December 17, 2004
By Margaret Bar-Akiva
An Open Letter to NJ Legislators
An Open Letter to NJ Legislators
Dear Members of the General Assembly and Senate:
On behalf of the Common-Interest Homeowners Coalition (C-IHC) I am writing to ask for your support of S-2016, the “Common Interest Community and Homeowners’ Association Act”. This bill, introduced last month by Senator Shirley Turner, is in response to the serious governance problems plaguing homeowner associations (HOAs) today.
As you may know, nearly 1.3 million New Jersey residents, many of whom are senior citizens, currently live in HOAs such as condominiums, planned unit developments,
town homes, and cooperatives. But unlike other New Jersey homeowners, they often discover that living in such communities means unknowingly relinquishing some of their basic constitutional and property rights.
On a daily basis, HOA homeowners are subjected to boards that hold closed-door meetings, conduct improper elections, deny access to financial records, impose unreasonable fines, and initiate frivolous and self-serving lawsuits -- all at the homeowners’ expense. Elections are often not conducted by secret ballot as required by the governing documents, and voting deadlines are sometimes improperly “extended” when the outcome is not to the liking of the board. Some HOAs have been forced into bankruptcy as a result of mismanagement or corrupt business practices, and homeowners have been forced to pay thousands of dollars in special assessments in order to salvage their homes. When homeowners exercise their fundamental right to ask probing questions they are often vilified, harassed or derided by their boards.
Because HOAs are unregulated businesses there are very few protections currently available for homeowners under State law. One of the few is the Alternative Dispute Resolution (ADR) process, which requires HOAs to provide a fair and efficient mediation process as an alternative to litigation. But too often homeowners who try to avail themselves of this process find that it is either non-existent, tainted by bias, or too costly to pursue. In some communities boards are refusing ADR requests even on matters in which the board has violated State law or its own governing documents.
All of these undemocratic practices have been documented on numerous occasions by the Department of Community Affairs and confirmed in the report submitted by the Assembly Task Force to Study Homeowner Associations a few years ago. (Both this report and a Background Report on Government Regulation of HOAs can be obtained from the Office of Legislative Services).
There is no doubt that today’s lack of democratic governance in HOAs stems from laws which originally failed to recognize them as quasi-governmental entities and established them instead as private business corporations. And while the outcome of this form of housing might not have been anticipated 40 years ago, we have now acquired sufficient experience from which to make at least the following three observations:
Applying the corporate business model and the business judgment rule to HOAs has proven to be deeply flawed because it has unwisely exempted them from State scrutiny;
The lack of governmental oversight has allowed HOAs to turn into breeding grounds for special interest groups and has permitted incompetent and unscrupulous board members to act with impunity;
The wide latitude given to HOA boards to impose fines, levy assessments, and place liens on peoples’ homes renders them quasi-governmental in nature and requires that they be viewed like any other government-regulated business.
Senator Turner’s bill seeks to remedy these deficiencies by recognizing the quasi-governmental nature of HOAs, and by providing them with clear and uniform guidelines to follow. In addition, it requires HOA boards to operate in an open and democratic manner. The recent history of HOAs across this nation paints a disturbing picture of government officials who have abdicated their responsibility in protecting HOA residents from a housing experiment gone awry. New Jersey now has an opportunity to transform and improve this landscape by passing S-2016.
We are requesting your support of this crucial legislation and would welcome the opportunity to meet with you if you have any questions or concerns.