Governance in the Garden State Keeping Up With Key HOA Legislation

Governance in the Garden State

 Voting is an important right that hopefully all Americans exercise, but once  your elected officials hit office, that doesn’t mean that you should just sit back and wait until the next Election Day to  care.  

 There is a tremendous amount of major legislation set to impact condo owners and  multifamily dwellers working its way through the halls of government, and it's  wise for any HOA or building administrator to stay abreast of what’s happening and voice their concerns to elected officials.  

 Less is More

 “The political atmosphere today is not conducive to measures that increase  government’s role in common interest housing,”says Ronald L. Perl, an attorney with the law firm of Hill Wallack LLP in  Princeton. “The trend is to cut government spending, so proposed legislation that creates  new responsibilities or roles for government that need to be funded have a  difficult time. One of the difficulties presented for any proposed legislation  is a reluctance to create new government boards to supervise.”  

 A look at some of the bills making their way around include new laws for board  transparency and conduct; bedbug laws; and proposed legislation relating to  Federal Housing Administration (FHA) regulations. In New Jersey, there are a  number of organizations that are deeply involved in the legislative process  advocating on behalf of condo owners; homeowners associations and those living in multifamily housing.  Some of these organizations include the Community Associations Institute–New Jersey Chapter, (CAI-NJ) and the New Jersey Apartment Association (NJAA), among others.  

 “Because we represent community managers, business partners and unit owners,  CAI-NJ strives to always represent all aspects of community association living,  when we take a position on a piece of legislation,” says Curt Macysyn, executive vice president of CAI-NJ. “We often times weigh the cost against the projected benefit to communities, when  taking a position on a bill. Also, community association law tends to be very  specific in nature, and many times, legislators and bill drafters are not  familiar with the nuances of this area of the law. The result can be  initiatives that do not do what they purport to do and thus have unintended  consequences to boards and communities.”  

 Currently the CAI-NJ's Legislative Action Committee (LAC) is reviewing a number  of bills affecting the governance and operations of community associations. For  example, there are two bills that affect the voting rights within common  interest communities. The bills are Senate Bill 2187, sponsored by Senator Jeff  Van Drew (D-1, Cape May County) and Assembly Bill 2971 sponsored by  Assemblywoman Charlotte Vandervalk (R-39, Bergen County).  

 “Also, we are concerned about a bill that would require registration and training  for in-house security guards, sponsored by Senator Thomas Kean, Jr. (R-21,  Essex, Morris, Somerset & Union Counties),” says Macysyn. “A bill that would impact the application of pesticides at recreational fields in  community associations is sponsored by Assemblywoman Annette Quijano (D-20,  Union County).”  

 On the Agenda

 Of some concern are new laws for board transparency and conduct that could  require big changes if passed.  

 “A bill was recently introduced by Senator Sean Kean (R-11, Monmouth County),  Senate Bill 2798, which would prohibit conflicts of interest by governing board  members or management companies of homeowners association,” Macysyn says. “Because of the way the bill was written, we are unsure about the actual impact  of the legislation, and we are meeting with the sponsor to get clarity on a  number of issues.”  

 Other important pieces of legislation are being discussed in Trenton as well:  

 Senate Bill 2777, (a.k.a, the “New Jersey Foreclosure Fairness Act,”) which was first introduced in the 2008-09 session, is aimed at imposing  additional foreclosure notice requirements and amending the “Mortgage Stabilization and Relief Act.” Additionally, Assembly Bill 2493, the ”New Jersey Fair Debt Collection Practices Act,” which was also introduced in the last legislative session, seeks to eliminate  abusive practices in the collection of consumer debts and promote fair debt  collection, this bill would relate directly to the collection of maintenance  and common fees.  

 According to Perl, CAI-NJ plans to have a manager licensing bill introduced  soon.  

 “The bill will have an educational requirement, ethics code and enforcement  mechanism,” Perl says. “With community association managers responsible for the management of millions  of dollars of funds and property, there is certainly a need to ensure that  those professionals are appropriately educated and regulated. This will require a professional board in state government. While much of the  cost would be covered by licensing fees, there is still the need to set up and  fund this board.”  

 Lori O’Mara-Van Driesen, director of public information for the New Jersey Office of  Legislative Services, says that there are dozens of bills that people should be  looking at and she points out that anyone can go to their website, legislativepub/ols.asp, to see updates on each piece of legislation.  

 Other bills to watch include A3482, which was first introduced in 2008-09, and  amends the “Fair Housing Act” to permit a municipality to acquire and take advantage of property foreclosures  in the municipality in order to provide affordable units; S2401, a 2008-09 bill which would require issuance of construction permits for  the installation of wheelchair ramps on residential real property within 3  business days of application; and A430, a bill which would permit the master  deed of a condominium to reflect proportional common and limited common  elements interests of each owner as fractions.  

 Lender Requirements

 Following the worst housing and financial crisis since the Great Depression, the  federal government is undertaking sweeping changes to the mortgage finance  system. These changes will determine who gets mortgages, for what type of home  and in what type of community. Condominium projects now have to be approved by  the Federal Housing Administration (FHA) in order for individual unit buyers to  be eligible for mortgages subsidized by the FHA, and most banks, still reeling  from the housing bubble burst, are taking their financing cues from the FHA  regarding qualifications for mortgages. Late in 2009, the FHA announced that  all previously certified projects would have to be re-certified. Spot loan  approvals were discontinued as of February 2010.  

