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FOR WHOM THE BELL TOLLS? โ€“ WIDENING THE SCOPE OF NEW JERSEY CONDOMINIUM ASSOCIATION ALTERNATIVE DISPUTE RESOLUTION AFTER BELL TOWER CONDOMINIUM ASSOCIATION V. HAFFERT

By: Angela B. Kosar, Esq.

Condominium Associations in New Jersey have recently found themselves with a new order of business on their meeting agendas – reexamining their existing alternative dispute resolution procedures between and among their unit owners and the condominium association. This year, The New Jersey Appellate Division in Bell Tower Condominium Association v. Haffert, 423 N.J. Super. 507 (App. Div.) cert. denied 210 N.J. 217 (2012) broadly construed the term “housing-related disputes” as set forth in the New Jersey Condominium Act to include a dispute between a unit owner and the condominium association board over the manner in which a special assessment was approved. However, it is the use of the word “broadly” in the opinion that has far reaching ramifications.

In New Jersey, condominiums are governed by the New Jersey Condominium Act, N.J.S.A. 46:8B-1 to -38. Section 14(k) of the Act requires condominium associations to provide “a fair and efficient procedure for the resolution of housing-related disputes between individual unit owners and the association, and between unit owners, which shall be readily available as an alternative to litigation.”1 In Bell Tower. the defendant unit owners refused to pay a $22,400 special assessment approved by the Bell Tower Condominium Association (hereinafter “BTCA”), resulting in BTCA filing suit to enforce payment. Bell Tower is a 5 unit condominium complex in Sea Isle City, New Jersey.2 Defendant Haffert owns the largest unit in the complex.3 The BCTA consists of five board members, of which Defendant Haffert was a member.4 Haffert was not present at a board meeting at which time the assessment was approved.5

Haffert objected to the imposition of the assessment due to his inability to attend the meeting at which it was approved, but also because it appears that recommended repairs to a fire stairwell were left out of the assessment, and BTCA failed to pay for repairs to Defendants’ storage shed, causing them to pay for monthly off-site storage.6 Given Defendants’ refusal to pay the assessment, BTCA initiated suit against Haffert to force payment.7 Haffert counterclaimed alleging BTCA failed to follow the requirements in its governing documents and requested as part of its prayer for relief that the matter be submitted to alternative dispute resolution.8 The Law Division determined the subject matter of the BTCA/Haffert dispute was not appropriate for resolution through alternative dispute resolution, but based its decision upon the Planned Real Estate Development Full Disclosure Act, N.J.S.A. 45:22A-14, instead of the alternative dispute resolution requirements of the Condominium Act.9

In reversing the trial court, the Appellate Division focused on the “strong public policy” of New Jersey “favoring arbitration as a mechanism for resolving disputes.”10 The Court reviewed the obligations of the condominium association as set forth in the Act, and commented that the provision of the Act requiring alternative dispute resolution was consistent with the public policy of the state.11 The Court even recognized that they previously construed the statute in another case and decided that

  • because a condominium association is required to provide a procedure for the resolution of ‘housing-related disputes’ as an ‘alternative to litigation,’ . . . qualifying disputes must be sent to arbitration if, after suit is filed, either party chooses to invoke the alternative dispute remedy that must be made available under the Act.12

The problem, however, was that the term “housing-related disputes” was not defined in the Act.13 Nevertheless, the Appellate Division decided the term, though “a broad one”, “is not ambiguous”14 and defined the term as follows:

  • The term "housing-related disputes" signifies that only disputes that arise from the parties' condominium relationship are subject to the arbitration provisions of N.J.S.A. 46:8B-14(k). Any other dispute would be resolved either in the Law Division or in the municipal courts. Examples of disputes that are not "housing-related disputes" within the meaning of N.J.S.A. 46:8B-14(k) might include, without limitation, an auto accident in the condominium parking lot, a commercial dispute arising from a failed business venture between two unit owners, a palimony claim asserted by one unit owner against another, a legal or medical malpractice claim against another unit owner, a crime or disorderly persons offense committed by one owner against another, or any other dispute that does not arise directly from the parties' condominium relationship.15

The Court ultimately decided that the refusal to pay the special assessment was a “housing-related dispute” for purposes of the Condominium Act and, therefore, should have been the subject of alternative dispute resolution.16

While the Bell Tower decision is a clear example of legislation from the bench, the fact that the New Jersey Supreme Court denied certification clearly communicates to New Jersey condominium associations that the alternative dispute resolution requirement of the Condominium Act is alive and well and should be used to its fullest extent before bringing an action in Court. It also suggests that failure to exhaust the remedies under the Condominium Act might serve as a defense to such lawsuits and a basis to dismiss an action in favor of alternative dispute resolution. Moreover, if “housing-related dispute” is to be construed broadly, then a whole host of disputes will now have to find their way into a condominium association’s alternative dispute resolution program before making it to litigation.

The upside is that alternative dispute resolution is cheaper, faster and more private than litigation, and the right alternative dispute resolution professional and program can be an asset to the condominium association, saving both time and money. In light of the Bell Tower decision, it is in the condominium association’s best interest to work with an attorney experienced in alternative dispute resolution services to create and administer an alternative dispute resolution program that will satisfy everyone’s needs.

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1See N.J.S.A. 46:8B-14(k).
2See Bell Tower, 423 N.J. Super. at 510.
3Id.
4See Bell Tower, 423 N.J. Super. at 511.
5Id.
6Bell Tower, 423 N.J. Super. at 512.
7Id.
8Id. at 512-513.
9Id. at 513-514.
10Bell Tower, 423 N.J. Super. at 514.
11Id. at 516.
12Id. at 516 (internal and external citations omitted)
13Bell Tower, 423 N.J. Super. at 517.
14Id
15Bell Tower, 423 N.J. Super. at 517.
16Id. at 517-518.