Greenbaum, Rowe, Smith & Davis LLP Client Alert

On July 13, 2017, Governor Christie signed into law bipartisan legislation amending and supplementing the Planned Real Estate Development Full Disclosure Act (PREDFDA).  The new law provides, among other things, that all unit owners be members of their community associations and that such members have the ability to fully participate in the election of their executive board.  The legislation applies to all common interest developments in New Jersey, including condominium associations, homeowners’ associations (HOAs), and cooperatives, regardless of whether the community was established prior to the effective date of PREDFDA. 

New Jersey had previously lacked a comprehensive scheme of governance for the establishment of HOAs involving individual home ownership, such as single family homes and townhouses governed by a HOA that was established prior to the enactment of PREDFDA.  Statutory governance of such HOAs was limited to the Nonprofit Corporation Act or the Business Corporation Act, whichever was applicable to the specific HOA’s formation. 

The driving force behind the new law, which helps fill that void, is the Radburn neighborhood in Fairlawn, New Jersey.  Created in 1929, Radburn is a 149-acre common interest community consisting of single and two-family homes, townhouses, and an apartment complex, together with a community center, 23 acres of parks, and recreation facilities.  Radburn is overseen by the Radburn Association, a non-profit corporation. Although there are approximately 3,100 residents in the community, membership in the Radburn Association was limited to current and former trustees of the corporation, or about 40 of the 3,100 residents. 

The Radburn Association is governed by a nine-member Board of Trustees. Prior to the enactment of the Radburn Bill, the Board was chosen as follows:

The genesis of the unrest in Radburn was the Board’s 2004 decision, made without the participation or knowledge of many community residents, to sell a parcel of land adjacent to Radburn for the construction of townhouses and apartments.  Dissatisfied with the manner in which the Board was able to handle the decision, several residents filed a lawsuit in the Superior Court of New Jersey, challenging Radburn’s system of governance as a violation of New Jersey law and the New Jersey Constitution.  Although the Court ultimately ordered the Radburn Association to hold meetings open to the residents, and to disclose financial documents to the residents, it refused to interfere with Radburn’s system of governance through judicial fiat.  That ruling provided the impetus for legislative action.

Specifically, the new legislation: 

Although many of the thousands of community associations in New Jersey already provide the rights and procedures required by the new legislation, the law will now provide a much needed comprehensive scheme of governance for HOAs whose governance was not previously regulated by PREDFDA.

The author of this Alert, Christine F. Marks, is a member of the firm’s Community Association Practice Group.