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Fox v. Kings Maintenance Association

May 17, 2001

STEPHEN G. FOX, PLAINTIFF-APPELLANT, AND GAY P. FOX, WEB-OCTOBER SENDAYDIEGO, JOSEPH AND ARLENE COLACHE, STEVEN AND JUDITH GEZCO, LYNNE DANT, SUSAN SETTERBERG, LAWRENCE M. AND JUDITH C. DOAN, STEVEN RAYMOND, ROY A. AND JOAN E. WILLAUER, JAMES AND WILHELMINA LARUSSO, LIONEL HENRY AND JOANNE AMANTE, CHARLES AND DONNA PEART, ARTHUR AND SALLY MANGANO, LAWRENCE G. AND ELAINE LEAF, BARRY AND SUSAN SCHULNICK, WILLIAM AND MILDRED Z. SMITH, CHARLES FIELD, EDWARD AND CAROLYN MANTO, BARRY AND BETH SOHOL, WAYNE AND ELIZABETH CROCE, HAROLD AND LISA GILHAM, SUSAN FUDCIA, MICHAEL APPLEBAUM, DIANE L. FABII, ANDREW FLITTER, MARK JAMES, JOHN AND LYNNE MOORE, JOSEPH P. AND DEBRA JAY, LOUIS AND WINKI GAEV, RAYMOND J. AND ADELE F. MANNELLA, HELENA BERGEN, MILTON E. AND PATRICIA BURDSALL, ROBERT AND SUZANNE UITTENBOGAARD, VICTORIA GORMAN, MAXINE WOLF, KATHLEEN M. QUINN, EDWARD AND SANDEE GOLDEN, JERRY A. AND JEANETTE BRUNETTI, ISADORE AND DORIS MARKS, GEORGE M. AND CAROL B. PATTERSON, WILLIAM AND SHIRLEY LOVE, RICHARD C. AND MARYANN T. EMERY, JOHN MEEHAN, ROSEMARY STAFFORD, SAMUEL A. AND EDNA M. BATES, ROBERT E. AND LOUISE D. GOEHRING AND PHILIP D. AND DELORES G. BRENNAN PLAINTIFFS,
v.
KINGS GRANT MAINTENANCE ASSOCIATION, INC., PATRICIA D. CASASSA, MARVIN COE, BEVERLY COX, FRANCIS WHEELER, THOMAS DAGNEY AND TOWNSHIP OF EVESHAM, DEFENDANTS-RESPONDENTS.



The opinion of the court was delivered by: Stein, J.

ON APPEAL FROM ON CERTIFICATION TO Appellate Division, Superior Court

The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law Division.

Argued January 16, 2001

On certification to the Superior Court, Appellate Division.

The primary issue presented by this appeal is whether the Condominium Act, N.J.S.A. 46:8B-1 to -38, permits a municipal planning board to require a condominium association irrevocably to delegate its powers over its unit owners' common elements to an umbrella association controlled by non-unit owners. The Appellate Division held that the Condominium Act allowed a municipality to mandate such a governance scheme. We granted certification, 165 N.J. 489 (2000), and now reverse the judgment of the Appellate Division. We hold that the Condominium Act prohibits a municipality from requiring unit owners in one sectionalized community to delegate their governance rights over their community's common elements to unit owners in other sectionalized communities by the use of an umbrella association. In our view, the Act is better understood to authorize an umbrella association to serve only the limited function of coordinating and managing property intended for the common and beneficial use of unit owners of several separate condominium associations, such as common roadways, common open space, and common recreational facilities.

I.

This appeal involves forty-six plaintiffs who own condominiums in the Waters Edge condominium community (Waters Edge), one of fifteen distinct communities comprising the Kings Grant Planned Unit Development (Kings Grant). Kings Grant is a large development located in Evesham Township and Medford Township, Burlington County, New Jersey. Kings Grant spans approximately 1,800 acres and consists of fifteen sectionalized communities including six townhouse and nine condominium communities. There are a total of 1,447 individually owned units, and Waters Edge represents sixty-seven of those units.

The Evesham Township Planning Board (Planning Board) originally approved the initial Kings Grant project in 1968 and 1971. In 1983 Kings Grant Equities, Inc., the owner of the remaining undeveloped land, came before the Planning Board to request a revised preliminary approval to authorize the additional development of Kings Grant. The revised proposal involved the construction of sectionalized communities including single-family homes, townhouses, and condominiums, and the development of community facilities for all Kings Grant unit owners such as bicycle trails, recreational facilities, commercial centers, and open space.

After eight public hearings on the proposal, the Planning Board adopted Resolution 83-45 (Resolution) on September 1, 1983. In the twenty-four page Resolution, the Planning Board gave preliminary approval to the proposal that included the development of separate communities with common covenants and restrictions bearing on traffic, quality-of-life, environmental and safety issues. The Resolution conditioned the future development of Kings Grant on express "Findings of Fact" and "Specific Conditions." In Finding of Fact eleven, the Planning Board called for the establishment of an umbrella maintenance association, as follows:

HOMEOWNERS ASSOCIATION

In order to ensure the professional management of the common properties in Kings Grant, and in order to promote the responsibilities and economies which are necessary in a development as large as Kings Grant, an umbrella organization is needed to coordinate the maintenance and improvement of all common private property. The "umbrella" association should have the power to mandate and collect fees in order to preserve its effectiveness for the maintenance and control of the common improvements. However, the liability for fees should be allocated in such a way that condominiums, cooperatives, and other sections with common structural elements will pay for the costs attributable to the operation, repair and maintenance of the improvements in their particular section.

