The New Jersey Condominium Act, N.J.S.A. 46:8B-14(k) provides,
K. An association shall provide a fair and efficient procedure for the resolution of housing-related disputes between individual unit owners and the association, and between unit owners which shall be readily available as an alternative to litigation. A person other than an officer of the association, a member of the governing board or a unit owner involved in the dispute shall be made available to resolve the dispute. A unit owner may notify the commissioner of community affairs if an association does not comply with this subsection. The commissioner shall have the power to order the association to provide a fair and efficient procedure for the resolution of disputes.
The Condominium Act does not define what are "housing-related disputes" that require some type of mediation between parties.
The Appellate Division recently grappled with that issue and reached a decision of great consequence to a condominium's obligation to provide Alternative Dispute Resolution ("ADR") to unit owners prior to litigation. In Bell Tower Condominium Association vs. Haffert, 2012 W.L. 86813 (N.J. Super A.D.), unit owners appealed from the award of a summary judgment to the condominium association which entered judgment against the owners for the sum of $22,400. The judgment was the result of the owners' refusal to pay their portion of a special assessment for various improvements to the condominium's property. The owners refused to pay because they objected to the association's decision making process concerning the special assessment and its allocation of funds. The unit owners repeatedly notified the association in writing of "their disagreement with the manner in which the decision had been made and their concerns about how the money would be allocated" Id. at 2.
The Appellate Division was called upon to determine whether or not the dispute between the parties fell within the language of N.J.S.A. 46:8B-14(k) which requires the condominium association to establish a "fair and effective procedure for the resolution of housing-related disputes".
The Appellate Division in Bell Tower ultimately held it was a housing-related dispute that should have been submitted to a form of ADR because the unit owners had raised substantive issues which went to the very core of the association's management of the condominium's common elements. The Appellate Division held,
The present dispute is a housing-related dispute within the meaning of the applicable statute. Underlying defendants' refusal to pay the special assessment is their contention that the board breached the fiduciary obligations imposed upon it by N.J.S.A. 46:8B-14(j). N.J.S.A. 46:8B-14(j) requires a condominium association to 'exercise its powers and discharge its functions in a manner that protects and furthers or is not inconsistent with the health, safety and general welfare of the residents of the community'. The present dispute is clearly 'housing related', as it is premised upon one of the sections of the Act. Id. at 6.
While the Appellate Division in Bell Tower recognized a "strong public policy in favor of arbitration" it did recognize that only "qualifying disputes" are subject to the requirement of arbitration.
Condominiums need to be mindful of their obligation to offer ADR concerning qualifying disputes prior to filing litigation against a unit owner. Otherwise, they risk having their complaints dismissed by a Court and referred to mediation.