Page 5 - NJ Cooperator Spring 2020

NJCOOPERATOR.COM THE NEW JERSEY COOPERATOR — SPRING 2020 5 QUESTIONS & ANSWERS Legal Q A& Visit us at ARMANAGEMENTCO.COM and call us today. Mount Arlington: 973.398.6609 Morristown: 973.605.2775 facebook.com/armanagementco linkedin.com/company/armanagementco Better Community Living Starts Here Is the Power of an Out-of-State Board Treasurer Legal? Q I live in a 64-unit condominium. the basis to the suit, I presume that you are any shares of common expenses or other the condominium. Clearly, the governing Th e board of directors is in a law- suit for not following its fi duciary surer is appropriate or legal. responsibilities. Th e treasurer resides out of state and has all maintenance payments sent Law (‘the Act’), N.J.S.A 46:8B-12.1 provides to her monthly. She then is the ONLY per- son signing checks for all purchases, with- out other board members’ knowledge. She the association. N.J.S.A. 46:8B-13 requires INSISTS she is allowed to do this. So is it the bylaws to set forth the condominium’s shall be maintained separately in the as- true? Can she do this? —Sensing Something’s Amiss A “You state that your condo- minium’s board of directors tion is responsible for: is being sued for violation of their fi duciary responsibilities,” says Anne funds for common expenses and the pay- Ward, an attorney with the Newark fi rm of ment thereof. Ehrlich, Petriello, Gudin & Plaza. “Appar- ently, the treasurer is the only offi cer sign- ing checks for all of the association’s pur- chases and does so without any oversight. tion at reasonable times by unit owners. condominium association or the funds of includes a duty to act with common sense To complicate the situation, the treasurer is Such records shall include: living out of state. I am unsure if these facts are the basis of the lawsuit or if other acts tures. or omissions are at issue as well. Whatever asking if the delegation of power to the trea- “To begin, the New Jersey Condominium mon surplus.’ that the board of directors of a condomini- um is responsible for the administration of management of the association. It provides: form of administration. Section 46:8B-14 of sociation’s name. For investment purposes sistent with the health, safety, and general the Act sets forth the duties of the associa- tion (which acts through its offi cers or gov- erning board). “Th at section provides that the associa- ‘(b) Th e assessment and collection of the amount identifi ed as reserve funds. A the association such as a corporate offi cer ‘(g) Th e maintenance of accounting re- cords, in accordance with generally accept- ed accounting principles, open to inspec- ‘i) A record of all receipts and expendi- ‘ii) An account for each unit setting for sponsible for the fi nancial management of charges due, the due dates thereof, the pres- ent balance due, and any interest in com- “Section 46:8B-15 of the Act outlines more detailed requirements for the fi nancial 46:8B-14 (j) of the Act also requires that: ‘All funds collected by an association ers and discharge its functions in a manner only, reserve funds may be comingled with welfare of the residents of the community.’ operating funds of the association. Com- ingled operating and reserve funds shall be Profi t Corporations Act, N.J.S.A. 15A:1- accounted for separately, and a comingled 1 et seq., in addition to the Act. Th us, the account shall not, at any time, be less than governing board has a fi duciary duty to manager or business entity managing a does to a corporation. Th e board also has a condominium, or an agent, employee, of- fi cer, or director of an association, shall not While bylaws do not specifi cally provide for comingle any association funds with his or the degree of fi nancial oversight required of her funds or with the funds of any other a board, the board’s fi duciary responsibility another association as defi ned in Section 3 of P.L. 1977, c419 (C. 45:22A-23).’ “Clearly, the governing board is re- board is accountable to its members and must be transparent in all of its fi nancial transactions. “In addition, and quite notably, section ‘(i) an association shall exercise its pow- that protects and furthers or is not incon- “A condominium is subject to the Non- fi duciary responsibility to all its members. continued on page 19