Each year Trenton is flooded with legislation aimed at improving the lives of residents and business owners. For homeowner associations, condominiums and cooperatives, new rules and regulations can be either a blessing or a curse, as certain camps feel there is too much oversight from government while others welcome the assistance.

“When I first started in this business thirty years ago, there wasn’t much interest in legislating on issues for homeowner associations,” says Attorney Ron Perl of the Princeton-based law firm Hill Wallack LLP. “Today, there is far greater interest, and legislators have heard from their constituents relative to issues in community associations.”

Aside from growing numbers of residents (and legislators) living within condominium and cooperative communities, Perl says the increases in proposed legislation are due to homeowner associations becoming more complex. “There are people who feel that more legislation is not necessarily better, but more and more we will see legislation that deals with these residents and their concerns.”

Inspection Legislation Gains Traction

With a number of multifamily bills currently being considered, Conor Fennessy, vice president of government affairs for the New Jersey Apartment Association (NJAA), said there are a few proposed bills his organization is closely monitoring. Among those noted was the “Hotel and Multiple Dwelling Law” (A1290), bipartisan legislation that would eliminate duplicate municipal registration and inspection of multi-dwelling properties.

The bill, sponsored by Assemblywoman Mila M. Jasey, D-27, states that “New Jersey was one of the first states in the nation to adopt statewide regulations governing multi-family housing and remains one of just a handful to have statewide registration and inspection requirements. There is an overlap of jurisdiction under New Jersey laws concerning the maintenance requirements for and inspection of multiple dwellings.”

Fennessy says the current law is causing headaches due to “inspection duplication” at the local and state level, which his organization feels slows related processes and causes confusion and unneeded expense. While many bills flounder or remain in a period of flux, A1290 has a good chance of success due in part to its mention in the Red Tape Review Commission Report released in February by Lieutenant Governor Kim Guadagno, the commission chair. “This confusing array of laws requires correction, so that the state’s requirements for landlord registration, and maintenance and use standards and inspection of multiple dwellings are clear and not duplicated at the local level,” the report notes.

Another boost in support of the legislation was a ruling by Judge James Rothschild of the New Jersey Superior Court. He found that the City of Orange’s municipal $100 annual inspection fee, enacted in 2010 requiring inspections of rental properties, was void and unenforceable. Rothschild contended that the city was only able to inspect rental properties when a change of ownership occurred, not annually, which was outlined in recent New Jersey legislation.

“What we do is try to make every effort to reduce burdensome regulation that does not have a realistic basis behind them,” says attorney Thomas Martin with the Hackensack law firm of Nowell Amoroso Klein Bierman. Martin is the chairman of the New Jersey chapter of the Community Associations Institute’s (CAI-NJ) Legislative Action Committee and works with members of the New Jersey State Legislature to help educate and clarify the issues on pending legislation. “This inspection issue is a perfect example of that where a municipality is saying to do one thing and a representative of the state says something else, which leaves everyone else caught in a no-win situation.”

FHA Woes

Concerning many boards, associations, industry analysts and organizations like CAI-NJ are pending regulations related to the Federal Housing Administration (FHA) condominium lending guidelines, the Qualified Residential Mortgages (QRM) and the Federal Housing Finance Agency’s (FHFA) transfer fee rule.

“With regard to FHA loans, an association has to qualify and there is a fairly substantial application process, which amounts to a lot of time, money and effort,” says Martin. “These proposals are on our radar screen. We are working with the legislators on this as we feel there are alternatives. While it is impossible to predict, the way the legislature is going now, the next action will likely happen in May.”

In an attempt to educate boards and owners and possibly save time and money, CAI-NJ recommends that “community associations should remind residents that loan forbearance offered by FHA, Fannie Mae, Freddie Mac or on behalf of any lender does not apply to association assessments. CAI-NJ also encourages all associations to work with troubled borrowers to avoid delinquencies and to preserve the ability of owners to remain in their units. Boards may want to consider adding this information to delinquency notices to ensure the board is aware of any residents who are in a forbearance program. Foreclosing on such owners may invite federal regulation of association enforcement powers.”

Perl notes that there has been a unified effort from numerous organizations, including the aforementioned and the National Association of Realtors (NAR), to make FHA requirements more realistic. “Requirements regarding affordable housing restrictions have also been impacted by the proposed regulations, which is among issues we are working on currently,” says Perl. “There is also an attack on third party transfer fees by FHA, which is having a big impact on associations. All these issues have to be addressed.”

