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:
- 2 seats appointed by the Association’s members
- 6 seats elected by residents from a list of candidates nominated by the sitting trustees
- 1 seat filled by the President of the separate Radburn Citizens’ Association
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:
- Amends and supplements PREDFDA to apply to all planned real estate developments and to require that every owner of a community association be a member of the governing association
- Amends and supplements PREDFDA to require that the executive board of every association be elected by a vote of its members and to provide guidelines for open and fair elections, including but not limited to the following:
- Unless the governing documents set a specific time or interval, the elections shall be held at two-year intervals
- Terms shall not exceed 4 years
- Written notice informing members of the right to nominate themselves or other members in good standing for candidacy to serve on the board shall be given to all members no later than 30 days prior to the date for mailing notice of the election meeting
- Nominations are valid if made prior to the mailing of ballots or proxies to the members
- Ballots and proxies cannot be mailed until the day after the deadline for submission of nominations; if there is no expiration date set forth for nominations, ballots cannot be mailed until the business day prior to mailing notice of the election. In any event, the time period for submitting nominations cannot be less than 14 days from the mailing of the request for nominations
- Written notice of the election meeting shall be sent between 14 and 60 days prior to the scheduled meeting. The notice must include a proxy ballot and an absentee ballot (unless prohibited by the bylaws); candidates are to be listed in alphabetical order by last name
- Amends PREDFDA to require that an association’s bylaws provide that all meetings of the board, except conference or working sessions, be open to all members; that notice of all meetings be given to all members; and that minutes of the meetings be made available to all members
- Amends PREDFDA to provide for voting by voting eligible tenants, where applicable, and to provide a 60-day window after the transition election for the developer to turnover required information
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.