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

How often have you seen the FBI warning screen preceding a movie and wondered, does this warning apply to me?  A common issue raised by community associations is whether the association can show a motion picture or DVD at a site within the association, possibly the pool, clubhouse, or community room.  The Federal Copyright Act, Title 17, U.S.C. Section 101(1) and Section 106 make it unlawful to show a film in public without the explicit permission of the film’s copyright owner.  Renting or purchasing a cassette or DVD from the local video store or library gives the customer the right to view the film, but not to show it in public.  The Copyright Act defines “public” in this context as “any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.”  According to Senate Report # 94-473, Page 60; House Report number 94-1476, Page 64, public performances of movies are illegal unless they have been authorized by license.  Even “performances in ‘semi-public’ places such as clubs, lodges, factories, summer camps and schools are ‘public performances’ and subject to copyright control.”  Furthermore, both for-profit corporations and non-profit organizations must secure a license to show videos, regardless of whether an admission fee is charged. 

Non-compliance with the Copyright Act is considered infringement and can carry steep penalties. Unlicensed exhibitions are federal crimes and can subject the association to a penalty ranging from $750.00 to over $100,000.00  per exhibition for knowingly violating the Copyright Act.  Even inadvertent violators of the Copyright Act are subject to substantial civil penalties ranging from $750.00 to $30,000.00 for each illegal showing, plus other possible penalties under the Copyright Act. 

Therefore, if the association wishes to organize a weekly movie viewing, movie marathon, or some other event where a copyrighted motion picture will be shown, the association should first obtain a license.  Fortunately, the obtaining of a license is a relatively simple procedure.  The association may contact the Motion Picture Licensing Corporation (“MPLC”) and request the purchase of an annual license.  The fee to obtain a license from the MPLC is based upon the type of organization, the number of units within the association, and the number of locations at which the film will be shown.  For example, for an association with 200 homes and one clubhouse, the number of units would be 200 and the location for exhibiting the movie would be 1.  The cost for an association to obtain a license varies according to the formula stated above, but appears to average$2.10 per unit, so that an association with 200 units would be charged an annual licensing fee of $420.00 and an association with 428 units, $899.00.

Securing a license from the MPLC would allow an association to exhibit movies an unlimited number of times.  Once a license has been obtained, the association could show any of the movies covered by the umbrella license granted by the MPLC.  The umbrella license covers the majority of the major motion picture producers and distributors including Walt Disney Pictures, Warner Bros., United Artist Pictures, Touchstone Pictures, Orion Pictures, Sony Pictures Classics, Fox 2000 Films, plus a large number of other corporations.  Furthermore, once a license has been obtained, the association and guests of its members would be allowed to use the association’s facilities and equipment to show movies.  While a license would not allow the association, or one of its committees or organizations, to charge an admission to view the movie, the association would be allowed to take volunteer donations to offset the cost of purchasing the license.  In addition, the association could charge to sell beverages or food at the time of the movie showing.  An additional benefit of the license granted by the MPLC is that if the association had previously infringed upon the Copyright Act or rights of any of the companies covered under the umbrella license, the MPLC agrees that upon obtaining a license, it will not seek legal recourse or assert any claim for any of the prior possible infringements.

It is imperative that an association’s Board of Directors and legal counsel be aware of these issues so that inadvertent violations of the Copyright Act may be avoided.

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Condominiums within Pennsylvania and New Jersey are creatures of both real estate law and state statutes.  A condominium’s enforcement authority is rooted in restrictions that both run with the land and are recorded as restrictive covenants with the deed clerk of the county where the condominium is located.  The major respective statutes are the Pennsylvania Uniform Condominium Act and the New Jersey Condominium Act. 

Both state statutes provide that a condominium association is entitled to recover its reasonable attorney’s fees along with the costs of suit incurred as a result of the condominium having to litigate matters relating to the collection of common expense assessments [N.J.S.A. 46:8B-21 and 68 Pa. C.S. 3315(f)]. Simultaneously, the majority of condominium declarations/master deeds and bylaws allow for the recovery of reasonable attorneys’ fees and legal costs in collection actions.
   

