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McNeill v. Evergreen Court Condominium Association, Inc.

A-0352-08T2 (N.J. Super. App. Div. 2009) (Unpublished)

CONDOMINIUMS; FEES — If a condominium’s master deed requires initial unit purchasers to make working capital contributions exclusively and the condominium association has always interpreted the term “initial unit purchaser” to mean “any purchaser of property,” then all purchasers, even those buying from a prior unit owner, may be required to contribute to the working capital reserve.

A prior owner sold a condominium unit. At closing, the new owner was charged a capital contribution amount to be paid to the condominium association. The master deed provided that “each initial unit purchaser shall pay to the association a non-refundable contribution towards the working capital reserve equal to three months common expense installments.” The purchaser claimed that, because his purchase was a subsequent resale and not an “initial” purchase, he was not subject to the capital contribution provision. When the association refused to refund the money, the new owner filed suit against them.

The Law Division dismissed the buyer’s complaint, ruling that the association did not breach the contract. It believed that it needed to review all the relevant evidence and determined that the meaning that was usually given to expressions used in contractual transactions is the meaning that one of the parties in good faith gives to them. At trial, the representative for the association stated that it had been the association’s practice to interpret the provision to mean that the capital contribution was to be made by all purchasers, not just those initially buying the units. He stated that it was a small complex and they needed the money to run the association without having to raise maintenance fees all the time. The Court believed that the testimony offered a reasonable interpretation and was not in contradiction with the statute (which permitted collecting such fees for subsequent sales). Thus, it held that the purchaser failed to satisfy the burden of showing by a preponderance of the evidence that the term “initial unit purchaser” referred only to the first purchaser and that consequently there was a breach of contract. The new owner appealed.

The Appellate Division affirmed, holding that the lower court’s findings of fact and conclusions of law were amply supported by the record. It mentioned that the master deed did not, in and of itself, restrict the obligation to pay the working capital contribution exclusively to initial unit purchasers. It also noted that the lower court had uncontroverted evidence that the association “always” has interpreted the term “initial unit purchaser” to mean “any purchaser of the property.” The Court agreed with the lower court that this interpretation was reasonable in light of the number of units and the significant financial burden that would be placed upon the association’s members if the buyer’s interpretation prevailed. Finally, it stated that the buyer presented no evidence to dispute the association’s claim that, notwithstanding the language contained in the master deed, everybody, including subsequent unit purchasers, paid the capital contribution fee.

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