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Committee for a Better Twin Rivers v. Twin Rivers Homeowner’s Association

383 N.J. Super. 22, 890 A.2d 947 (App. Div. 2006)

COMMUNITY ASSOCIATIONS; PLANNED UNIT DEVELOPMENTS; FREE SPEECH—[NOTE: N.J. Supreme Court reversed the holding in this case on 7/26/07.] A Planned Unit Development’s governing association is the functional equivalent of a government body and cannot deprive residents of their rights to express their views on matters of public or community concern.

Several residents of a large planned unit development (PUD) challenged the manner in which the PUD was administered. The community was organized as a planned unit development by deed to a community trust. The trust was responsible for owning, operating, and maintaining the common property. The management of the common property was delegated to a homeowners’ association. The PUD was similar to a miniature town and provided parks, pools, ball fields, and other amenities exclusively to its residents.

Several residents attempted to change the manner in which the PUD was administered and attempted to publicize their position to the other residents. Those residents challenged the association’s policies that restricted their rights to place signs on residents’ lawns. They charged that the association charged excessive fees for use of the community room, and denied them access to the financial records and equal coverage in the community newspaper.

The lower court held that the homeowners’ association was not subject to the constitutional limitations that are imposed on the public sector. It found that the homeowner’s association did not have governmental powers delegated to it and did not perform governmental functions. The lower court agreed with the association’s argument that, as a private condominium association, the homeowners’ associations decisions were to be upheld under the business judgment rule unless the residents could show that those decisions were fraudulent, self-dealing or unconscionable. Since the residents asserted that they could not demonstrate that the association’s restrictions were unconscionable or as a result of self-dealing or fraud, the lower court found those restrictions acceptable.

On appeal, the Appellate Division disagreed and reversed, noting that the New Jersey Supreme Court had adopted a balancing test for resolving the conflict between the protections private property owners are entitled to and the rights of expression on private property. In State v. Schmid, 84 N.J. 535, 423 A.2nd 615 (1980), the New Jersey Supreme Court set the following standards to be considered: (a) the nature, purposes, and primary use of the private property; (b) the extent and nature of the public’s invitation to use the property; and (c) the purpose of the expressional activity on that property in relation to the private and public use of that property. The Court found that the PUD was a quasi-municipal entity that provided many of the basic services a governmental entity would normally perform for its residents. As such, the association was the functional equivalent of a government body and could not deprive the residents of their rights to express their views on matters of public or community concern.

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