On January 7, 2015, the Judicial Panel on Multidistrict Litigation (JPML) ordered that six putative class-action lawsuits stemming from Colorado, Illinois, Indiana, Iowa, North Carolina and Ohio will be venued and centralized in the U.S. District Court for the District of New Jersey. New Jersey was selected to handle this MDL litigation matter because the primary defendant/manufacturer of the outdoor decking material at issue, GAF Materials Corp., is headquartered in Wayne, NJ. The cases are consolidated before U.S. District Court Judge Jose Linares in Newark. The number of nationwide suits subject to the consolidation order is expected to at least double.

The claims at issue involve an outdoor decking product manufactured by GAF. One of the class representatives, Thomas McGovern, installed the subject decking at his vacation house in Mackinac Island, Michigan in 2009. The decking almost immediately began to warp and stain when exposed to the elements. The condition of the material was so bad that it had to be completely replaced two years later. The claims involve violations of applicable consumer protection laws, breach of warranty and unjust enrichment, and relate primarily to the defective product itself rather than improper installation.

GAF is represented by Quinn Emanuel in New York. Insofar as GAF has not filed a motion to dismiss any of the actions, it looks like these MDL cases are headed into full-blown litigation.

A New Jersey appellate court recently issued a reported opinion in Hill International v. Atlantic City Board of Education, addressing whether an affidavit of merit issued by an engineer, addressing the conduct of a defendant, architect, was sufficient in order to satisfy the requirements of the affidavit of merit statute.

At issue was whether the conduct of a licensed New Jersey architect, and his licensed architectural firm, was deficient in terms of his failure to properly perform contract administration and design services, provided in connection with construction of a school. The affidavit of merit was issued by a licensed engineer, who was not a licensed architect, although the two professions do have some overlap. The court addressed whether the affidavit of merit statute, which requires an affidavit from an “appropriate licensed person” should allow this type of deviation or be construed to require a supporting affidavit of merit from a “like-licensed” professional in all malpractice or negligence cases falling within the purview of the statute.

The court held that, to support a claim of malpractice or professional negligence, the affidavit must be issued by an affiant who is licensed within the same profession as the defendant. The court did however carve out exceptions where an affidavit from such a like-licensed expert was not required – in circumstances where the plaintiff’s claims do not involve the exercise of functions within the scope of the licensed professional’s role, or where the claims are confined to theories of vicarious liability or agency that do not assert or implicate deviations from the defendant’s professional standards of care.

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In a decision that has renewed the faith of condominium law practitioners in our state’s judicial system, the New Jersey Appellate Division recently issued a strongly worded opinion in Port Liberte II Condo. Ass’n v. New Liberty Residential Urban Renewal Co. et. al., 2014 N.J. Super. LEXIS 19 (App. Div. Jan. 21, 2014) (approved for publication on January 31, 2014), that has prevented a grave injustice and allowed unit owners to control their own fates by having the power to validate unauthorized decisions of the board.

In what has been exclaimed as a “big win” for condominium associations and unit owners, the Appellate Division has determined that a condominium board’s decision to file suit without taking a pre-litigation vote, required by the association’s bylaws, can be affirmed at a later time by the membership and cannot be challenged by the defendants. Designed to protect the financial interests of the unit owners, the bylaws cannot be used by defendant developers and contractors to suppress those very same interests. Non-homeowners, therefore, do not have standing to challenge unauthorized or procedurally defective decisions of the board to start suit.

Faced with widespread construction defects in the common elements of its 225-unit community with a price tag in excess of thirty million dollars for repairs, the Port Liberte II Condominium Association filed suit in 2008 against those responsible, the Developer and the contractors that built the development. Several years into the law suit, the defendants sought dismissal of the entire action because the Association had not obtained a community vote to approve the filing of the suit, as required by a provision of the bylaws drafted by the Developer. To rectify that oversight, the Association held two separate votes to ratify the original filing of the suit, the first in October of 2009, which was approved by the community 72 votes to 3, and a second in October of 2011, which was approved by a vote of 65 to 1. Armed with these two examples of overwhelming support in the community for the lawsuit, the Association opposed the defendants’ motions to dismiss the case arguing that the defendants, as outsiders who owned no units in the community, had no standing to enforce the bylaws, and, even if they had such standing, the original filing of the suit was overwhelmingly ratified by the unit owners.

