This is part 8 of Randy Sawyer’s 16 Part series on UCIOA. You can read previous posts here.

Section 87, subsection (h)

’87(h) – If the association does not accept the declarant’s settlement offer, or if either the association or the declarant does not accept the arbitrator’s determination, then the association may commence any legal action the association deems appropriate, provided that prior to the filing of any complaint commencing a legal action against the declarant, a majority of the association’s non﷓declarant members present, in person or by proxy at a meeting of the association where a quorum is present, shall approve the commencement of a lawsuit. The quorum for a meeting of the members of the association for the purposes set forth in this subsection shall be 33 percent of all members of the association qualified to vote, unless the declaration or bylaws shall provide for a lesser quorum requirement. For purposes of determining a quorum, membership interests allocated to declarant units will not be considered in determining a quorum.

The language of subsection (h) of Section 87 has a number of glaring problems. They are discussed separately below:
If the association does not accept the declarant’s settlement offer, or if either the association or the declarant does not accept the arbitrator’s determination, then the association may commence any legal action the association deems appropriate, provided that prior to the filing of any complaint commencing a legal action against the declarant, a majority of the association’s non﷓declarant members present, in person or by proxy at a meeting of the association where a quorum is present, shall approve the commencement of a lawsuit.

This provision effectively takes all decision-making authority away from the Board of the Association, which has a fiduciary duty under PREDFDA, the New Jersey Condominium Act, and common law, and gives it to the unit owners. The obvious benefit to the developer from this provision is that the developer is betting that the Atoo many chefs in the kitchen@ syndrome will control. In other words, the developer knows that it is more difficult to get a large number of people to agree upon an undertaking then just a handful. No matter how strong the merits of the Association=s claims are, and no matter how in the right the Association is, there will always be a number of unit owners that want to bury their heads in the sand and not get involved in a lawsuit. The developers know this. The result is that it will be extremely difficult to educate enough unit owners of the severity of the Association=s claims to get a majority to vote in favor of litigation.

The quorum for a meeting of the members of the association for the purposes set forth in this subsection shall be 33 percent of all members of the association qualified to vote, unless the declaration or bylaws shall provide for a lesser quorum requirement.

The quorum of unit owners necessary to hold a vote on litigation is set here at 33 percent, unless the declaration or bylaws provide a lesser quorum. The developer is the one who drafts the declaration and bylaws, so there will never be a lesser percentage for a quorum. It will likely be very difficult in some instances to get a quorum of 33 percent of unit owners to come to a meeting.
For purposes of determining a quorum, membership interests allocated to declarant units will not be considered in determining a quorum.

This language completely ignores a common reality in the condominium world that our firm experiences on a regular basis. Developers often sell units in a condominium to friends and family members. These individuals may not be employees of the developer, but they always support the developer – usually because the developer sold them their unit on favorable terms. These individuals, commonly referred to as insiders, should not be allowed to influence a vote on whether litigation against the developer should be commenced, but under UCIOA they would have the ability to possibly derail such litigation. This provision does nothing to address this reality.