Seeking open government State looks to set rules for condo associations

Two Hudson County residents have been leaders in a statewide movement to better regulate the way condominium associations do business.

Residents in what are sometimes called “gated communities” are seeking more of a voice in their condo and co-op associations. Some residents claim they are being harassed by unfair condominium rules that they had no power to establish or change.

Boards that govern these housing units have the power to fine, even eventually evict people for various infractions of rules, and according to critics, the rule books can be as complicated as municipal laws.

“Some people feel they’ve been cut out of the democratic process,” said Stan Maron, a resident of Guttenberg’s Galaxy Towers and the president of The Common-Interest Homeowners Coalition, a resident-founded reform organization. “The constitutional rights that apply to people living in a city don’t apply once they buy into a homeowners’ association.”

Hearings held before a state task force in 1995 had condo owners telling horror stories about life in their communities. In one case, retirees to one South Jersey gated community sued their own board to stop the board from spending millions of dollars of dues on a clubhouse without consent of the whole community.

A professor in another community was fined $20 a day because of a basketball hoop he left in his driveway. Another couple was forced to remove a patio because it was built two feet too long.

The Common-interest Homeowners Coalition was founded in 1997 is a group of residents who are critical of the way condo boards are run. It has been pushing for the legislation.

Dr. Lois Pratt of North Bergen, who died earlier this year, was considered one of the strongest advocates for reform. Pratt helped found CIHC, was a professor at the New Jersey City University, and has pushed for bill that would expand the rights of condo and co-op residents.

“Because of her background in sociology and urban studies, she saw the trends of the future – that people would be living in these kinds of communities, especially the elderly,” said Diane McCarthy of East Windsor, former president of CIHC, last week.

Condominium rules, Maron points out, unlike municipal laws, are often imposed on people without a consensus of the residents of the condo development and often cover a variety of things, some of which can seem rather bizarre. Some developments monitor everything from door colors to the height of fence and can restrict any kind of sign, flag or outdoor display. In some places, a condo board can dictate whether or not a residence can have a TV antenna and even regulate the make or model. Some rules can restrict kinds of vehicles, for instance, allowing sport utility vehicles while outlawing pickup trucks.

A rise of gated communities

“Gated communities are special districts that aren’t built into the intergovernmental framework,” said Evan McKenzie in his 1994 book “Privatopia,” (Yale University Press), a study of the rise of closed communities over the last two decades.

A few gated communities date back to the 1940s and 1950s, with such communities as New Jersey’s Smoke Rise in Passaic County as among the first, but a huge jump occurred in the 1980s, partly because of a new rise in wealth and a concern over rising crime. The trend in New Jersey seemed to begin in the late 1970s, when private developers began to construct communities for retiring people in Southern and Central New Jersey. Although there is a popular perception that gated communities are wealthy, many middle class people began seeking these enclaves, too.

Edward J. Blakey, in his 1997 book “Fortress America (Brookings Institute Press) estimated there are 30,000 gated communities nationwide with over 8 million people living in them. In New Jersey, the state Department of Community affairs estimated 800,000 live in one kind of gated community or another. These can be condominiums, cooperatives, town houses or subdivisions. Some of these communities are as large as small towns. Twin Rivers, where McCarthy lives in Mercer County, has 10,000 residents.

“We have a lot of the same problems and concerns that towns have,” she said. “But we don’t have the same access to information or the say we should have in running these communities.”

Complaints lead to task force and legislation

Over the last decade the Codes and Standards Office in the state Department of Community Affairs has reported a large increase in complaints of residents against their own condo associations. In 1995, the state set up a task force to look into gated communities, and this group came up with 32 recommendations that would better govern homeowners’ associations.

“We came together to find a way to deal with the abuse of power going on in many housing associations,” McCarthy said. “We spoke before the task force, which listened to our complaints.”

The CIHC came as a result of these hearings.

“The over-riding issue is the abuse of power,” Maron said. “Even when the rules are clear in some of the communities, enforcement is arbitrary. Favoritism is rampant.”

In some associations, people living in the community can’t even look at the bi-laws by which they are being judged.

“Everything is done is secret,” Maron said, noting that enforcement of rules often depends upon who is in power at the time, and sometimes the rules are used to discourage or prevent new people from getting involved.

