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.

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.

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.

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. 

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.

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. 

It is important to note that this legislation does not affect the rights and responsibilities of condominium owners and boards pursuant to the New Jersey Condominium Act.  In most, if not all condominiums the roofs are designated as common elements or common property.  Therefore, the decision to install solar collectors on the roof of a condominium would have to be made solely by the condominium association’s. 

As discussed in several Superior Court opinions, the New Home Warranty Program is ineffectual at best and is rarely an advisable option. Therefore, homeowners and condominium associations are often times forced to sue the developer of their property in an effort to obtain money for necessary repairs. Unfortunately, it often happens that home builders and condominium developers create a corporation or limited liability company for a specific project. The company is minimally funded, and it hires only independent subcontractors. The company is then shut down when the project is completed. A judgment against this company would be completely worthless. In other instances, if a project is not particularly profitable, the developer company may file for bankruptcy protection and whatever limited assets it has would be disbursed to the various creditors. In these situations, if the homeowner or association discovers defects in the construction after several years, there would be no source of recovery. The warranty program provides almost no assistance, and suing a defunct corporation is a waste of time. Therefore, the homeowner or association would be stuck paying for costly repairs. However, if the developer had general liability insurance in place during the project, those insurance policies could provide coverage for the construction defects. Unfortunately, in New Jersey and many other states, builders are permitted to develop land and build homes with minimal or no insurance in place.

In order to prevent these problems and protect new homeowners, the Nevada Assembly has proposed a bill that would require all licensed contractors to carry liability insurance. The bill would require all contractors to carry between $300,000 and $3 million worth of insurance, depending upon the size of the contract. According to the bill's sponsor, Majority Leader John Oceguera, this would protect homeowners from having to sue and/or negotiate with shell companies that are no longer in business, or companies that have filed for bankruptcy protection. Not surprisingly, the Associated General Contractors organization in Nevada objects to the proposed requirement, claiming that insurance is an expensive product, that it would put a significant burden on the contractors and that the cost would be passed directly to the homeowners. The bill has not yet passed, and faces strong opposition as well as a competing bill from the Nevada Senate.

In the last several years, the New Jersey legislature sought fit to require home improvement contractors to carry liability insurance, but has thus far not applied such a requirement to new home builders and developers of cooperatives and condominiums. We will continue to monitor the situation, and update our readers in the event that additional information becomes available.

The Plaintiffs had several responsive arguments, each of which the court rejected.  The court found that the statute of repose began to run upon substantial completion of the McGinty's unit, not the completion of the entire 2,663 unit development nearly ten years later, as argued by the Plaintiffs.  The court relied upon the Supreme Court cases of Daidone v. Buterick Bulkheading, 191 N.J. 557, 564 (2007), in which the Supreme Court found that the Statute of Repose began to run upon "substantial completion" of their unit, not the entire project.
 

The court also found that although Hovnanian performed repairs after the certificate of occupancy was issued, those repairs were "temporary and cosmetic" and thus did not constitute a separate improvement to the property, and even if they were separate improvements, the complaint was not filed within ten years of those repairs.
 

Interestingly, the plaintiffs further argued that the statute of repose was not meant to deny recovery to a person who is in direct privity with the negligent party, but was intended only to apply to a third-party social guest, with no direct privity to the owner-builder.  The court rejected this argument as well, finding no such language in the statute.
 

All of the claims, including the personal injury claims were extinguished within 10 years of the date of the certificate of occupancy.  This decision reinforces the strict nature of the statute of repose and the New Jersey Judiciary's strict adherence to the letter and intent of the statute as drafted by the legislature.  If you or your Association has incurred damage related to the construction or improvement of real property, contact the author of this article to discuss your rights under the statute of repose and other applicable statutes and rules. 

No action . . . arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained on account of such injury, shall be brought against any person performing or furnishing the design, planning, surveying, supervision of construction or construction of such improvement to real property, more than 10 years after the performance or furnishing of such services and construction.
[N.J.S.A. § 2A:14-1.1]

The statute applies to, among others, building contractors, whose professional work is functionally related to and integrated with a building plan or design, which gives rise or contributes to a defective and unsafe condition.   E.A. Williams Inc. v. Russo Development Corp., 82 N.J. 160, 169; (1980).   However, the New Jersey Supreme Court, in Greczyn v. Colgate-Palmolive, 183 N.J. 5 (2005), addressed the interplay between the fictitious party practice and the Statute of Repose.  In doing so, the court allowed plaintiffs to join defendants in a lawsuit after the expiration of the statute of repose as long as the plaintiff was diligent in determining the identity of the responsible party.  In Society Hill, supra, the New Jersey Superior Court relied upon the Greczyn case in allowing the Condominium Association to continue its case against one of the contractors, in part, because the Association relied upon another defendant, the Developer K. Hovnanian, for information and documents related to the construction of the buildings.  Given that the Association did not construct the buildings, it was at the mercy of the Developer and others as to information related to construction.  Once that information was provided and thoroughly reviewed by the Association, the contractor was joined by name in the lawsuit.  The Judge found that it is at least a question of fact as to whether or not the Association was diligent in joining the contractor, thereby leaving the issue to be determined by the jury.

If your association has building issues and have been told that your claims are barred by either the statute of limitations or statute of repose, contact my office to discuss.  Your community may have options and other means of recovery for construction defects caused by negligent construction.

If you have questions related to building related defects, whether or not your association can recover damages on behalf of the unit owners, or if your master deed contains similar language that permits the association to act when it deems necessary, please email me at MWiechnik@stark-stark.com.
 

This is a victory for all New Jersey condominium associations in that the court recognized that it is patently unfair to permit a sponsor to benefit from its own malfeasance. A sponsor should not be permitted to violate the Condominium Act and fail to turnover plans and documents and then use that misconduct to bar a subsequent lawsuit by the Association.

To learn more about a condominium's rights to obtain plans and other documents from the sponsor, contact Mark M. Wiechnik, Esquire mwiechnik@stark-stark.com.

The trial court found that Stephens had no personal liability for any acts of Secret Gardens, including its alleged violations of the CFA and dismissed the claims against him.  The Appellate Division reversed this decision, stating that New Jersey "case law has long recognized that a corporate officer or employee who participates personally in a violation of the CFA or its implementing regulations may be held individually liable for the violation."   The court found that there was undisputed evidence that Stephens had participated personally in the alleged violations of the CFA committed in connection with the execution and performance of the home improvement contract between plaintiff and Secret Gardens.  In fact, Stephens himself testified at his deposition that he was the one who prepared the contract submitted to plaintiff, inspected the work as it was being performed, and discussed the change orders with plaintiff.  The Court found that these actions by Stephens constituted the primary grounds for plaintiff's CFA claims and, therefore, Stephens would be liable for any violations of the CFA in which he participated personally.   This provided the only source of recovery for Lanza, as Secret Gardens, Inc. filed bankruptcy during the pendency of the litigation.

This decision further broadens the already powerful New Jersey Consumer Fraud Act by permitting aggrieved consumers the opportunity to obtain a recovery from officers and executives of corporations that may have no assets, file bankruptcy and/or have no insurance.  New Jersey's Consumer Fraud Act has long been one of the most powerful tools of product consumers, and with this clear reinforcement of the law, the citizens of New Jersey are further protected from unfair trade practices.