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Highland Lakes Country Club & Community Association v. Franzino

A-1324-03T2 (N.J. Super. App. Div. 2004) (Unpublished)

COMMUNITY ASSOCIATIONS; ASSESSMENTS—Where a community association’s documents are ambiguous as to whether a current owner is liable for arrearages created by a predecessor owner, the current owner is not liable.

A private residential community sued one of its owners for membership fees owed by the owner’s predecessors. The lower court held that the owner was responsible for those arrears. There was no evidence that the previous owner ever told the current owner about the community’s prior claim for past due fees. At the closing, current owner paid the initiation fee and the dues for one year. The community applied those payments to the assessments owed by the prior owners and refused to allow the current owner to use the community’s facilities until he paid everything that was owed. The association’s bylaws deny membership privileges until “all” dues, assessments and initiation fees in arrears are paid in full. The community interpreted this to include money owed by prior owners. The lower court agreed, holding that the new owner was responsible for the debts of the prior owners of his property.

On appeal, the Appellate Division noted that the provision was just as easily and reasonably read to refer only to the arrears any new owner would expect to incur, beginning with the effective date of his membership. Furthermore, another provision of the bylaws stated that liens for unpaid dues, assessments, initiation fees, and late charges are not effective unless and until recorded. In the case at hand, there was no lien of record when the new owner took title to the property, and a reasonable reading of this provision of the bylaws would lead a purchaser to assume that he had no obligation to pay anything for amounts charged to prior owners unless a lien was recorded as the bylaws required. Therefore, the bylaws not only failed to provide clear notice of any obligation to pay arrears incurred by prior owners, but also suggested the opposite – that there was no obligation to pay or reason to even inquire further unless there is a recorded lien. For this reason, the Appellate Division reversed the lower court’s decision, holding that the owner was not responsible for the inherited debts.

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