Answered by Anne P. Ward, Esq., Senior Counsel in the Condominium Law Department of Ehrlich, Petriello, Gudin & Plaza.
I. Do you recommend term limits on Board members?
I strongly recommend that the members of a Board of Trustees of a condominium have time limits placed on their terms in office. The purpose of a limited term of office is two-fold. First, it allows a member sufficient time while in office to learn the skills necessary to discharge his or her responsibilities in an effective and competent manner. On the other hand, term limits ensure that only those board members who are competent and responsive to the condominium's needs are re-elected to the Board. Term limits permit members of an association to either reject or re-elect Board members based on their performance while in office. This way, unit owners can identify effective leaders and promote continuity through the institution of term limits.
Moreover, I strongly recommend that Board members' terms be staggered so that only one or two members of a Board are running for re-election in any given year. The By-Laws should provide for continuity. This is accomplished by establishing multi-year and staggered terms for the Board of Trustees. In this way, despite the creation of a vacancy by resignation or otherwise, the association will always have experienced persons serving on its governing Board. The worst election scheme of all is one which provides for the annual election of all Board members. This approach usually promotes an undue emphasis on association politics at the expense of good management of the association by the Board. It often results in an annual wholesale infusion of new Board members, professionals and management personnel just about the time that the collective experience of their predecessors was beginning to benefit the association.
In my experience, it is critical to a Board's ability to effectively function that it always has some experienced members. The participation of seasoned members ensures consistency in the condominium's management. Board members who are familiar with the various issues which have been facing a board and who understand a condominium's projects, priorities, and previous commitments contribute to stable management. Staggering memberships lightens a new member's burden during his transition to a leadership role since he can rely on the experience of other members. A new member's learning curve, so to speak, on condominium issues does not disrupt or unnecessarily delay the condominium's undertakings if seasoned veterans are available to operate the condominium.
For all the foregoing reasons, most condominium governing documents, which are the Master Deed and By-Laws, provide for staggered elections on an annual basis and do limit a Board member's duration of service to one or two years. According to the New Jersey Condominium Act, N.J.S.A. 46:8B-13, a condominium's By-Laws must address "…the powers, duties and manner of selection, removal and compensation, if any, of officers and board members". So if your By-Laws do not already address the issue of term limits, it should be amended to include such provisions.
II. How does the Association Amend Its Governing Document?
The By-Laws and Master Deed of a condominium govern its administration and operation, the procedural rights and obligations of its members, and the duties and powers of its Board of Trustees and officers. In other words, a condominium is governed by the condominium's governing documents. The By-Laws and the Master Deed must spell out, in detail, the procedures for amending their terms. N.J.S.A. 46:8B-13. Therefore, your condominium's Master Deed and By-Laws should be consulted with respect to the requirements which apply to the process of amendment. Please be aware that if those procedures are not strictly adhered to, any purported amendment will most likely be considered invalid and cannot be enforced. Obviously, such a consequence must be avoided, so follow the processes and notice requirements outlined in the Master Deed and By-Laws carefully.
For example, all Master Deeds and By-Laws, with which I am familiar, require that the exact language of a proposed amendment be circulated to members of the association for their review. Most require that voters receive a copy of the proposed amendment a certain number of days before the actual vote. This allows members an opportunity to thoroughly review the proposal and to make suggestions or ask questions at a meeting called for that purpose. Proper notice of the meeting to vote on a proposed amendment must also be provided and the timing and manner of such notice is set forth in a condominium's governing documents. The manner of notice and timing vary among individual condominiums. The percentage of votes required to amend a Master Deed and By-Laws will be set forth in the respective document. Lastly, a lawful adoption of an amendment must be recorded in the Office of the County Clerk or Register's Office where the condominium is located. See N.J.S.A. 46:8B-8. An amendment which is not recorded is neither effective nor enforceable.
III. Can an Association Adopt Rules Governing the Use of Condominium Property and Enforce The Rules Against Owners?
In fact, it is an Association's duty to adopt and enforce rules "governing the use and operation of the condominium and the condominium property and the use of the common elements…." N.J.S.A. 46:8B-14(c). It is axiomatic that the Board of an Association must enforce the terms of its governing documents and the rules and regulations adopted thereunder. N.J.S.A. 46:8B-15. Moreover, the rules and regulations must be enforced in a uniformly consistent manner.
The Board has a fiduciary responsibility to each and every unit owner. This means that it must act in a manner which promotes each owner's interest in the condominium. Clearly, this means the Board cannot discriminate among or between owners by refusing to enforce its rules against some owners while threatening punitive action against others. N.J.S.A. 46:8B-14(j).
The Board can impose "reasonable" fines against owners who are violating rules, if authorized by the Master Deed and By-Laws. It can also assess against owners the "reasonable" attorneys' fees incurred by it in its efforts to collect maintenance fees and/or enforce provisions of the governing documents and rules and regulations. N.J.S.A. 46:8B-15(e) and (f).
If the Board is not enforcing the rules or regulations, or not enforcing them against all the owners, its conduct is a blatant violation of the New Jersey Condominium Act, N.J.S.A. 46:8B-1, et seq., and of a condominium's governing documents.
A Board must give written notice of a violation to a unit owner prior to imposing a fine and must advise an owner of its right to participate in an alternative dispute resolution ("ADR") procedure. N.J.S.A. 46:8B-15(f). The New Jersey Condominium Law requires that:
"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." N.J.S.A. 46:8B-14(k).
If an owner disputes the validity of the basis to a notice of violation, the owner can demand a hearing under the condominium's ADR. Courts' have interpreted the phrase "housing-related disputes" in 46B-14(k) very broadly. However, the phrase does not include an owner's obligation to pay maintenance fees or special assessments unless the owner can show that the basis to the fee or assessment is illegal.
Violators should be aware that many governing documents provide that a stated fine may be imposed for each day that a violation continues to exist. So, for example, if an owner violates a condominium's rule against renting his unit and the rules provide for a $500 fine, an owner may be forced to pay more than $500 if he violates the prohibition. Depending on the language of the rule, the fine may be imposed on a continuing and daily basis while the violation exists and until it is remediated or removed.
If an owner does not pay the fine (or fines), the association can have recorded against the unit a lien which will negatively impact an owner's ability to pass title on the unit. N.J.S.A. 46:8B-21. Moreover, the association can foreclose the lien in the same manner as a bank can foreclose a mortgage. N.J.S.A. 46:8B-21. In theory, the board can apply to a court for injunctive relief stopping an owner from continuing the violation, such as continuing to lease a unit. N.J.S.A. 46:8B-16(b).
I recommend that each owner educate himself on his responsibilities by carefully reviewing the condominium's governing documents and rules and regulations and by seeking more information from the Board or its attorney (if it has legal representation) to clarify the meaning of a rule, if necessary, and the consequences of violating its prohibitions.
