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Ramtown Manor Association, Inc. v. Bohm

A-2647-02T2 (N.J. Super. App. Div. 2003) (Unpublished)

HOMEOWNERS ASSOCIATIONS; ASSESSMENTS; ATTORNEYS FEES—Homeowners association declarations are to be construed in accordance with their purpose so as to permit boards to perform their obligations and assess members accordingly and, further, there is no good faith threshold implied in an attorney fee shifting provision in such declarations.

A homeowner’s association operated under a declaration that gave the association “the authority to assess unit owners certain fees to support the cost of maintenance repair activities.” It included both annual assessments and special assessments. The association decided that it would be desirable to install vinyl siding on all of its units and adopted a small monthly increase to offset the cost of such future project. Four years later, the association’s board felt that the project should be take place immediately and voted to institute an additional, much larger, monthly assessment because the original assessment for that purpose had not generated sufficient funds. Apparently, a number of the unit owners balked at paying and one particular unit owner advised the association that he was not liable for any of the costs. The association sued for the unpaid assessments, unaccrued, but accelerated, assessment installments, and attorneys’ fees. The unit owner did not dispute how the assessment was calculated, but only the association’s authority to levy the assessment. The lower court granted summary judgment in favor of the association, “holding that the Declaration authorized special assessments to fund the [] project.” On the other hand, the lower court denied the association’s request for attorneys’ fees because the unit owner’s “opposition was not in ‘bad faith.’” The lower court’s reasoning was that the unit owner did not oppose making the payment because he didn’t want to pay (as evidenced by his placing the money in his attorney’s account), and that “there’s a good faith element that in essence [the association] really [wasn’t] the prevailing party because there was the ambiguousness of these documents. ... [T]herefore I feel it would unfair to enforce an [attorneys’] fee provision [] because it was brought in good faith.” The lower court further “ordered for all affected unit owners an amnesty period within which to pay ‘any and all assessments ... without incurring any obligation to pay counsel fees and costs to the Association.’”

The Appellate Division upheld the lower court’s conclusion that the association had the authority to levy the special assessment. It also pointed out that the Declaration was a contract to which all of the unit owners were bound. It analyzed whether the particular project was the kind of project for which the association was authorized to make special assessments and found it was. The unit owner had attempted to carefully parse the declaration and, in particular, tried to show that there was no mention of “exterior finish” in the declaration’s definition of “common areas” subject to assessment. In fact, the unit owner took the position that the association had the authority to impose an assessment to repaint the exterior walls, but not to replace the siding. The Court had very little patience for that argument, pointing out that “while generally we apply the rule of strict construction when dealing with a covenant, this rule should not be used to defeat the obvious purpose of the restriction.” It felt that the unit owner’s “overly strict interpretation in this case overlook[ed] the underlying purpose of the covenant.” If the association could not replace dilapidated wood siding it could not fulfill its obligation to “maintain a uniform, harmonious appearance within the planned community.”

“Although New Jersey has a strong policy disfavoring shifting of attorneys’ fees, ..., a party may agree by contract to pay attorneys’ fees.” Here, the declaration expressly authorized the shifting of attorneys’ fees and “the controversy over the authorized purposes for special assessment fees” fell within the declaration’s fees provision. It encompassed “any dispute” arising under the declaration. Further, it was clear that the association was the “prevailing party,” having demonstrated that it had the authority to levy the special assessment. Consequently, the lower court was wrong when it superimposed a “good faith” exception to the obligation to pay attorneys’ fees. Lastly, the Appellate Division believed that the lower court “clearly exceeded its authority by attempting to adjudicate the rights and liabilities of parties not joined” in the controversy when it granted an amnesty period to the unit owners. Essentially, doing so was beyond the authority of the lower court “and in error.”

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