Daily Development for Wednesday, July 31, 2007
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

This is an edited report prepared largely by Ira Meislick, our regular New Jersey reporter.

ASSOCIATIONS; FREE SPEECH:  The New Jersey Supreme Court balances the contractual rights of homeowners associations against the free speech rights of its homeowner-members, holding that an association has considerable power to affect those free speech rights.  Such associations are not “quasi municipal” entities, but in New Jersey this may not matter.  The question is one of degree of suppression and degree of alternative communication means.

Committee for a Better Twin Rivers v. Twin Rivers Homeowners’ Association, 2007 WL 2127686 (N.J. Supr. Ct. 2007); July 26, 2007.

A planned unit development consisted of “privately owned condominium duplexes, townhouses, single-family homes, apartments, and commercial buildings.”  It “cover[ed] approximately one square mile and ha[d] a population of approximately 10,000 residents.”  It was governed by a trust “for the stated purpose of owning, managing, operating, and maintaining [its] residential common property.”  The “[t]rust-owned property and facilities [were] for the exclusive use of … residents and their invited guests.”  The general public was not invited to use those facilities.  The trust was controlled by its trustee, a homeowners association.  The association maintained the development’s residential roads, provided street lighting and snow removal, assigned parking spaces in its parking lots, and collected rubbish in portions of the development.  Upon acquiring property in the development, each owner automatically became a member of the association and subject to the association’s Articles of Inc

orporation and Bylaws.  Those Articles authorized the association to “exercise all of the powers, rights and privileges provided to corporations under the New Jersey Nonprofit Corporation Act . . . .” The Bylaws additionally authorize the Association to “adopt, publish and enforce rules governing the use of common areas and facilities.”  The association had a board of directors.  Its members were elected by all eligible members of the association.

A committee of property owners sought to affect the manner by which the development was governed.  In pursuance of their goal, they sued the association and others.  “The thrust of the complaint was that the Association had effectively replaced the role of the municipality and the lives of its residents, and therefore, the Association’s internal rules and regulations should be subject to the free speech and free association clauses of the New Jersey Constitution.”  One count of their complaint “sought to invalidate the Association’s policy relating to the posting of signs.  The Association’s sign policy provided that residents may post a sign in any window of their residence and outside in the flower beds so long as the sign was no more than three feet from the residence.”  Only one sign per lawn and one per window were permitted.  No signs were permitted on utility poles or natural features within the community.  “The stated purpose for the sign policy [was] to avoid the clutter

of signs and to preserve the aesthetic value of the common areas, as well as to allow for lawn maintenance and leaf collection.”  The committee’s members sought injunctive relief to permit posting of signs on the private property of community residents and, subject to reasonable regulation, on the common elements. 

The second complaint related to use of the development’s community room.  Although the room was generally available to residents of the development and to clubs, organizations, and committees approved by the association, the association’s policy “involved a two-tiered rental charge system that differentiated between uses of the room.”  During the pendancy of the litigation, the association changed the system in favor of the uniform rental fee and a refundable security deposit.  In its suit, the committee argued that the association’s “community room policy denied them equal protection of the laws and unreasonably and unconstitutionally violated their right to access the community room on a fair and equitable basis.”  They also argued that the rental fees were excessive and were unrelated to the association’s actual rental cost. 

        The last major complaint from the committee was that owners in the development “were denied equal access to the Association’s monthly newspaper.”  The newspaper’s purpose was “to provide residents with news and information that concern[ed] the community.”  It had an editorial community that selected the newspaper’s content.  The paper was delivered to all residents in the development, but not to the general public.  The committee sought a declaration that all residents should have “equal access” to the newspaper.  In addition, the committee “sought a permanent injunction enjoining the president of the Board from using [the newspaper] ‘as his own personal political trumpet.’” 

The lower court, while noting “that the Association asserted considerable influence on the lives of [the development] residents, [felt that such] impact was a function of the contractual relationship that residents entered into when they elected to purchase property in [the development].”  It “applied the traditional test for evaluating the reasonableness of restrictive covenants and found that the covenant relating to the posting of signs was reasonable and enforceable.”  It found that the community room regulations were impermissibly vague and ordered that they be modified to provide clear standards.  Lastly, the lower court concluded that the committee had not been denied access to the association’s newspaper.

The Appellate Division reversed the lower court, “holding that the Association was subject to state constitutional standards with respect to its internal rules and regulations.”  The association filed a further appeal with the New Jersey Supreme Court.

In that appeal, the association argued that a precedential case in New Jersey,  State v. Schmidt, 84 N.J. 535 (1980), set forth a test and under that test, “ it was error to impose constitutional obligations on its private property.  The Association urge[d] [the Supreme Court] to follow the vast majority of other jurisdictions that have refused to impose constitutional obligations on the internal membership rules of private homeowners’ associations.”  It emphasized that the association did not invite public use of its property and that its members participated in the association’s decision making process.  It also argued that the business judgment rule protected association members from arbitrary decision making.  It reiterated that the association’s relationship with its members was a contractual one, “set forth in reasonable and lawful restrictive covenants that appear[ed] in all property deeds.” 

