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NJ Appellate Division Addresses Condo Associations, Developers, & Lawsuits

Recently, the New Jersey Appellate Division in Belmont Condominium Association v. Geibel addressed the issue of when a condominium association has standing to sue a developer.

The case involved a thirty-four unit condominium building in Hoboken called the Belmont. Seven years after the sale of the last unit, the community association sued the developer for defects to common areas, asserting claims for common law fraud and negligence, along with claims under both the New Jersey Consumer Fraud Act (“CFA”) and The Planned Real Estate Development Full Disclosure Act (“PREDFDA”). The claims arose out of the allegedly faulty construction of the Belmont and certain pre-construction assertions made by the developer. The association alleged that the building was “plagued by water leaks” almost immediately after construction was completed. The leaks impacted both the individual units and the common elements of the building. After years of failing to correct the problem, the association sued the developer.

The developer argued that the association lacked standing to bring claims under the CFA. The Court rejected this argument, holding that under the New Jersey Condominium Act (“NJCA”) condominium associations have the “exclusive right” to sue a developer for defects pertaining to the common elements. However, the court did note that individual owners could still sue developers for damages to their individual units.

Next, the Court rejected the developer’s argument that the association lacked standing because it could not demonstrate reliance by the original purchasers on any of the alleged misstatements by the developer. The Court noted that reliance is not an element required for a claim under the CFA. The Court further rejected the developer’s argument that the association could only recover damages for the unit owners who actually sustained damage as a result of the developer’s alleged misrepresentations. The Court held that because the NJCA permits associations to sue for damages to common areas sustained by “any or all” of the unit owners, it therefore was entitled to recover all damages necessary to make repairs, and not a prorated amount based on the unit owners who identified damages.

The Court did, however, side with the developer regarding one issue. The Court held that the association could not maintain a claim to re¬place all the windows in the community. The Court reviewed the definition of common elements contained in both the NJCA and the master deed for the Belmont, and found that neither identified windows as common elements. The Court also noted that the windows served individual units and not the building as a whole.

Here at Lieberman & Blecher, we represent Homeowners and Condominium Associations in a variety of matters ranging from issues with developers to environmental contaminations within units/complexes.

 

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