On February 23, 2006, the Uniform Common Interest Ownership Act (UCIOA) was voted out of the Housing Committee in the Assembly and sent to the Assembly floor for a full vote. The bill, known as A-798, is a sweeping bill that for the first time in New Jersey history would enact one law governing issues affecting all community associations in the State, including condominiums, homeowners, and cooperatives. On March 2, 2006, the bill was passed by the New Jersey Assembly by a vote of 55-14, with 6 abstentions. That same day, the bill was received by the Senate and referred to the Senate Community and Urban Affairs Committee. The bill has not yet come out of consideration by the Senate Community and Urban Affairs Committee.

UCIOA has been touted by its supporters as a “first of its kind” that will help protect the rights of homeowners living within a community association, while also helping community associations operate more efficiently. The bill will purportedly consolidate various laws applicable to New Jersey’s common interest communities, will provide numerous protections for owners in such communities, and will clarify the powers of community association boards. According to one of the bill’s primary sponsors, Assembly-member Wilfredo Caraballo:

“This bill . . . establishes a consistent set of board powers and limitations that will apply to all associations, thereby ending confusion over the rights of boards. Some of the issues addressed are the ability to borrow money, grant easements over the common property, and adopt rules and regulations governing certain types of negative behavior. Unit owners will benefit from this new-found clarity that addresses the powers and limitations of the homeowner association boards that are elected.

Sounds great, right? So what’s the problem? The problem is that those who live in planned communities, or are considering purchasing a home within such a community in New Jersey, should look past the rhetoric and examine the motivations behind the supporters of the bill. When one considers that organizations such as the New Jersey Association of Home Builders, large developers that build condominium and other community developments in New Jersey, and law firms that represent large developers, are all lining up to sing UCIOA’s praises, a prudent mind should question whether the bill is, in reality, a wolf in sheep’s clothing.

Stark & Stark’s Construction Litigation Department has carefully analyzed UCIOA in light of our experience handling construction litigation cases on behalf of condominium and homeowner associations throughout the State of New Jersey. Contained deep within UCIOA’s pages are two sections, Sections 87 and 88, that greatly restrict a community association’s ability, in fact its very right, to avail itself of the court system of our State to sue the builder of the community for damage caused by construction defects. What follows in this blog and several to come is a line by line analysis of Sections 87 and 88 of UCIOA with our thoughts on the vagaries of the language itself and the overall restrictive effect of these sections of the bill:

Section 87, intro paragraph

The first paragraph of UCIOA’s Section 87 establishes the requirement that the Association go through a lengthy and cumbersome “dispute resolution process,” before filing “any form” of construction defects litigation, with the following language:

§87. (New section) Except for applications for emergent relief, prior to the commencement of any form of construction defects litigation on behalf of an association against a declarant or any members of the executive board appointed by the declarant, the following alternative dispute procedure shall be followed:”

Right out of the gate Section 87 takes away an Association’s choice to file litigation against a developer for “any form of construction defects litigation” without first jumping through the hoop of an alternative dispute procedure. The language used in this intro paragraph, moreover, is apparently intentionally drafted to be as broad as possible. Specifically, the term “any form of construction defects litigation” is not defined and amounts to a significant ambiguity in the statute. Considerable litigation is sure to occur over exactly what types of claims fall within this language. Litigation community associations cannot afford. Obvious cases involving defectively constructed roofs, water penetrating through improperly installed exterior cladding, etc., may clearly fall within the category of “any form of construction defects litigation.” What is not so clear, however, is whether cases involving, for example, a breach of warranty for windows that do not meet required specifications, product liability claims for damage caused by faulty construction components such as defective pipes, roof shingles, etc., or design claims arising from improper structural designs or roof designs, also fall within the category of “any form of construction defects litigation.” Are these types of claims “construction defects” claims, or are they design defect claims, product defect claims, or something else?

If claims such as design defect claims and product defect claims are not “construction defect” claims, what happens in a case that involves both (1) claims that fall within the statute’s category of “any form of construction defects litigation,” and (2) claims that do not fall within that category? Must the Association pay for two separate, ongoing, adversarial procedures – one alternative dispute resolution procedure against the developer under UCIOA and a separate litigation against design professionals and product manufacturers in state court? The statute also makes no reference whatsoever to claims against subcontractors who worked for the developer when the community was built. Would an Association have to file a separate lawsuit against subcontractors while going through the alternative dispute resolution process with the developer outlined in UCIOA?

The expense of these approaches would likely be prohibitive to most Associations. The question is, was this intentional?