On appeal from Superior Court of New Jersey, Chancery Division, Bergen County.
Morton I. Greenberg, J. H. Coleman and R. S. Cohen. R. S. Cohen, J.A.D., dissenting.
[214 NJSuper Page 410] Plaintiff, a nonresident owner of a unit in a condominium complex, challenges a rule adopted by the owners' association (Association) increasing the parking fee for tenants of nonresident owners from $25 to $75 a month, while leaving untouched the $25 fee charged to resident owners. Plaintiff attacks the rule as being unreasonable and unconstitutionally discriminatory. The parking facilities are part of the "common elements." The Association had the right to operate the parking facilities, to fix parking fees and to lease or rent the spaces. Plaintiff's
practice was to lease an indoor parking space for $25 a month for which he charged his tenant $75 per month. After the Association heard about this, it increased the parking fee for nonowners and required the tenants to execute parking space leases with the Association.
The trial judge found that the higher fee structure for tenants was discriminatory but not illegal. He concluded that the fee structure was not unconstitutional because there was no state action and the rule was not unreasonable inasmuch as it did not burden nonresident owners any more than resident owners. Summary judgment dismissing the complaint was entered accordingly. Plaintiff now appeals.
A condominium association stands in a fiduciary relationship to the unit owners. Siller v. Hartz Mountain Assoc., 93 N.J. 370, 382 (1983), cert. den. 464 U.S. 961, 104 S. Ct. 395, 78 L. Ed. 2d 337 (1983); Papalexiou v. Tower West Condominium, 167 N.J. Super. 516, 527 (Ch.Div.1979). A two-pronged test has been established to determine whether the Association breached its fiduciary duty: (1) whether its action was authorized by statute or its own bylaws, and, if so, (2) whether the action was fraudulent, self-dealing or unconscionable. Siller, supra, 93 N.J. at 382; Papalexiou, supra, 167 N.J. Super. at 527. The scope of judicial review is limited to these two questions, which are issues of law. Papalexiou, supra, 176 N.J. Super. at 527; see generally Note, Judicial Review of Condominium Rulemaking, 94 Harv.L.Rev. 647, 658-667 (1981). As long as the Association acted reasonably and in good faith the courts will not second guess its conduct. Papalexiou, supra, 167 N.J. Super. at 527.
It is undisputed that the parking fee schedule under attack was unanimously adopted by the Board of Directors of the Association and plaintiff does not attack its validity on procedural grounds. Hence the first prong of the Papalexious test has been met.
As to the second prong of the test the judge concluded that the increased fee was reasonable and was adopted in good faith. He stated:
The defendant has established that the common property has to be supported by assessment against those, against all owners. So that the receipt of additional funds from non-owner [sic] runs to the benefit of all owners, meaning that they would then have to pay that much less by way of assessment. So that the act of discrimination by charging more is really for the benefit of all owners of the association, not a detriment to the owners, and that is the duty of the board of directors to exercise their best judgment in their actions to benefit all.
I don't see that Mr. Thanasoulis is in any way hurt by this. Because he does not charge for the parking space. The tenant makes a direct agreement with the association.
We reject plaintiff's contention that the fee change was unreasonable or made in bad faith because N.J.S.A. 46:8B-32 created a presumption of unconscionability as to the new leases between the Association and tenants. We read N.J.S.A. 46:8B-32 to be limited to leases made between the developer and owners' associations that are not controlled by the unit owners. See Siller v. Hartz Mountain Assoc., supra, 93 N.J. at 382 n. 10; Berman v. Gurwicz, 178 N.J. Super. 611, 620 (Ch.Div.1981). Here the Association was completely controlled by the unit owners.
We now affirm the judgment dismissing the complaint substantially for the reasons expressed by Judge Huot in his oral decision of July 19, 1985. We are completely satisfied that all issues raised in this appeal are clearly without merit. R. 2:11-3(e)(1)(A) and (E). We add only that the record is barren of any proof which even remotely suggests that plaintiff suffered an economic loss by virtue of the rule change. Also, plaintiff failed to demonstrate a "sufficiently close nexus" between the State regulating condominiums by statutes and the parking rule implicated here so that it can be said that the parking rule change emanates from or is attributed to State action. State v. Schmid, 84 N.J. 535, 545 (1980), app. dism. sub nom. Princeton Univ. v. Schmid, 455 U.S. 100, 102 S. Ct. 867, 70 L. Ed. 2d 855 (1982). The Condominium Act, N.J.S.A.
46:8B-1 et seq., did not command or compel passage of the new rule and there is no State actor involved in the administration of the new rule. See Callen v. Sherman's, Inc., 92 N.J. 114, 124-125 (1983). Hence the new parking rule is not unconstitutional and does not represent a breach of the Association's fiduciary duty to any of the unit owners.
R. S. COHEN, J.A.D., dissenting.
Plaintiff Triantafyllos Thanasoulis owns a condominium apartment unit in Winston Towers, a highrise residential development in Cliffside Park. He rents the apartment to a tenant who lives there. Plaintiff brought this suit to challenge two condominium by-law amendments adopted by defendant owners' association. One imposes a monthly charge for parking spaces three times greater for tenant-occupants than for owner-occupants of the condominium units. The other prohibits rental of a condominium unit by a new purchaser until after he or she lives in the unit for at least one year, except in hardship cases. Plaintiff asserts that as a unit owner he has the right to a parking space on terms equal to those afforded to owner-occupants, and the right to rent the parking space to his tenant on terms he chooses. Plaintiff also asserts that, although the prohibition on rentals does not apply to him, but only to new purchasers, it improperly depreciates the value and marketability of his unit. The Chancery Division upheld the differential parking charges as a reasonable action of the Association, and held that plaintiff did not have standing to challenge a rental prohibition which expressly excepted him. I disagree on both scores.
A condominium unit owner holds exclusive title to the unit and shares title to the common elements with the other unit owners. The unit is an individual parcel of real property, which the owner may deal with "in the same manner as is otherwise permitted by law for any other parcel of real property." N.J.S.A.
46:8B-4. Common elements may include the land on which the condominium project is built, parking areas, lobbies, hallways, elevators, and central services and utilities, not reserved to a particular unit or group of units. N.J.S.A. 46:8B-3d. Unit owners have the common right to use the common elements for their reasonable intended purposes. N.J.S.A. 46:8B-6. The proportionate undivided interest of a unit owner in the common elements is inseparable from the unit, and
any conveyance, lease, devise or other disposition or mortgage or other encumbrance of any unit shall extend to and include such proportionate undivided interest in the common elements. . . . [ N.J.S.A. 46:8B-6]
Common element spaces may not be converted to the exclusive use of a single owner without unanimous consent of the other owners. Makeever v. Lyle, 125 ...