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Every day condominium associations battle delinquencies and employ creative strategies for collecting unpaid assessments. Sometimes ambitious collection efforts are successful – sometimes not. One aggressive strategy employed by associations is the appointment of a rent receivership for a vacated or abandoned unit owned by a delinquent owner. If successful, a receivership would entitle the association to collect rent for a unit it technically does not own and apply the monies received towards the owed arrearage. While the concept sounds good in theory, it is actually quite difficult to accomplish in practice given the likely upside down mortgage on the property, the inevitable foreclosure proceedings by the bank, and the fact that abandoned units are not occupied by paying tenants.

All those dissuading factors, however, did not stop one association from trying. Faced with over $30,000 of unpaid maintenance dues for two abandoned units, Woodlake at King’s Grant Condominium Association, made an application to the Chancery Court for an appointment of a rent receiver. The Chancery Judge denied the Association’s request finding that the “extraordinary remedy of appointing a rent receiver” was not appropriate under those facts and circumstances. The Association appealed and the Appellate Division issued an unpublished decision on April 1, 2014 affirming the judge’s denial of the Association’s application. See Woodlake at King’s Grant Condo. Ass’n v. Coudriet, 2014 N.J. Super. Unpub. LEXIS 714 (App. Div. Unpub. 2014).

Despite recognizing that the Association was seeking the appointment of a receiver so that it could rent out defendants’ vacant units and recoup some of the assessment monies owed by the defendants, the Appellate Court did not find legal support or plaintiff’s arguments persuasive in favor of forcing the defendants to rent their units or for allowing the Association to rent those units to new tenants. Even though the Association’s assessment liens would remain unpaid after a foreclosure sale because the mortgage liens on the units exceeded their fair market value thereby leaving the Association with no remedy, the Appellate Division found no authority in the bylaws or in the Condominium Act for providing the appointment of a rent receiver.

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In early April, a Bergen County judge dismissed a construction defect complaint filed by a mammoth 40-story condominium complex known as the Palisades, located along the Hudson River in Fort Lee, based on the statute of limitations. While dismissal for filing suit outside the statute of limitations is nothing new or surprising, the way in which the judge reached that conclusion and applied the “law” is. According to Judge Robert C. Wilson, the six-year statute of limitations begins to run upon “substantial completion,” is not subject to the discovery rule, and is not tolled until the association is created and subsequently controlled by the homeowners. Not only does this decision render the ten-year statute of repose meaningless, it unduly prejudices the rights of condominium associations whose legislatively granted six-year window to file suit can seemingly be judicially dwindled down to two years or one year or less.
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Until now, owners of single-family homes were left to their own devices and resources in seeking redress for construction defects. Class suits were thought to be unavailable to homeowners despite their homes having been built by the same builder and suffering from the same general defects. The differences in subcontractors used, methods of construction, location of defects, time built and nature of resulting damages defeated class certification and deterred law firms from bringing class action lawsuits alleging construction defects. The economics of bringing an individual construction defect suit weighed heavily against litigation and, as a result, homeowners ended up either living with the defects or paying for repairs out of pocket.

Fortunately for homeowners, a recent decision from the Appellate Division captioned D’Andrea v. Hovnanian, 2013 N.J. Super. Unpub. LEXIS 1484 (App. Div. June 18, 2013) has changed that landscape. According to the Appellate Division, the four prerequisites for bringing a class action lawsuit – numerosity, commonality, typicality, and adequate representation – were met by a class of plaintiffs who sued developer K. Hovnanian (“Hovnanian”) for fire safety hazards in the HVAC system installed in their homes.

Arguing against class certification, Hovnanian contended that the individualized nature of home construction made such causes of action unsuitable for class certification. Hovnanian pointed out, and Plaintiffs agreed, that there was no single deviation common to each class member’s home. Nevertheless, despite the significant differences among the construction defects, there remained a “strong commonality in the nature of the claimed defect – fire safety hazards in HVAC return systems.” Seeing the forest instead of the trees, the court focused on whether construction of the HVAC cavities met the applicable code rather than on the differences in materials and construction methods used.

