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Lake Shawnee Club, Inc. v. Akhter

A-4717-06T1 (N.J. Super. App. Div. 2008) (Unpublished)

PROPERTY OWNERS ASSOCIATIONS — Where a property owner’s deed clearly indicates that the owner is required to be a member of a property owner’s association, owners, whether choosing to or not, must belong to the association and must abide by its rules.

A developer created an association exclusively for all residents of a community. At one point, all owners in the community were members of the association. The membership fees paid for maintenance of a dam (that created a private lake), beaches, a clubhouse, and recreational fields. It also paid for liability insurance. The association’s charter allowed for the collection of unremitted dues or fees from members of the association. Homeowners were restricted from selling, renting or otherwise conveying their properties without association approval. Mandatory membership had been ended when it was found out that the association used the membership to discriminate against purchasers based on race or ethnicity. A time came when the association concluded that the need for repairs to the dam and the dredging of the lake required it to again enforce mandatory membership. A number of property owners refused to join the organization or to pay the membership fee, neither of which were mandatory at the time they moved in. Non-members of the association were still required, by their deeds, to pay a small fee for maintenance within the community.

The association sent bills for dues and maintenance to all property owners, including ones who were not members of the association. A number of them refused to pay the membership dues. The association sued those property owners who refused to join the association and sought overdue membership dues. Alternatively, it argued that the association had a right to be paid for goods and services rendered. The lower court found that the association had no authority to charge membership fees to non-members and also issued an order that barred the association from initiating any future actions for the collection of membership fees.

On appeal, the Appellate Division pointed out each property owner’s deed required owners to pay dues, and read along with sales agreement, clearly indicated that there was a membership requirement. The association pointed out that its rules had been changed to be non-discriminatory and the only remaining requirement for membership was to be purchaser of a property. The Court reversed the lower court’s dismissal of the association’s claim, but also found that there were outstanding questions regarding the association’s conduct over the years and whether it had the right to collect dues on other grounds. It also reversed the lower court’s decision that barred the association from making further claims for dues, remanding the matter for a factual determination.

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