By Deborah Goonan, Independent American Communities
What would you do if a voluntary property or homeowners association suddenly demanded mandatory annual assessments, claiming the legal right to do so?
A group of fifteen homeowners in the proximity of Lake Parsippany, New Jersey, have filed suit to stop Lake Parsippany Property Owners Association (LPPOA) from making the transition from a Voluntary lake membership organization to a mandatory homeowners association.
According to the facts presented in the formal complaint filed by the Plaintiffs, LPPOA was originally formed in 1933 as a planned, private lake community.
In its early years, in addition to managing the lake and related activities, the private community of 2,200 lot owners provided all of its own maintenance and utility services. However, LPPOA has always been a voluntary membership association.
By 1948, utilities, road maintenance, and trash pickup had been delegated to the Township. By 1985, maintenance of drainage basins and the lake’s dams were also delegated to the Township.
Exhibits to the complaint include nearly $100,000 in maintenance related to the lake and its dam, including the use of heavy equipment, approved by the Township of Parsippany-Troy Hill.
But over the past several decades, membership in LPPOA began to dwindle. Due to the size of the subdivision, many homes are quite a distance from the lake, and relatively few nearby residents engage in recreational pursuits at Lake Parsippany. So in 1990, the board of LPPOA decided to open up membership to non-residents of the 2,200 lots originally bound by Covenants, Conditions, & Restrictions creating the voluntary association.
For more than 25 years, an open membership policy barely kept the lake association afloat. Then in 2015, the board of LPPOA realized its voluntary membership revenue would be insufficient to continue to maintain the lake and its recreational facilities. So they hired an HOA industry law firm, Dolan & Dolan, to provide a written opinion on the matter. The attorney concluded that, since each lot owner has an easement to use the lake, all parcel owners are theoretically obligated to help pay for its ongoing maintenance.
In Janary 2017, knowing it would prove difficult to obtain unanimous voluntary participation in lake maintenance, the Association decided to bill each and every lot owner an annual fee of $115 – even if they chose not to purchase lake membership.
That’s when owners objected, and fifteen of them have filed a lawsuit. Their attorney, Brian M. Rader, contends that no common interest community exists, because the terms of the CC&Rs have been broken since 1990, when LPPOA chose to open membership to the general public.
For reference, see the following NJ Law Journal summary and the link to the formal complaint, with exhibits.
Property Association, Homeowners Spar Over Added Lake Maintenance Fees
Michael Booth (NJ Law Journal)
A Morris County judge has blocked a local property owners association, which is responsible for maintaining a private lake, from collecting additional maintenance assessments after it opened up the lake for use by nonassociation residents and incurred greater costs.
Superior Court Judge Robert Brennan on Jan. 17 issued a temporary injunction against the Lake Parsippany Property Owners Association, barring it from collecting on further assessments it issued against the approximately 2,200 property owners who live around Lake Parsippany, said the attorney representing the plaintiffs, Brian Rader, in a statement.
The lawsuit was filed by 15 of the property owners, Rader said.
Money already collected by the association does not have to be returned, but must be held in escrow pending the outcome of a trial, Brennan said in an order.
Link to Verified Complaint:
A growing trend for lake communities
In the copy of the legal complaint above, pay particular attention to Exhibits G and H. You can see that exerting pressure on homeowners to submit to a mandatory association is a growing trend.
Furthermore, even if holdout owners do not voluntarily elect to become members of a mandatory property owners association (POA), New Jersey courts have relied on case law that permits “fair share” assessments based upon easements to use and access the lake. In other words, even without a mandatory HOA, if your house is bound by LPPOA CC&Rs and its easements, you might be forced to pay an annual fee toward maintenance and insurance for the lake.
And if you read how the process would work at LPPOA, a mandatory assessment would be due for each parcel you own that is subject to the original CC&Rs for the voluntary association, regardless of whether or not you enjoy activities at the lake. In fact, you would still have to purchase a separate membership to enjoy swimming, fishing, or boating at the lake.
Note that in 2015, membership was 443, and 143 of those members lived outside the boundaries of the restrictive covenants. In a nutshell, 300 lake club members fully expect 1,900 lot owners to subsidize the cost of maintaining Lake Parsippany. And the courts may allow that to happen.
What is happening with mature lake communities is similar, in many ways, to the trends for golf communities. As demand for recreational sports and amenities wanes, diehard members will go to great lengths to save their beloved lake or golf course, even if that means forcing neighbors to participate in paying for those amenities, like it or not.
But the fact remains that lake and golf members belong to private clubs. We are not discussing public parks to be funded by all taxpayers.
In the end, it seems quite unfair to force 75 or 80% of homeowners to fund what would otherwise be a failed business model. I certainly don’t buy into the claim that the mere presence of a lake increases property values. Rather, it creates a financial liability and an insurance risk for the community.
Once again, it becomes clear that seemingly straightforward CC&Rs can be creatively interpreted to serve the needs and desires of a few property owners, and the sector of the industry that feeds off of Association Governed Communities.