In New Jersey, the Rules of Professional Conduct at 1.5(a) and New Jersey Court Rules 4:42-9 govern applications for attorney’s fees.  Whereas these rules set forth eight (8) factors to be considered by the reviewing court, experience has shown that the determination of the  “reasonableness” of the attorney’s fees boils down to the subjective opinion of the particular judge ruling on the fee application.  Courts of both states will consider such issues as whether opposition was filed by the debtor defendant, whether court appearances were required, whether discovery was exchanged and whether any additional motions or court pleadings had to be filed outside of the ordinary. 

In Pennsylvania, this subjective standard was illustrated in the case of Mountain View Condominium Association v. Bomersbach, 734 A.2d 468 (Pa.Cmwlth. 1999).  In Mountain View, the Commonwealth Court of Pennsylvania ruled that the lower court did not err in its  calculation and award of attorney’s fees which the condominium was entitled to recover from a unit owner. What makes Mountain View so noteworthy is that the Court allowed a fee award of $46,548.64 on what was initially only a debt of $1,200.00 when the condominium initiated the law suit.

Whereas the fee rates which condominiums agree to pay their attorneys may be the same or similar to their competitors’ within the industry, the court’s awarding of these fees through the foreclosure process is dependant upon the court’s subjective opinion.  Some courts rightfully award a condominium all legal fees and costs incurred in a foreclosure action, penny for penny, whereas in some situations some specific judges dramatically reduce the amount of the attorney fee award.

 When a judge issues an order awarding attorneys fees and legal costs less than the amount which the condominium incurred, the condominium may file a motion seeking the court to reconsider its position on the award, or the condominium can appeal the court’s decision to the proper appellate court.  However, both of these options will cause the condominium to incur additional legal fees which may not be recoverable from the debtor.  The decision as to whether the condominium should file a motion for reconsideration or appeal the court’s decision after the entry of final judgment should be made on a  case by case decision based upon the total amount which the court has reduced the fees awarded, and the time-frame in which the condominium finds itself in regards to moving forward with the foreclosure action.

As stated by the trial court in Mountain View, “[t]he Association had the option of either backing off or enforcing its rights under the Declaration and the decisional law.  The fact that it elected not to compromise, to stand on principal and to uphold the law requires that its attorney’s fees be covered.  Any holding to the contrary would cause chaos in Condominium Associations whose compliant members would have to bear the cost of dealing with non-compliant members.” In the end, there is no sure-fire way to predict the amount of attorney’s fees which will be awarded by a court.  However, this should never deter an condominium from enforcing its declaration/master deed and bylaws to collect unpaid assessments, the “life-blood” of the condominium.

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In 1981, Terrence P. Crawford drafted his well-regarded “10 Commandments”.  Over the past 25 years, Terry’s Commandments have withstood the test of time.  The following list has been created as a supplement to the original 10:

    1.      Thou shalt strive to maintain the highest standard of ethical conduct in the performance of the Association's affairs and operation, and to ensure that the Association members maintain confidence in and respect for the entire Board.

    2.     Thou shalt act in the best interests of the Association as a whole.  

    3.    Thou shalt comply with the Association’s governing documents and relevant law.  You should be familiar with the Association’s master deed, bylaws, and other governing documents and should always attempt to make reasonable decisions that are consistent with these documents.

    4.    Thou shalt act within the framework of the Association and not take action contrary to the Board’s decisions or act unilaterally.  

    5.    Thou shalt not use your position for private gain, for example:

        You should not accept or solicit, in any way, any gift, favor, gratuity, loan, or any other thing of monetary value from a person who is seeking a contractual or other business or financial relationship with the Association. You should never use your position for financial or personal gain. You should never seek preferential treatment from the Board or any of its committees.  You should never accept a gift or favor made with the intent of influencing your decision or action on any official matter.  You should never willingly misrepresent facts to advance a personal cause or influence the membership to advance a personal cause.