 Perl calls this “Topic A” at the moment as there is activity on both the FHA front and Federal Housing  Finance Agency (FHFA).  

 “The largest immediate impact has been in the mortgage industry, where the  federal government is seeking to recover from the collapse of the mortgage  industry in 2008 and prevent its re-occurrence,” he says. “The Federal Housing Administration is revising its condominium guidelines in  ways that will affect many associations.”  

 “This is meaningful because the percentage of FHA loans in the market has  dramatically increased between 2007 and now,” he says. “In 2007, it was at 5 percent, with some estimates having it between 25 percent  to 30 percent now.”  

 The impact of these changes will be profound and may have the potential to  affect the value and viability of tens of thousands of homeowners and  condominium associations. Industry professionals point out that one element of  the federal response to the mortgage and housing crisis, is that regulators and  legislators lack a basic and clear understanding of the principles that govern  housing in community associations.  

 “We are seeing increased scrutiny in the way lenders view community associations  because the viability of a mortgage is strongly dependent upon the upkeep and  maintenance of the common property and elements, as well as an up-to-date  reserve study and adequate monies in reserve,” Macysyn says.  

 There are new requirements by leading government lenders Fannie Mae and Freddie  Mac that are impacting apartment buyers, development, and other  multifamily-related operations throughout the state.  

 “CAI-NJ’s Mortgage Matters initiative is a comprehensive response to mortgage challenges  at the federal level,” Macysyn says. “The common thread for Mortgage Matters is to ensure that potential homebuyers  have access to affordable mortgage products and that the criteria used to  determine eligibility for loans in community associations are realistic  measures of an association’s financial health. As the rules being developed today will likely govern  mortgages for the next several decades, the stakes could not be higher.”  

 Another issue regarding the federal overhaul of the mortgage system has to do  with the drafting of regulations under the Dodd-Frank Wall Street Reform and  Consumer Protection Act of 2010, named for U.S. Senator Christopher Dodd (D–Connecticut) and U.S. Representative Barney Frank (D-Massachusetts). Those  regulations will provide the underwriting criteria for federally backed  mortgages (which essentially means the entire mortgage market).  

 NJAA Has a Say

 NJAA is dealing with two major issues this current legislative session,  according to Conor Fennessy, NJAA’s vice president of government affairs. Assembly Bill 3835 clarifies enforcement  responsibility of the state Housing Code concerning multiple dwellings from  municipalities to the state under the “Hotel and Multiple Dwelling Law.” Meanwhile, Assembly Bill 1628 (first introduced in the 2008-09 session) looks  to require submetering for water and sewer utility service in all new apartment  buildings where the basic characteristic of the use is residential.  

 “Most apartment buildings have one big master meter that measures for the entire  building,” Fennessy says. “We want to install meters in each apartment and bill folks for only what they  use. We think it’s fairer to measure so if they conserve, they are rewarded.”  

 The potential savings of permitting water submetering will range from 15 to 39  percent and will conservatively exceed 2 billion gallons per year. If they get  approval for mandatory submetering in new construction, the NJAA will then ask  that existing buildings be retrofitted.  

 “A third of New Jersey’s population lives in rental housing. Most policymakers think of home ownership  first, but we want to remind them that rental housing is an important part of  the economy of the state,” Fennessy says. “Informing, educating and interfacing with policy makers is a key mission of the  NJAA.”  

 UCIOA Update

 The Uniform Common Interest Ownership Act (UCIOA), the long-standing bill of  rights for co-op and condo owners continues to hit stumbling blocks in Trenton.  

 “UCIOA is such a massive, omnibus bill, that few people—including opponents of the bill—took the time to read and understand it,” says Perl, who was a member of the UCIOA Task Force. “Many of the public criticisms I heard about its contents were simply inaccurate.”  

 The UCIOA is not merely a bill of rights for owners in community associations,  but it also acts as a modern enabling statute containing provisions including  the manner in which these communities are established, transition from  developer to homeowner control, governance details and much more.  

 The latest version of UCIOA, proposed for New Jersey by the Community  Associations Institute, contains provisions to enhance homeowner protection;  this bill has not yet passed.  

 “In an era in which short sound bites prevail, it is difficult to get legislators  or the public to go through a massive bill to gain a full understanding of its  contents,” Perl says. “Moreover, many of the bill’s benefits were technical, and best appreciated by those who practice in the  field as attorneys, accountants or property managers.”  

 Regardless of where you and your neighbors and board members come down on any of  the issues being introduced and debated in New Jersey over the next several  legislative sessions, the important thing is to stay informed of what's afoot,  both in Trenton and in your own municipality. Getting informed and being  involved is the best way to make sure your investment—and your home—are protected and fairly governed, both this term and far into the future.  

 Keith Loria is a freelance reporter and a frequent contributor to The New Jersey  Cooperator. Editorial Assistant David Chiu contributed to this article.  


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  • So the council are to buy hoseus to rent out i assume. Can i ask, then why the hoseus they rent out at present do not conform to the HMO's they force on private landlords. They seem to want their cake and to eat it too.There is already a council body to look after homes is there not. That is the council, after all they already have council hoseus and people used to be able to rent then buy. I do not understand this need to waste more public money setting up a new body, and there is no need to involve a housing association. But neither housing associations or the council properties adhere to the HMO's. Something very wrong there i think.