started in November, I believe that the low temperature caused his cold.  In addition, when he warmed up at his friend's house, the symptoms seemed to go away."  The doctor doesn't specify how cold is cold enough to make someone sick, nor does she account for the person sneezing in the cubicle next to Mr. Jones at work, or the fact that Mr. Jones had 3 colds before moving into ABC Apartments, or that during the 3 weeks between his first and second visit to the doctor, when he got better, Mr. Jones ate 37 oranges. 

ABC Apartments asks the judge to throw out this claim, because the Plaintiff can't show that A) it was too cold in the apartment because they can't define "too cold", B) if it was "too cold", that the temperature caused Mr. Jones to actually catch a cold, or that C) he didn't catch the cold from his cubicle-mate, or that D) the vitamin C in the oranges cleared up the cold, not the fact that he went to a warmer apartment.  The court denies ABC's request, saying that there is a sufficient basis for the report, and that ABC is free to beat up (verbally of course) the expert during cross examination and convince the jury that the doctor has no idea what she's talking about. 

This seems to be a reasonable decision, until my Mom is picked to sit on the jury.  As soon as my Mom hears that it was cold in the apartment, and that he has a cold, her mind would be made up.  As sure as the sun comes up in the morning, being cold gives you a cold.  There is no disagreement, believe me.  It doesn't matter if ABC produces the President of the Hot and Cold Association of America to testify that they took the temperature in the apartment, and its 59 degrees.  And while that might be mildly chilly, it’s definitely not cold, and besides, being mildly chilly doesn't cause any sort of illness.  There has been no such proof ever produced.  In my Mom's head, however, that Plaintiff wins 10 times out of 10.  Case closed.  The question then is, shouldn't the court have excluded this testimony to prevent my Mom from using what she "knows" to be true, even if there was no real causal connection?  Shouldn't the court know better than to allow an expert to testify that will at best confuse a jury and at worst confirm inaccurate "common knowledge".

The New Jersey Appellate Division thinks not.  In an unpublished opinion, the court recently permitted a case to go forward where a tenant claimed to have been injured by exposure to toxic mold.  In Smith v. Northridge at Edison, the Plaintiff's doctor, relying on the Plaintiff's explanation of the facts as she believed them to be, submitted a report that said essentially because the water intrusion and mold growth occurred at the same time as her symptoms, and because her symptoms seemed to diminish when she left the apartment, she was obviously damaged by the mold in the apartment.  The doctor claimed that the temporal similarities led him to believe that her condition was caused by the "harmful conditions present in her residence."  The doctor had never visited the apartment and did no testing or investigation of the types of contaminants present in the apartment.  The trial court dismissed the plaintiff's claims, finding that the doctors lack of specificity as to the type of mold spores, the lack of objective testing on the plaintiff, and the failure to identify that it was even mold in the apartment was fatal to the doctor's ability to testify.  There was no way to tell what the plaintiff thought was mold, actually was mold, and that whatever it was that was found type of mold caused the symptoms experienced by the plaintiff.

The Appellate Division, however, found that the temporal evidence (the fact that the "mold" apparently grew around the same time as the symptoms occurred and that the symptoms subsided when she left the apartment) and the plaintiff’s positive response to treatment, was sufficient to permit the doctor to testify at trial. The matter was remanded back to the trial court for further proceedings, which means a trial will eventually be held to determine the outcome of the case.  No word whether or not my Mom has been called for jury duty.

This case is an example of the courts increasing unwillingness to dismiss marginal claims or thinly based expert opinions.  Much like the criminal justice system would rather a guilty man go free than put an innocent man behind bars, the civil courts would rather permit a marginal claim to proceed, than dismiss even a slightly meritorious claim.  Americans should have their day in court.  Recent cases on toxic mold personal injury cases are a clear example of this philosophy.  The problem is that the pendulum has swung too far in favor of allowing almost any doctor to testify as to causation of mold personal injuries, mostly based on what they have been told by their patient, and permitting jurors to ignore the science in favor of what they think they know about mold and its health effects.  Courts need to take into account the possibility of an erroneous jury decision based on facts not in evidence, and the implicit message they send to jurors when allowing a doctor to testify on matters on which they have only slightly more experience than do the jurors.  Judges need to be the gatekeepers and the Appellate Division needs to support their effort.

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A group of homeowners in the Carol Lynn Resorts campground have sued the property owners, the State of New Jersey and Woodbine Borough over alleged changes to the park rules and regulations.  The owners allege that the owners of the campground have recently changed the rules that call into question whether or not they can use the facility as a year round residence rather than a seasonal vacation spot. The owner of the property denies any such change to the rules and regulations and claims that even though the Department of Community Affairs grand fathered many of the residents in, and permitted them to live year round in the facility, and the borough approved an ordinance also permitting residents to live year-round in the facility, some homeowners were not satisfied. 

