Community Associations

When liability for any of these breaches is imposed on an individual director or trustee, the issue of indemnification arises. In New Jersey, because condominium associations are generally organized as not-for-profit corporations under the Nonprofit Corporation Act, indemnification may be available to an officer of an entity organized under this Act provided that the officer (1) “acted in good faith and in a manner which the [officer] reasonably believed to be in or not opposed to the best interests of the corporation,” and (2) “with respect to an criminal proceeding, the [officer] had no reasonable cause to believe the conduct was unlawful.”
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New Jersey courts that have considered the application of the business judgment rule have concluded that the scope of judicial review of condominium association decisions is limited to a two-pronged test: (1) whether an association’s action was authorized by statute or its own bylaws and, if so, (2) whether the action was fraudulent, self-dealing or unconscionable. Thanasoulis, supra, 110 N.J. at 655; see also Chin v. Coventry Square Condo, 270 N.J. Super. 323, 328-29, (App. Div. 1994); Siller, supra, 93 N.J. at 382; Papalexiou v. Tower West Condo, 167 N.J. Super. 516, 527 (Ch. Div. 1979).
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Like directors of corporations, members of association Boards enjoy various protections for the consequences of their business decisions. Essentially, in order for a Board member to be personally liable for an act of the Board, the Plaintiff would have to prove either (1) that the Board acted without authorization from the association’s governing documents, Condominium Act or other statute; or (2) that an authorized act of the Board was fraudulent, unconscionable or resulted in self-dealing. Generally, as long as a Board member acts in good-faith and makes informed decisions, he will be protected from personal liability by operation of the business judgment rule.
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Transition is often confusing for condominium associations run by Boards populated with unit owners who are not attorneys and who have no prior experience going through the process. Upon transition of control of the condominium association’s board of directors from the sponsor-developer to the unit owners, a key responsibility of the Board is to engage the services of an engineer or architect to conduct an inspection of the common elements to determine if there are any deficiencies. One of the most important considerations for the Board in transition is spending the Association’s money wisely when it comes to engineering investigations
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How do engineers find this moisture damage without tearing off all of the brick and cast stone? They use moisture probes, which are inserted through the mortar joints in the brick and cast stone and into the sheathing and framing. These probes measure the amount of moisture inside the sheathing and framing.
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Transition is often times a confusing issue for condominium associations run by Boards populated with unitowners who are not attorneys and who have no prior experience going through the process. Upon transition of control of the condo association board of directors from the sponsor-developer to the unitowners, a key responsibility of the Board is to engage the services of an engineer or architect to conduct an inspection of the common elements and building design to determine if there are any deficiencies.
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Donald B. Brenner, Chair of Stark & Stark’s Construction Litigation Group, presented a seminar at the 2010 New Jersey Cooperator Expo. The expo was held in Secaucus, New Jersey on May 5, 2010. Mr. Brenner presented a seminar entitled, Legal and Legislative Update: Important Decisions, New Laws, and how they Impact Your HOA, Condo. and/or Co-Op, in conjunction with Stark & Stark Community Association Group Co-Chairs, David J. Byrne and A. Christopher Florio.
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