Atlantic Palace Condominium Association v. I & S Associates, L.L.C.

A-710-97T2 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: October 27, 1998

CONDOMINIUMS; VOTING—Where permitted by an association’s by-laws, voting can be by “voting representatives” even if the non-profit corporation proxy rules would not otherwise so permit.

A high-rise condominium project in a resort municipality was heavily used by unit owners for short term rentals. A rental agent had agreements covering approximately half of the units. The rental agreements appointed the agent as the voting representatives of the various unit owners. Specifically, they granted the rental agent a limited power of attorney to participate in, and vote at, condominium association meetings where the unit owner giving the power not previously assigned its proxy to another party and was not present or otherwise represented.

The owner of approximately 40% of the units in the condominium project argued that the association’s by-laws prohibited assignment or transfer of memberships in the association, thereby precluding the rental agent from representing the unit owners at an election of trustees. In response, the rental agent argued that its agreement created a principal-agent relationship between it and the unit owners and, as agent, it was permitted to represent a member in a non-profit corporation. Even though the association’s by-laws limited assignment and transfer of membership interests, when read in conjunction with a separate section of the by-laws, a contrary conclusion could have been reached. Specifically, a section of the by-laws permitted occupants of units to be designated as the “voting representative” of the unit owner. In addition, the by-laws broadly defined occupant as “all individuals using a Unit with the permission of the Unit Owner, whether guest, tenant or otherwise.” To the Court, this meant, that the by-laws contemplated the transfer of voting rights and that the rental agent had a sufficient interest in the Unit to allow it to be appointed as a unit owner’s voting representative.

Another argument proposed was that the Non-profit Corporation Act limits the validity of a proxy to eleven months, unless otherwise provided, but in no event longer than three years from its execution. In the Court’s mind, however, a proxy is only one of several vehicles by which one party, acting as an agent, may vote as the representative of another. Therefore, not only is proxy voting permitted under the Act and not barred by the internal documents of the association, but the rental agency actually appeared as a voting representative, and not by proxy. Lastly, an argument was raised that the rental agreement improperly separated the voting rights from the stock ownership, contrary to public policy. While that may have been previously the law in New Jersey, the Non-Profit Corporation Act expressly permits several methods for members to “separate” their voting rights from their ownership interests: voting by fiduciaries, proxy voting, and voting agreements. For all of those reasons, the rental agent was permitted to cast votes in the election of the association’s trustees.