On appeal from Superior Court of New Jersey, Law Division, Middlesex County, L-10066-01.
Before Judges Stern, A. A. Rodríguez and Lefelt.
The opinion of the court was delivered by: Rodriguez, A. A., J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: September 16, 2003
The issue presented in this case is whether the Board of Trustees (Board) of a condominium homeowners association may change the method of calculating maintenance assessments several years after the condominium has been in operation. Based on the circumstances presented here and pursuant to the business judgment rule, we conclude that the Board has such authority.
The Whittingham Condominium community was developed in phases from 1985 until 1995. It consists of three different categories of dwellings: Townhouses, Single Detached Homes, and Manor Homes. The Manor Homes are apartment units which are clustered in groups of four in one structure. In each of the categories, there are models of varying sizes. The developer of Whittingham, Union Valley Corp., collected maintenance assessments from 1985 until 1995. In 1995, the ownership transition was completed and individual owners assumed control of the Whittingham Homeowners Association (Association).
The Declaration of Covenants, Conditions and Restrictions (Declaration) provides for the collection of maintenance assessments by the Association. The maintenance assessment includes fixed expenses and variable expenses components. The fixed expenses are allocated on an equal basis to all homes,"regardless of value, size, or type." However, variable expenses, typically exterior maintenance, repairs, ground's care, and insurance are calculated according to a formula based on the proportion of a unit's"square footage" to the aggregate"square footage" of all units for which a certificate of occupancy has been issued. Unfortunately, the term"square footage" is not defined in the Declaration, Master Deed or the By-laws. The interpretation of that term lies at the center of this dispute.
During the period of developer control, the variable expense assessment was allocated according to certain measurements of each unit (the developer measurements). It is not clear how the developer arrived at these measurements, which were used in the first year operating budget. These measurements differed from those found in the architectural drawings made by Stephen Mark Goldner Associates, which were attached to the Public Offering Statement. A third and different set of measurements were indicated in the developer's sales brochure. More importantly, although there are different models of varying sizes in each category, the same square foot measurement was used for all models in one category, i.e., Townhouse = 1619, Single Detached = 1488 and Manor Homes = 1034. It is suggested in this appeal that the developer measured the exterior wall of the foundations to arrive at these figures.
After the unit owners assumed control of the Association, its Board decided to remeasure all of the units. The Association commissioned Coral Construction Co. (Coral) to do this task. Coral submitted a report in September 1995 establishing the following square footages for the models in each category:
The Coral measurements reflect the interior square footage of each unit. According to the Association's brief, it instructed Coral to measure the interior living space of each unit because the Master Deed describes each condominium unit as:
the area bounded by the interior surface of the perimeter walls of the garage to which there is direct access from the interior of the remainder of said unit, ...