The dispute seems to stem from an interpretation of documents, although in the opinion of the property owner, there is no ambiguity and no resident will be asked to leave.  It seems as if in this case, as is bound to occur when a property or Association falls under multiple jurisdictions, that the various levels of government bureaucracy can not communicate sufficiently to provide a simple answer to whether or not residents are permitted to live year-round in the facility, and whether the property owner has a right to dictate otherwise.  It will be interesting to follow the results of this case, as there are many Associations across New Jersey that may or may not be incorporated, or officially recognized as a Homeowner's Association, and may not know under which agency's jurisdiction they fall under. 

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In an effort to protect beach going summer renters, owners in several New Jersey beach towns, such as Stone Harbor, will be required to obtain a renter’s licenses in order to in order to legally rent their units. The license will include, among other things, registration with the local municipality and a fire inspection.  The inspections will have to be conducted each year, at the cost of the owner, in order to maintain compliance with the law and avoid costly fines.  The program in Stone Harbor, for example, begins for the 2010 rental season, if it passes through an upcoming council vote.
 

If a unit fails inspection, it cannot be occupied until it passes. If it’s already occupied at the time of inspection, then the owner has 30 days from that time to make repairs or corrections. An owner of a rental may get another five days to make repairs after re-inspection within the 30-day period.  Of interest to condominium owners who rent their units, each condo unit will be considered a separate rental, which will require a separate inspection.  However, a valid inspection from the Department of Community Affairs, which inspects condominiums and multiple dwellings every 5 years to ensure compliance with the construction, housing and fire codes, will satisfy the license requirements, at least for the year that the DCA inspects the condo.  Check with your local municipal offices to see if there are similar requirements for renting your condominium unit or house.

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A condominium association in Wildwood, NJ has had a crash course in the failure of the New Jersey New Home Warranty Act to protect the rights of New Jersey residents.  The condominium is being forced to watch their decks degrade and collapse before their eyes, while bureaucratic red tape and government inefficiency combine to create a disastrous situation for the unit owners.  The decks were improperly constructed, and as such, have experienced water intrusion that has caused decay, mold and even mushrooms to grow on the wood.  This has rendered them unusable.  After the problem came to light, and it became clear that the general contractor would not stand behind its work or the work of its subcontractors, the association looked to the Department of Community Affairs (DCA) for assistance under the New Home Warranty Program.  The DCA inspected the property and found that the construction was improper and that the decks were rotted beyond repair.  Under the New Home Warranty Program the DCA declared that the general contractor (who was unable to do the work properly the first time) had 30 days to draft and submit a plan of repair and 30 days after that to actually repair the property. 
 

The general contractor, not surprisingly, has attempted to place blame with the Township inspectors, who should have caught its inferior work during their routine inspections.  However, the general contractor knows full well that the responsibility of the Township inspectors is extremely limited, and they are surely not responsible for ensuring that the architectural plans or specifications are followed.  They are merely there to make a cursory review of the property and ensure that the work meets very minium requirements for safety.  They do not ensure quality workmanship.  That job, pursuant to the building code, is the general contractor's alone.  Their reliance on the Township inspectors is a transparent attempt to deflect the blame to someone else.  
 

The association has learned a difficult lesson that many across New Jersey have learned the hard way.  Because it chose to file a claim under the New Home Warranty Program, its fate is no longer in its own hands.  The DCA will decide on the scope of the repair, who does that repair and the cost at which the repair will be done.  The association has little, if any, input going forward.  If the association is not satisfied with the repairs suggested or eventually conducted, they are unable to appeal the decision in court.  Once a person or association files a claim under the New Home Warranty Program, they are prohibited from suing any of the parties responsible for those defects in New Jersey Superior Court.  The decision of the DCA (or the warranty company) is final and more often than not, the program favors builders and contractors over the homeowners.
 

Associations from Cape May to Bergen County, should be aware of their rights before filing a claim with the New Home Warranty Program.  In order to make a fully informed decision, the association should contact an attorney who is versed in the practice of construction in New Jersey and who knows condominium and homeowners association rules and regulations. For example, under the statute of repose in New Jersey, homeowners and condominium associations generally have 10 years from the date that construction is completed to sue the general contractor and its subcontractors for damages related to the construction.  Often times, depending on the type of damage that the association has incurred, the contractor's insurance policies can be source of recovery for the association.  This may provide a more complete recovery, a more favorable result for the association, and it will certainly provide the association more control over its destiny then they will receive by putting its fate in the hands of government officials who may not be completely interested in obtaining the most favorable result for the association. 

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