NJ HOA homeowners - I want to hear your problems...

Started by EricS16 • 15 replies • 3506 views

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EricS16 (New Jersey)
Posts: 7

Posted:

NJ HOA homeowners - I want to hear your problems with boards that disregard membership rules, elections, financial disclosure, open meetings and bylaws as they see fit.

Here's my background: I am the President-Elect of the Radburn (Fair Lawn NJ) Citizens Association. I have advocated for open disclosure and democratic principles in the HOA. As President, I will be seated as a Trustee during my 2-year term.

The are 9 Trustees on the Board: The Citizens Assoc. President, (6) revolving 3-year seats and (2) 1-year seats.

The Citizens Association elections are run in a completely popular manner, open to all residents within the HOA including tenants if they so desire to become involved.

The Trustee elections are conducted as follows: (2) three-year seats are filled annually via a ballot of (4) residents who have been nominated and received the highest votes by the seated Board in a privately held run-off. Ballots are then sent to all residents to vote for (2) of the four nominees by plurality of votes.

(2) 1-years seats are nominated and elected by count of hands at an annual private Trustees meeting, the attendees of which are current and prior Trustees who are "members".

There is no automatic method to become a member other than to have been chosen by prior members at their meeting, regardless of ownership or longevity in the community.

Now, the problems: financial disclosure is nearly non-existant, save for an annual "projected budget" meeting which lists broad categories with no finer detail of key and substantial items such as "administrative salaries" and "professional services." Questions such as "how much of this amount has been spent with the attorney" are brushed off as "private." Even the percentage of delinquent dues is not disclosed and does not appear in the projections.

Similarly, open meetings are equally uninformative: almost all matters are resolved at private work sessions, or between the Board President, manager and attorney with little disclosure even to the other trustees. Public meetings, where all business is purportedly discussed and voted upon, consist almost exclusively of a single agenda item: acceptance of prior open meeting minutes.

The Association by-laws are, unfortunately, almost mute on all these matters of disclosure. Various calls for reforms over decades have resulted in several committes which produced large reports of suggestions for change, but none have been implemented. The latest such report was derided by the Trustees at the time, who stated that even if 90% of the residents supported the changes, they would not be implemented.

In fact, even if the Board were inclined to make substantial changes, the by-laws authorize the self-selected "members" to hold their own special meeting and veto any by-law change.

When a group of homeowners sued the Association to open nominations, membership and disclosure, the result was found under PREDFDA (NJSA 45:22A-21...) that disclosure was to be "guided" by the Condominium Act, but "member of the Association" was not defined due to an omission in the law, thus a self-selected group could continue to be called members exclusive of all other homeowners.

So, we stand with a 8-against 1 system of homeowner control, the only recourse being legislative change.

I'd like to hear from all of you in NJ with systemic issues in your HOA. There must be change to assure equity and fairness for all homeowners.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Eric,

I think many of us on this forum are at a loss to comprehend all that you have written.

Let me ask a basic question because one statement makes me think this is not the right forum for your posting. You wrote "There is no automatic method to become a member other than to have been chosen by prior members at their meeting, regardless of ownership or longevity in the community."

In most homeowner associations (HOA's) one automatically becomes a mandatory member by purchasing property within a subdivision. This comes about because when the subdivision was laid out it was given a name, a plat was recorded, and a Declaration of Covenants, Conditions, and Restrictions (CC&R's) was recorded that referenced the subdivision either by its recorded name or by the recorded plat. As each lot is sold, the deed indicates that it is subject to the recorded CC&R's. Among other things, the CC&R's may require membership in a homeowner's association.

Because you said there is no automatic method to become a member of your associations, it seems as though your Citizens Association is not actually an HOA but more of a private club.

EllieD (Vermont)
Posts: 446

Posted:

Larry, Google the name of the Association posted along with the NJ address. See Wikipedia write up. Interesting!

EricS16 (New Jersey)
Posts: 7

Posted:

Larry, you are quite right that this is usually the case. Radburn was founded in 1929, when early enabling laws first permitted HOAs to collect assessments by deed restrictions. However, the developer, City Housing Corp., wanted to maintain control for the first 30 years because wary banks would not lend the entire amount of mortgages. Instead, private investors including such names as John D. Rockefeller made up the difference, and the second mortgages were held by the developer.

The original board was formed by the developer even before the first houses were sold, and the structure of membership was based on the idea that Radburn was to be a new type of Garden City, self-sufficient with a "patriarchal" governance that was eventually to be placed in the hands of the residents.

Alas, the market downturn at the end of 1929 led to a series of events that bankrupted City Housing before only a fraction of Radburn had been completed. Along with the failure of the developer long before its 1960 goal to cede control, the skeletal outline of the by-laws was never advanced and the self-selecting nature of membership was never addressed.

You may read the contorted decisions of the Superior and Appellate courts on "Moore v. The Radburn Association" to see how the judges recently upheld the tenuous idea that we have contracted away our right to self-determination to this insular group of members who act for our benefit, nevermind that they are all homeowners as well, but some homeowners are more equal than others, to borrow from Orwell.