    6.    Thou shalt act professionally at meetings. You should strive to conduct yourself in a professional and businesslike manner at all meetings. You should never make personal attacks against other Board Members, Association members, residents, officers, management, or guests.  Your language at meetings should be kept professional. You should always express any differences of opinion in a courteous and respectful manner.

    7.     Thou shalt maintain confidentiality.  You should strive to maintain the confidentiality of all legal, personnel, contractual and management matters involving the Association. You should also strive to maintain confidentiality of the personal lives of other Board Members, Association members, residents and management staff.

        8.     Thou shalt disclose conflicts of interests.  You should immediately disclose to the Board any perceived or potential conflict of interest regarding any aspect of the business operations of the Association.

        9.    Thou shalt  refrain from defaming or harassing anyone in the community. You should never  engage in defamation (libel and slander), by any means, of any other Board Member, Association member, resident, or management staff member.  Furthermore, you should refrain from harassing Association members or residents. In your position as a Board Member, you should never threaten, harass, or otherwise attempt to intimidate, in any way, any other person.

    10.     Thou shalt attend meetings on a regular basis.    

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It is a fact that approximately 80% of all new housing built in the United States is built within some form of community association, whether it be a condominium, cooperative or homeowners association.  In 2005 alone, over 9,000 condominium units were approved for sale by the New York State Attorney General’s office.  Furthermore, for the second year in a row, condominiums in Manhattan have outsold cooperatives.  Those in the market for a new home should consider the various differences between a condominium, cooperative, or homeowners association.  

Living in a cooperative or condominium offers homeowners a whole new system of benefits and costs to be weighed.  Whereas ownership of condominiums provide the benefit of easy resale and mortgage refinancing, a homeowner has little to no control over who his or her neighbor may be.   On the other hand, co-ops provide the distinct ability for the cooperative to take on a unique identity and sense of community over time.  In general, condominium association boards do not have the ability to approve the resale of a unit.  Whereas, in Manhattan, cooperative boards have significantly more discretion when it comes to accepting or rejecting applicant owners or tenants.  It should also be noted that the powers of co-op boards differ between New York and New Jersey.  Another notable difference is that many New York cooperatives have a transfer fee “flip tax” that must be paid at the time of the sale of a unit.

Furthermore, a basic difference between condominiums and cooperatives is the very nature of the interest possessed.  No matter whether the condo is in a basement or a penthouse, the interest being owned is an actual piece of real property.  However, in a cooperative, the resident owns shares of stock in the cooperative cooperation.

One should consider the significant differences between obtaining financing for the purchase of a co-op unit or condominium unit.  To purchase a condominium unit, the only restrictions are those imposed by the lender or mortgage company. However, financing the purchase of shares in a co-op may include annual income restrictions and down-payment minimums.  Additionally, both your finances and personal history can come under scrutiny by a cooperative board.  All these issues and more should be taken into account by those seeking their new home.  

Stark & Stark has represented condominium and cooperatives for over 16 years.  Furthermore, Stark & Stark is equipped to assist your cooperative or condominium board with its legal planning, operations, financing, and conversion options.  If you have questions or comments regarding any of the issues raised, please contact Richard Linderman or David Byrne in Stark & Stark’s Community Associations group.

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The New Jersey Condominium Act (the "Act") at N.J.S.A. 46:8B-38 specifically prohibits a condominium association or its developer from reserving or retaining a right of first refusal to purchase a condominium unit upon resale, gift, or devise, by the unit owner. This provision of the Act adopted in 1980 effectively supplemented and amended the prior section of the Act, N.J.S.A. 46:8B-36, which provided for a rebuttable presumption of unconscionability with respect to master deeds or by-laws which had provided for a right of first refusal on behalf of the condominium or its developer.

It is unlikely that you will find a public offering statement or master deed drafted for a recently developed condominium which includes a provision allowing for a right of first refusal on behalf of either the condominium or its developer. However, rights of first refusal have been found in older governing documents, specifically those drafted in the late 1990s and which pertain to condominiums funded with HUD monies or other urban renewal funds.