Building Permit Extensions Possible

As the economy and housing market gradually climbs out of recession, more and more developers are left in a quandary as they are holding building permits set to expire. Since it’s a lengthy process to obtain these permits, Fennessy, along with the NJAA, is pushing hard to have legislation passed that would ensure these developers can continue with proposed plans once funding is in place.

The bill, S743, co-sponsored by Senators Paul A. Sarlo, D-26, and Steven V. Oroho, R-24, has bipartisan support. “While the multifamily sector has fared slightly better than some other sectors in the real estate market, financing remains difficult and economic uncertainty continues to challenge projects that would benefit New Jersey’s communities and provide much needed affordable housing for our working families, young couples and seniors,” says Fennessy. “The Permit Extension Act would put additional time back on the clock, so-to-speak, allowing these projects the precious time needed to reach fruition. More time ensures that important projects that have been planned and are ready are not scuttled due to short-term economic considerations blocking any one of the critical components of a jobs producing housing construction project.”

The bill was voted on favorably in committee and had a second reading on the floor. If passed, permit holders would be “grandfathered” and their permits valid until December 31, 2014, perhaps longer.

Smoking Bans & Other

Far-Reaching Legislation

For many concerned residents, the issue of building or association smoking bans is among hot topics being discussed. According to the University of Minnesota, 70 to 90 percent of Americans are non-smokers, but nevertheless, most children and adults are regularly exposed to secondhand smoke. It is estimated that just 15 percent of cigarette smoke is inhaled by the smoker, leaving the balance to linger. Secondhand smoke contains over 4,000 chemicals, including more than 40 cancer causing agents and 200 known poisons. The Environmental Protection Agency classifies it as a Class A carcinogen.

While the health risk associated with smoking are clear, whether or not the New Jersey legislature will enter the debate over boards banning smoking is questionable. “For now its left up to the associations to make that decision,” says Martin. “It comes down to a rights issue. It's the same with pets; some like pets, while others don’t for a number of reasons—from allergies to the disturbance of a barking dog. That is why there are bylaws. Now associations might start advertising that they are smoker-friendly or a non-smoking building, as appropriate. With that said, New Jersey might look to New York City to see how they deal with cooperatives on this particular issue.”

For smokers, as Martin notes, it becomes an issue of individual rights, as many believe they should be free to smoke in the privacy and confines of their own apartment or unit. There has been push-back against smoking bans by pro-smoking organizations such as Citizens Lobbying against Smoker Harassment (CLASH). A recent press release from founder Audrey Silk put CLASH’s general stance on banning in no uncertain terms. “It’s time to take this country back...and let the deprogramming begin. Smoking is okay... as an informed adult’s choice. Once chosen there’s nothing to be ashamed of, nothing to apologize for, and we certainly don’t need anyone’s approval or permission nor to be banished like criminals from view.”

While Perl agrees that there is no legislation being considered currently, smoking bans as a concept is gaining more traction. “Secondhand smoke is a huge issue in communities,” he says. “There is a body of case law that is starting to develop that would provide associations with the authority to ban smoking in living units.”

While there are numerous bills currently in motion, the “Owners’ Rights and Obligations in Shared Ownership Communities Act” (A2246), introduced by Assemblyman Vincent Prieto, D-32, contains a number of issues. The bill states, in part, “There is a need to foster democratic governance in community associations in the following areas, including, but not limited to, the regulation of elections, budget adoption, access to association records, open meetings, education of owners and governing board members, and to raise awareness of the rights and obligations of owners and those owners serving their communities as governing board members. The legislature declares that it is necessary and in the public interest to establish an independent Commission on Shared Ownership Communities, comprised of individuals living in and providing services to such communities, to function as a state liaison for such communities.”

In Perl’s view, this bill, which has been referred to the Assembly’s Housing and Local Government Committee, is far-reaching. “It’s a rather large bill that addresses a number of issues from meetings to general governance issues related to community associations,” says Perl. “The bill is currently out there in the legislature, but it clearly needs a lot of work because some of it is impractical with regard to associations.”

As these various pieces of legislation wend their way through the corridors of governance, it pays for boards, managers, and HOA residents alike to pay attention to them, and understand how they may impact both their daily lives and the administration of their communities for the foreseeable future.

W.B. King is a freelance writer and frequent contributor to The New Jersey Cooperator.