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In late 1998 Monroe Station Associates started construction on the Belmont, a seven-story, thirty-four unit condominium building in Hoboken, New Jersey. Monroe Station served as the sponsor, developer, and general contractor of the Belmont. Prior to completing construction, Monroe Station filed a Public Offering Statement (“POS”), which stated that there were no known defects in the common elements of the Belmont building that a prospective purchaser could not determine by a reasonable inspection. Attached to the POS were certain marketing materials, which provided that the potential buyers would be getting a “Proven Developer and Construction Management Team which has overseen the building and renovation of over 400 Single Family & Condominium Homes, and over 1,000,000 Sq. Ft. of Office/Commercial/Retail Development.”

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Until now, owners of single-family homes were left to their own devices and resources in seeking redress for construction defects. Class suits were thought to be unavailable to homeowners despite their homes having been built by the same builder and suffering from the same general defects. The differences in subcontractors used, methods of construction, location of defects, time built and nature of resulting damages defeated class certification and deterred law firms from bringing class action lawsuits alleging construction defects. The economics of bringing an individual construction defect suit weighed heavily against litigation and, as a result, homeowners ended up either living with the defects or paying for repairs out of pocket.

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The short answer is – Yes! The Condominium Act specifically obligates all unit owners to pay a proportionate share of the common expenses. Even where a unit owner waives the right to use a common element or abandons the unit there is no exemption from liability for common expenses. The Condominium Act, N.J.S.A. 46:8B-1 to -38, provides in pertinent part:

A unit owner, shall by acceptance of title, be conclusively presumed to have agreed to pay his proportionate share of common expenses accruing while he is the owner of a unit. . . . No unit owner may exempt himself from liability for his share of common expenses by waiver of the enjoyment of the right to use any of the common elements or abandonment of his unit or otherwise . . .
[N.J.S.A. 46:8B-17.]

The “or otherwise” language implies that the obligation of unit owners to pay the proportionate share of the common expense is absolute and does not yield to other considerations, such as disputes with the Association. See Holbert v. Great Gorge Vill. S. Condo. Council, 281 N.J. Super. 222 (Ch. Div. 1994) (plaintiff owner was obligated to pay for previously unpaid common expenses, plus interest, despite having brought suit against defendant condominium association for alleged mismanagement of condominium affairs).

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Under the statute of repose, no action to recover damages for any deficiency in the design, planning, surveying, supervision or construction of an improvement to real property may be brought more than ten (10) years after the performance of “such services and construction.” N.J.S.A. § 2A:14-1.1. Essentially, the statute of repose provides that an injury occurring more than ten years after completion of improvements to real property does not give rise to a cause of action at all.

The New Jersey Supreme Court has held that the ten-year statute of repose for bringing an action against a contractor or an architect begins to run as of “substantial completion” of the real property. Russo Farms v. Vineland Bd. of Educ., 144 N.J. 84, 117 (1996). The Court defined “substantial completion” as the date when construction is sufficiently complete so that an owner can occupy or utilize the building. Therefore, generally when the architect certifies as much to the owner and a Certificate of Occupancy is issued attesting to the building’s fitness for occupancy, the real property is substantially complete and the statute of repose begins to run.

One important concept has evolved from recent developments of case law interpreting the statute of repose: the start date for the ten-year time limit of the statute of repose is not the same for all contractors and design professionals on a particular project; the start date differs depending on a party’s continued involvement with a construction project. See State v. Perini Corp., 425 N.J. Super. 62 (App. Div. 2012). The Perini Court engaged in a lengthy discourse of the relevant case law interpreting New Jersey’s statute of repose from which it derived three guiding principles: First, the trigger date is the date of substantial completion, not completion of every last task of the contractor; Second, separate trigger dates apply to subcontractors that have substantially completed their work, even if the improvement as a whole is not completed and ready for use and a certificate of occupancy has not been issued; Third, the trigger date for any single contractor runs from completion of that contractor’s entire work on the “improvement,” not from discrete tasks. [425 N.J. Super. at 74-75 (internal quotations omitted).] This means that certain contractors, who performed services on a job site early on, can benefit from a repose period that commences earlier than the date of substantial completion.

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