A condominium's board of trustees should be aware that such provisions providing for a right of first refusal are prohibited by the Act and should therefore advise its management to keep a look-out for instances where a developer may attempt to enforce such a right of first refusal. 

Technorati Tags: New Jersey : Condominium

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New condominiums and homeowner associations often suffer the effects of defective common elements. In these instances, Boards have the dual responsibilities of immediately correcting defects that pose a hazard to residents while also preserving the right to recover the cost of repairs.

Too often Associations rush to make repairs and destroy evidence that will later be needed to recover damages. For instance, if a condominium is faced with sinkholes and it immediately has the sinkholes repaired without properly protecting the evidence and providing notice to the developer, the Association's right to recover the costs of sinkhole remediation may be lost. Instead, the Association should block off the sinkhole and give notice to the developer of the defect/issue. The Association should also retain an expert to inspect the area, take samples, and preserve evidence. The developer should be notified before any remediation thereafter begins. However, action should not be delayed if the risk of personal injury is present.

Another common problem is when an Association discovers continuous leaks around window units of a particular home design. Often the Association will have its maintenance personnel attempt to repair the windows but the leaks still occur. After repeated attempts to remedy the problem by maintenance personnel, the Association provides notice to the developer of the problem. Unfortunately at this point, when experts come to review the window unit, the repairs and changes that had previously been made have effectively erased the cause of the original leaks. The Association will now have significant difficulty in its attempt to prove that any defect was due to negligent design and/or construction.

In situations regarding construction defects discovered early in the life of an Association, a general rule is to immediately give the developer notice of such defect and advise your construction experts to take all reasonable steps to collect and maintain evidence of the construction defect. This way valuable evidence is preserved.

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It is clear that New Jersey's Law Against Discrimination is applicable to New Jersey's condominiums. Last week, Stark & Stark Community Association attorneys David Byrne and Richard Linderman won a summary judgment motion on behalf of a Northern New Jersey condominium, securing an order dismissing an owners' lawsuit against the condominium that claimed they were the subject of discrimination.

The Plaintiffs, of Asian Indian descent, claimed that the condominium violated New Jersey's Law Against Discrimination by treating them differently than other members of the community not of Asian Indian descent. In their lawsuit the plaintiffs claimed the condominium prohibited two owners from using the community's recreational amenities as a result of persistent rule violations and direct threats against the condominium's pool company. However after two years of discovery and many depositions the owners, in response to a summary judgment motion, were only able to argue that they were discriminated against when a "Caucasian" family was allowed to use a floatation device in the pool after the use of a similar device by the plaintiffs was prohibited.

The Court found that one alleged instance of discrimination, without party names, proof or details, was insufficient to establish a prima facie case of discrimination on the condominium's part. Instead, the plaintiffs were required to provide specific instances of race-based conduct or disparate treatment. Mere conclusory allegations were not sufficient.

This decision shows that condominiums need not fear unsubstantiated allegations of racial discrimination in the enforcement of its covenants and rules.

Technorati Tags: New Jersey : Community Associations

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Courts have long held that a condominium association may inform its members of lawsuits pending against that condominium. Last week, Stark & Stark Community Association attorneys David Byrne and Richard Linderman won a summary judgment motion on behalf of a Northern New Jersey condominium association which affirmed this practice and clarified what information is permissible to include in notices sent to association members.

At issue in this matter was the decision by the condominium association to prohibit two owners from using its recreational amenities as a result of persistent rule violations. Those owners filed a several count lawsuit against the condominium, its board members individually and management. After court-ordered mediation proved unsuccessful, the condominium issued a notice to each owner in the community, stating the name of the lawsuit, the owners' names, the facts as alleged by the condominium and the financial demands having been made by the owners during mediation. The two owners thereafter sued the condominium, individual board members and management for defamation. The trial court dismissed the owners' defamation claim, finding that the condominium's notice to its owners regarding the ongoing litigation was "privileged" and thus could not be the subject of any defamation suit.

This decision shows yet again that a condominium is generally free to notify its owners of pending lawsuits, with such notice even including the owners' names and the specific facts of the dispute.

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