In Specific Condition eleven, the Planning Board explained that the umbrella association would be

a mandatory dues paying association for the coordination and control of privately owned streets, walkways, recreation, and other facilities limited to all or some of the residents of Kings Grant. The purpose of the association will be to provide overall management and control of the Kings Grant Planned Unit Development. [Emphasis added.]

Kings Grant Equities consented to the condition imposed by the Planning Board mandating formation of the umbrella association. To comply with the Planning Board's Resolution, Kings Grant Equities filed a Declaration on April 24, 1985, to establish the Kings Grant Maintenance Association, Inc. (KGMA). The Declaration explained that as a condition of granting all municipal approvals for the further development of Kings Grant, the Planning Board required Kings Grant Equities to establish a management system in which a single entity is fully responsible for "the maintenance, management, preservation, administration, upkeep and care of all common property." (Emphasis added.) The Declaration defined common property as follows:

[A]ll property intended for common and beneficial use of Unit Owners within any Section of Kings Grant regardless of the form of ownership. Common property shall also mean and refer to all lands, buildings, improvements and facilities including, without limitation, common elements as that term is defined in N.J.S.A. 46:8B-1, property owned by Community Associations and property owned by the owners of record of more than one Unit as tenants-in-common with no right of partition.*fn1 [Emphasis added.]

The Declaration stated that every sub-association within Kings Grant shall be deemed to have "irrevocably delegated" to KGMA all of its powers and duties for the maintenance, preservation, administration and operation of common property.

According to the Public Offering Statement filed by Kings Grant Equities, each of the Kings Grant communities would be required to form sub-associations to provide for the maintenance and administration of common property within the specific community. However, those sub-associations were required to delegate "most of their powers and responsibilities [for common property] to the Maintenance Association." The Public Offering Statement provided that the umbrella or maintenance association would possess "the power and the obligation to enforce any covenants and restrictions contained in any Declarations, Master Deeds, Certificates of Incorporation or By-Laws of each Community Association."

Article II of the Declaration, in conjunction with KGMA's Bylaws, sets forth the process for the unit owners' participation in the maintenance association and for representation on the KGMA Board of Trustees. According to those documents, each unit owner in Kings Grant is a "beneficial member" of KGMA. However, individual unit owners cannot participate directly in the management of KGMA. Instead, each one of the fifteen communities in Kings Grant elects one delegate to represent its interests. If a community has more than fifty units, that community receives one additional delegate for each fifty units in excess of the first fifty. Because Waters Edge has only sixty-seven units, it is represented by one delegate. Comparatively, a community with 110 units, would be represented by two delegates. Once chosen, each delegate is given a number of votes equal to the number of units within their representative community. Because Waters Edge has sixty-seven units, the elected Waters Edge delegate has sixty-seven votes to cast. A majority of the votes cast is necessary to approve or disapprove any measure.

KGMA is governed by a five-member Board of Trustees elected by the KGMA delegates. The Board has extensive powers and is responsible for managing KGMA's "property, affairs and business." Some of those powers include providing for the maintenance of the common property, employing persons to repair and maintain the common property, enforcing the obligations of beneficial members by levying fines against them for various violations, bringing and defending legal actions by or against beneficial members or any other party as necessary, managing the fiscal affairs of KGMA, providing for KGMA's required insurance coverage and investing and reinvesting KGMA's monies.

In April 1994, Waters Edge was created and made subject to the Condominium Act by a Master Deed filed in Burlington County. Waters Edge was the last of the fifteen communities in Kings Grant to be developed. The Waters Edge Master Deed established a Waters Edge condominium association, but declared that "certain powers and duties" of the Waters Edge community are "irrevocably delegated" to KGMA's Board of Trustees. Likewise, the Waters Edge Bylaws delegated many of the sub-association's powers and duties, including the day-to-day operation and maintenance of its buildings and common elements, to KGMA. At oral argument, Stephen G. Fox, counsel for plaintiffs, represented that KGMA exercised authority over all aspects of the management of Waters Edge, including, "tell[ing] us how much money we are going to spend each year to take care of our property. They tell us how to pay that money. They tell us how that money is going to be used. Are we going to paint our property this year or are we going to paint it next year. What color are we going to paint our property. They get to tell us everything."

In 1997 a number of Waters Edge unit owners objected to KGMA's interference with the Waters Edge sub-association's affairs. One of the objections concerned the KGMA Board of Trustees' participation in Waters Edge's annual membership meeting. Consequently, in January 1998, forty-six Waters Edge unit owners filed a five-count complaint against defendants KGMA, its project manager, and members of its Board of Trustees (collectively referred to as KGMA). Both plaintiffs and KGMA filed motions for partial summary judgment. KGMA filed a cross- claim against plaintiffs, seeking authority to administer and control Waters Edge's elections. The trial court granted partial summary judgment in favor of KGMA, upholding the authority, validity and constitutionality of KGMA as an umbrella association with the power to maintain and manage all of the common property within Kings Grant. However, the court also granted partial summary judgment to plaintiffs, finding that Waters Edge did not delegate to KGMA the power to ...


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