In most of these communities, a resident can’t vote or run for the condo association unless he or she is in “good standing.” Maron said some residents complain that people running for re-election to the board will find an infraction or create one to keep opponents from running against them or voting against a proposal. Maron said that by the time the matter is resolved – if it ever is – the election is over or the proposal approved.

McCarthy said these associations rival towns in more than mere population, that communities like the Galaxy and Twin Rivers have yearly budgets that run into millions of dollars. Tracing purchases or questions of finance often becomes a nightmare as the boards require specific questions, rather than simply opening up the books, she said.

Maron said even when residents get the information they want, they are sometimes required to sign a confidential agreement not to tell what they found out.

Both Maron and McCarthy say the proposed state laws would allow homeowners to better control the costs for operating their condo development, by better managing who gets what contract, or how much each homeowner pays for work to get done.

“Sure, associations can ask for private arbitration, but that often costs money and sometimes has the homeowner paying more in legal fees than the complaint was worth,” Maron said.

Using a private arbitrator may also keep the information confidential, so that a problem that affects other people will not be broadcast to others.

Hearings lead to legislation

The task force hearings produced a 75-page report, which in turn resulted in five pieces of legislation designed to open up these boards to their residents and establish better ways to resolve disputes.

Currently, the legislation is being reviewed by various state committees, but could come to a vote next year.

Under the package of regulations, associations would have to have disputes handled by independent panels. If a homeowner disagreed with the board’s ruling, he or she could appeal to the state’s Department of Community Affairs (DCA). The association boards would require secret balloting when electing board members. Board members would also not be allowed to count the ballots themselves, but would have to have a disinterested third party do so.

The most controversial element would require these boards to open up the financial records to the residents, something that is not done in many communities. While places like Harmon Cove in Secaucus do have a spending cap of about $10,000, above which a vote of the board is needed, many communities have no such cap.

The legislation would also require boards to take bids for large contracts, similar to policies that exist for municipalities. The new regulations would also make board members subject to existing conflict-of-interest laws so that board members could not give business to companies they own or are owned by close relations.

The DCA supports legislation that would bring reform to these associations, claiming these groups now act as small governments for gated communities. Currently New Jersey treats such associations as not-for-profit organizations, allowing them to govern themselves. Rules as to how such organizations run, how they hold elections and how they handle internal problems vary from community to community.

Members of boards, who do not get a salary, claim they are only enforcing regulations that keep their communities from getting unmanageable. The rules are generally designed to maintain peak property values and to keep individual residents from doing anything that would lower the value of the overall community.

The Community Association Institute, of Alexandria, Va., which represents management companies for such communities, agrees that reform is needed to make a more coherent body of laws. But the group disagrees with many of the financial regulations new laws would impose. They do not want government intervention in mediating disputes, claiming privately-hired mediators would do just as well and provide the same level of objectivity. The CAI has proposed its own reform measures called the Uniform Common Interest Ownership Act.

Maron said the two proposals differ sharply.

“We want to give more power to the resident-homeowner, the Community Association Institution wants to keep power in the hands of boards and management,” he said.

Harmon Cove Towers lets the sun shine in

Catherine Murray, a real estate agent who deals with many condominium sales in the county, agreed that reform of condo associations is needed, saying that some disputes can be like dealing with a Health Managed Care organization.

“Harmon Cove Towers has one of the most open door policies I’ve seen,” she said. “If you’re a owner there, you have access to information.”

Donald Evanson, Harmon Cove Tower Association president, said the association modeled its policies after the state’s governmental sunshine laws or Open Public Meetings Act. Public meetings are posted and also appear in local publications.

“We have an internal and external notification,” Evanson said. “These meetings are open to all owners.”

Evanson said the association has a finance committee that reviews invoices and provides periodic reports. The management company – Impac – also issues reports providing both an internal and external verification or review of financial matter.

All disputes between residents are handled through the American Arbitration Association’s alternative dispute resolution. This covers a range of issues from radios being played too loudly or children running down the halls, although to date, fewer than a half dozen people have actually reached the point of asking for arbitration, and none within recent memory, Evanson said, actually had to resort to that level of dispute settlement.

“Most disagreements were settled before the formal examination,” he said.

Harmon Cove Towers, Evanson said, modeled its system with the state’s sunshine laws in mind.

“We are a community of owners and residents,” he said. “So all the things we do are intended for the mutual benefit of all of us. As a result, we share with the total community at our community meetings. We have a very involved community of homeowners.”


© 2000, Newspaper Media Group