That leaves us in the current position that only our Legislators can effect such a change, as the Dept. of Community Affairs (DCA), which initially supported our position, has abdicated its role in such disputes. Worse yet, the court decisions make it possible for new associations to be formed with the same form of exclusive membership that excludes the majority of homeowners from any meaningful control or disclosure, possibly to keep such a group loyal to the developer to pay ongoing transfer fees.

Assembly bill A1730 addresses the basic ommissions in PREDFDA regarding membership and nominations. The bill has been reintroduced several times but has yet to be placed on the Committee agenda for further action, while our group has petitioned numerous times. Perhaps if we can collect anecdotes from other HOAs where rules are being disregarded by power-hungry boards, we can effect a useful change that will allow a clear administrative path to recourse without raisng the spector of costly lawsuits.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Eric,

Let me summarize (if I can):

1) You are in an unincorporated planned community
2) This planned community is ran by the Association
3) Membership in the Association is voluntary and by selection
4) Voting for amendments to the Bylaws are limited to members only.
5) Applicable NJ laws and the governing documents do not allow members to inspect the records of the Association.
6) You want to change that.
7) Because there is not enough support to change this from the members of the Association, you want legislative action and are lobbying for it.

Is this the crux of it?

May I ask, what is the language of the amendment you are proposing that is preventing support from the membership?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

The Radbrun situation is an interesting read.

As I understand it, the declarant originally appointed a Trustee BOD (9 members) and the BOD stays in control after the declarant is long gone. The Trustee BOD selects those to be on it (do not have to be an owner?) with the exception of one position on the BOD that the owners get to vote for..I think..LOL

Radburn, which was founded in 1929, is the first planned community in the area. The community is run by a board of trustees, which is made up of nine people. Of those nine seats, eight are reserved for people who are nominated or appointed by the current trustees. The ninth seat is filled by the president of the Radburn Citizen’s Association, which is an openly elected position.

It seems that over the years groups of/or individual owners have taken the issue to court requesting that the owners elect ther Trustee Board and some side issues of open meetings, budget reporting, etc.

Side issues aside, the courts have basically said you all know what you were buying into and we are not going to change the way Trustees are appointed. The courts have ruled that the Trustess be more open, publish more financial information, hold more public meetings, etc. but bottom line, the form of appointing Trustees seems to have held up in court.

Also it seems the Trustee's have been known to take the member elected person to court claiming various things to get them removed.

Let it be understood I have no dog in this fight. I posted as I find it interesting.

EricS16 (New Jersey)
Posts: 7

Posted:

JohnC, yes, that is basically all correct. The original BOD formed by the developer had 9 members selected by the developer and chose their successors. A Citizens Association was formed almost immediately to "find out what Radburn is doing" according to thier first newsletter. After a few years of petitioning, the current system which reserves one seat for the Citizens Association President was put in place.

TimB,

1) You are in an unincorporated planned community - YES
2) This planned community is ran by the Association - YES
3) Membership in the Association is voluntary and by selection - YES and NO: "Membership" is limited, but all properties are deed-restricted by CCRs and Guidelines.
4) Voting for amendments to the Bylaws are limited to members only. - YES
5) Applicable NJ laws and the governing documents do not allow members to inspect the records of the Association. - NO*
6) You want to change that. - YES
7) Because there is not enough support to change this from the members of the Association, you want legislative action and are lobbying for it. - YES

* Applicable laws are almost always interpreted as making records open to inspection, but the BOT refuses to do so. Even if a reform-minded BOT were to make changes as by-laws the 30 or so "members" could veto any changes or make further changes on their own.

As to "all know what you were buying into" this is a more than a matter of semantics, because the HOA by-laws which define membership are not filed with the master deed, thus few if any purchasers have any idea that their participation is limited. In fact, the original 1929 "green book" distributed by the developer contained the by-laws, restrictions and guidelines, but the following year and since, the HOA by-laws were replaced by the Citizens Association bylaws. When I purchased my property, having no idea of this distinction, I asked the manager at the time for any other organizational documents and I was told there were none applicable. A number of homeowners signed a statement to the same effect in connection with the past lawsuits.

EricS16 (New Jersey)
Posts: 7

Posted:

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By EricS16 on 12/09/2012 10:59 AM

* Applicable laws are almost always interpreted as making records open to inspection, but the BOT refuses to do so.

If the BOT refuses to allow inspection of the records when the Law stipulates they should, why then would you thing changing the Bylaws (which are typically subservient to State Law) will magically change the Boards mind and allow inspection of the records?

I guess I'm confused on what you really want the legislature to do.

EricS16 (New Jersey)
Posts: 7

Posted:

TimB, we're not looking to change the disclosure law, but to open nominations and membership to all homeowners. The lack of disclosure is symptomatic of why the system that has "worked so well for 80 years" (according to its supporters) is broken.

Clarence Stein, designer of Radburn along with Henry Wright, later recalled in his book “Toward New Towns For America”, “The Association was governed by a self-perpetuating Board of Trustees.…an American government without public representation!” (his emphesis) But Stein went on to conclude “A private association is essential. To be effective, such an organization should include in its membership all families of the community."

