NJ Governor “conditionally vetoes” bill that would prevent surprise mandatory HOA lake fees

By Deborah Goonan, Independent American Communities

debgoonan@icloud.com

 

It’s been said that the legislative process is a lot like making sausage. Start with some simple ground meat, add varying amounts of miscellaneous seasonings, and mix it together. You’re never quite sure you’ll like the recipe’s end result.

Likewise, New Jersey Senate Bill 3661 started out as a relatively simple bill. It was meant to clarify a 2017 amendment to the Planned Real Estate Financial Disclosure Act (PREDFDA), originally enacted in 1977.

But, as often happens with lawmaking, things are getting complicated.

 

Background summary: “Radburn Bill” 2017 amendments

PREDFDA was last amended in 2017, in response to complaints from homeowners in planned communities who had been denied the right to participate in their HOA elections.

Dubbed the “Radburn Bill,” the Legislature intended to ensure greater rights for property owners in common interest communities. By declaring all owners of property in planned communities as members of a homeowners’ association, the 2017 amendments now entitle each owner to vote in board elections, nominate candidates or run for office.

But while the new provisions of PREDFDA helped some New Jersey homeowners, they have wreaked havoc for other owners of property near Ramapo Mountain Lakes, a community located in the Borough of Oakland, Bergen County, NJ.

As a result of the 2017 amendments, Ramapo Mountain Lake (RML) Association now believes it has the right to collect mandatory HOA fees from hundreds of homeowners. Notably, most of these owners have no lake views, and no membership in RML’s voluntary membership lakes club.

After decades of operating as a voluntary membership lake association, RML began charging compulsory “lake maintenance” fees to 1,645 property owners in 2012. The association’s attorney, Eileen Born, based her case on a search of 67-year-old deeds, documenting that the developer issued stock certificates to thousands of properties in the early years of the community.

There’s just one problem: the stock certificates no longer exist, and most current homeowners were never informed that they would be legally obligated to contribute to a lake community’s HOA.

While some property owners have voluntarily paid these surprise bills from RML, about half of them (800 or so) are involved in a lawsuit to stop RML from demanding fees and placing liens on their homes.

 

NJ court declares Ramapo Mountain Lakes Association can collect mandatory HOA fees

In December 2018, State Superior Court Judge Christine A. Farrington issued an opinion on the nearly 3-year-old legal dispute. The lawsuit challenges the Association’s legal right to demand lake maintenance fees, and, in the event of non-payment, place liens on more than 800 of its nearby homes.

In short, Farrington ruled that RML is a common interest community (planned real estate development). As such, each property owner is legally obligated to pay annual assessments to maintain its two lakes and dams, and adjacent common property.

In response to this alarming ruling, New Jersey Legislature considered a bill that clarifies that PREDFDA does not magically transform voluntary HOAs into mandatory associations with the right to collect fees.

Here’s an excerpt of the 2nd reprint of S3661 that passed both the House and Senate in late August. This version of the bill acknowledges that many older planned communities did not require payment of fees or mandatory membership in an owners’ association. (Brackets [ ] indicate parts to be removed)

Note the following sentence:

“The association shall not compel an owner with non-payer status to pay a compulsory charge or be a member of the association.”

NJ S3661 2019 2nd reprint
NJ S3661 2019 2nd reprint

 

Current Status of NJ S3661

Even though the Legislature voted overwhelmingly in favor of S3661, NJ Governor Phil Murphy disrupted the process with a “conditional veto” of the bill.

New Jersey law allows its Governor to strike parts of a bill and suggest changes, then send a revised version back to the Legislature for their consideration.

You can read the details of the “conditional veto” here:
https://www.njleg.state.nj.us/2018/Bills/S4000/3661_V1.HTM

 

In this case, the Senate has already accepted the Governor’s conditional veto, without changes. Now the House must reconsider S3661.

Here’s the important part of the Third Reprint of S3661 showing the Governor’s recommended changes, as approved by the Senate. (Red highlights indicate parts to be removed, yellow highlights show the Governor’s suggested amendments.)

Note that this version of the bill states that communities established before 1977 (including Ramapo Mountain Lakes) “shall not be permitted to require property owners to pay assessments and other charges where the property owner’s title record does not impose such an obligation, unless otherwise provided by law.” (Emphasis added)

NJ S3661 2019 Third Reprint
NJ S3661 2019 Third Reprint

 

The good news: the conditional veto upholds the rights of homeowners guaranteed in the title to their properties.

The potential bad news: the veto adds a legal exception catch-all phrase, “unless otherwise provided by law.”

It’s unclear how legal experts will interpret this clause. And it’s equally unclear what other law(s) might actually override S3661 and justify imposing mandatory maintenance fees after all.

 

Clues in the Conditional Veto statement?

In this highlighted portion of Gov. Murphy’s statement, you’ll notice that he’s leaving the door open for lake community associations to find other ways to raise revenue to maintain their dams and storm water infrastructure.

 

NJ S3661 2019 Governor Conditional Veto
NJ S3661 2019 Governor Conditional Veto

 

Here, Gov. Murphy plays both sides of the fence. He’s against “surprise assessments and compulsory fees,” but he’s also “concerned…that the bill could undermine a lake association’s ability to collect the funds necessary to comply with critical environmental, health and safety requirements…”

Note the Governor’s reference to “…recommended revisions…clarifying that the bill will not impact existing obligations, whether in a recorded document, statute or common law.”

The government’s ultimate goal is to prevent picking up the tab for maintenance of privately-owned lakes.

Following HOA-industry status quo, state and local government often prefers to shift costs to the people who directly “benefit” from community amenities — in this case, recreational lakes.

Reading between the line, it seems possible that RML and Bergen County could explore additional funding options, getting around the fact that titles and CC&Rs don’t permit mandatory Association fees.

For example, majority of property owners within RML boundaries might vote in favor of establishing a special tax district to fund repairs and maintenance of Crystal and Mirror Lakes.

If Governor Murphy’s conditional veto is approved by the House, S3661 will surely impact thousands of owners of property on or near privately-owned lakes in the state of New Jersey. ♦