Too bad I only read that book a few years ago. It's not the kind of thing most people would find unless they were urban planning students.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Ahh, Now I understand.

Based on that understanding, I have the following comments:

1) Since your governed by an Association, I don't think the Legislature would have the authority to specify who may be members of a private Association that does not have mandatory membership.

2) Since laws are generalized for all, I don't see how the Representatives can gather support to adopt legislation directed at a single Association (which would likely have to be done to address your issue).

3) As I understand it, your membership is open to all homeowners - but because it's a voluntary Association and the way your Bylaws are written, membership requires approval (which is similar to many private organizations).

4) As I understand it, the nominating committee identifies four nominees, then the residents (not members) elect two from list of four to serve a three year term (there are 6 three year term seats).

Therefore out of the 9 board members:
6 are elected by the residents
1 is the President of the citizen Association who is actually elected by the residents
2 are elected by the members of the Association (note: The governing Association is different than the citizens Association).

Since you didn't specify (and I couldn't find any bylaws for the governing association online) if there were any qualification requirements that limited whom the nominating committee may select, I can only offer:

If the nominating committee may select anyone and there are no qualifications - I don't see an issue.

If the nominating committee is limited who they select due to qualifications - this is typical for many Associations and private organizations and corporate law typically allows for qualifications. Even in States where it says all members of the Association may serve on the Board, there is support that the members must be in good standing (paid current on Assessments) to qualify for being on the Board.

Therefore, I don't see how Legislation is going to help.

Have you taken the time to draft some sort of legislation that will address your concern to submit to your State Representative? If you have, are you willing to share?

Have you taken the time to draft some amendments to the governing Association Bylaws to see if you can gather support from those who are currently on the Board? If you have, are you willing to share?

From what little (and I admit, darn little) I understand of the issue, I believe it has to be resolved from within or governance transferred to another entity as outlined in your deed restrictions.

EricS16 (New Jersey)
Posts: 7

Posted:

TimB,

You are correct that the contention arises from the impression that Radburn is some sort of country club, when it is in reality a HOA with year-round residences exclusively. As such, the court found that it is indeed a HOA and is subject retroactively to the HOA regulations known as the Planned Real Estate Development Full Disclosure Act (PREDFDA) as well as to disclosure elements of the Condominium Act, though the HOA is not a condo. Retroactivity was found in another case that moved through the courts a few years prior, "Committee ... v Twin Rivers" which arose from questions of free speech.

PREDFDA refers to builders turning over control on a scheduled basis to the "members" however, the act failed to define "member" referring at other points to the "homeowners." The contorted court decision reasoned that the word "members" may represent a subset of all homeowners, thus found no fault in the current governance absent any further legislative clarification. It declined to address the limited disclosure of the organizational by-laws, as you noted which are not freely available to this day. In my opinion, the judge simply punted on this, not wanting to be seen as legislating from the bench. I could go on about the implications of that in NJ, but that's another discussion.

There is a current that can be read on http://www.njleg.state.nj.us/wmobile/BillViewwml.asp?varBillNumbr=A1730 which addresses the issues of membership and nominations. The statement section describes the justification clearly as a matter of equity. Other bills address issues of officer recalls and other nitty-gritty, but in our case, attaining a more democratic (representative) system would be fully satisfactory. Any other reforms would follow as needed once the self-perpetuating cycle of control was ended.

My original post was intended as a call to other New Jersey homeowners in HOAs which flaunt or distort the rules in an attempt to disenfranchise homeowners from meaningful disclosure or control for whatever purposes. I hope to organize supporte for legislative change that would offer recourse directly, avoiding further contentious and expensive lawsuits.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Eric

Do you really want politicians and bureacrats dictating how an HOA should operate?

I for one do not.

EricS16 (New Jersey)
Posts: 7

Posted:

JohnC,

This is a consumer protection law. When you buy into a HOA, you accept its covenants (assessments) in return for an interest in the common property (parks, pools, etc.). In Radburn, we have all the usual deed restrictions, yet we're told we have no equity in the HOA and a self-selected group of members have the final say.

The statutes currently exclude non-condo/coop HOAs with fewer than 100 units, rental-only developments and those with common property that is entirely unimproved open space. I'd be very interested to hear of any other association in NJ that would be adversely effected by the current bill.

VinyakP (New Jersey)
Posts: 11

Posted:

Eric,

Thank you for starting this thread. While this question may not be apt for this thread, I noticed that you are from NJ. I am on the board of a small self managed condo association and this is the first time filing taxes as the HOA was formed last year.

I wanted to understand from you whether any forms are to be filed for NJ state for taxes, currently we know we need to file form 1120H. We do not know if we need to file any other form.

CathyA3 (Ohio)
Posts: 6,299

Posted:

This thread is twelve years old and the info may be out-of-date, not compliant with current law, or otherwise misleading. If you have a new issue, I recommend posting in a new thread. You're more likely to get helpful responses.

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