The New Jersey Supreme Court first affirmed that under the New Jersey Constitution, individuals have the right of speech and assembly and every person “may freely speak, write and publish his sentiments on all subjects, being responsible for the abuse of that right.”  It also pointed out that people have the right to freely assemble together.  On the other hand, while “the rights of speech and assembly cannot be curtailed by the government,” only “under limited circumstances” have New Jersey courts enforced those constitutional rights against private entities.  Thus, it framed the issue as to whether the case before it “present[ed] one of those limited circumstances where, in the setting of a private community, the Association’s rules and regulations [were] limited by the constitutional rights of [the association’s members].”  In doing so, it engaged in an extensive review of federal case law, concluding “that there must be ‘state action’ to enforce constitutional rights against p

rivate entities.” 

Noting that New Jersey’s “jurisprudence has not been as confining,” it then reviewed New Jersey’s case law history, emphasizing that in the Schmidt case the, “constitutional equipoise between expressional rights and property rights must be similarly gauged on a scale measuring the nature and extent of the public’s use of such property.  Thus, even as against the exercise of important rights of speech, assembly, petition and the like, private property itself remains protected under due process standards from untoward interference with or confiscatory regulations upon its reasonable use.”  The decision in the Schmidt case set forth a test to accommodate that balancing of rights.  “That test requires courts to consider (1) the nature, purposes, and primary use of such property, generally its ‘normal’ use, (2) the extent and nature of the public’s invitation to use that property, and (3) the purpose of the expressional activity undertaken upon such property in relation to both the pri

vate and public use of the property.”  In assessing the reasonableness of any restrictions, a New Jersey court is required to consider “whether there exist convenient and feasible alternative means to individuals to engage in substantially the same expressional activity.” 

Case law has evolved under the Schmidt case.  The Court pointed to one such expansion in New Jersey Coalition Against War in the Middle East v. J.M.B. Realty Corp., 138 N.J. 326 (1994).  This was a shopping center leaflet distribution case where the New Jersey Supreme Court “recognized that regional shopping centers have broad powers to adopt reasonable conditions ‘concerning the time, place, and manner of such leafleting.’”  In that case, “[t]he Court emphasized that ‘[n]o highway strip mall, no football stadium, no theater, no single high suburban store, no stand-alone use, and no small to medium shopping center sufficiently satisfi[ed] the standard of Schmidt to warrant the constitutional expression of free speech to those premises, … .”

The Court also reviewed case law in other jurisdictions and found “that only a handful of states recognize a constitutional right to engage in free speech, assembly, or electoral activity on privately owned property held open to the public, such as shopping mall or college campus.”  It found that “[m]any other states have declined to recognize a constitutional right to free speech at privately owned malls, largely on the ground that malls are not ‘state actors.’”  It also took special note that, “in the context of an apartment complex, the California Supreme Court modified its position [in an earlier case], and now require[d] state action before free speech rights will be recognized.

Lastly, by way of background, the Court pointed out, “[s]imply stated, we have not followed the approach of other jurisdictions to require some state action before the free speech and assembly clauses under our constitution may be invoked.”  That comment noted that the New Jersey Constitution’s “free speech provision is ‘broader than practically all others in the nation.’”  Lastly, it pointed to an additional complication in this particular case in that the restrictions complained of by the committee affected “conduct both on the private housing association’s property and on the homeowners’ properties.  However, ‘[i]t is the extent of the restriction, and the circumstances of the restriction that are critical, not the identity of the party restricting free speech.’” 

Applying the first test, that is looking at the “nature, purposes, and primary use” of the property in question, the Court found that the development was primarily residential and that even though there were privately owned businesses within its borders, the association derived no revenues from them.  The municipality, not the association, provided schools, police, and fire protection, as well as a municipal court system court and first aid services.  Consequently, it found that the “nature, purposes and primary use” of the development was for private purposes and this factor did not “favor a finding that the Association’s rules and regulations violated [the residents’] constitutional rights.”

It then looked at the second test to see and explore the “extent and nature of the public’s invitation to use [the property].”  Here, it was clear that the association had not invited the public to use the property.  Even though it was not a gated community and “its roads [were] accessible to public traffic,” it accepted the association’s position that the property was for the exclusive use of residents and their invited guests.  “[T]he mere fact that owners may sell or rent property to members of the public who were invited to come into [the development] and inspect such property hardly implicate[d] a public invitation.”  Consequently, the Court concluded that the limited nature of the public’s invitation did not “favor a finding that the Association’s rules and regulations violated [the residents’] constitutional rights.” 

The third factor concerned “the purpose of the expressional activity in relation to both private and public use of the property.”  Consequently, the Court was required to examine “the compatibility of the free speech sought to be exercised with the uses of the property.”  Essentially it looked to the fairness of the association’s restrictions in relationship to the residents’ free speech rights.  Here it looked at the posting of political signs, free use of the community room, and access to the community newspaper.  After examining the record before it, the Court found that the residents’ “expressional activities [were] not unreasonably restricted.”  It accepted the Association’s position that “the relationship between it and the homeowners [was] a contractual one, formalized in reasonable covenants that appear[ed] in old deeds.”  It rejected the notion that unlike the university in Schmidt, and a very large shopping center in another case, the development was “not a private forum

 that invite[d] the public on its property to either facilitate academic discourse or to encourage public commerce.”  Rather, according to the Court, the development was “a private, residential community whose residents have contractually agreed to abide by the common rules and regulations of the Association.  The mutual benefit and reciprocal nature of those rules and regulations, and their enforcement, [was] essential to the fundamental nature of the communal living agreement that [the development’s] residents enjoy[ed].” 

The Court asserted that it was “mindful that at least in regard to the signs on the property of the homeowners, it [was] the private homeowners’ property and not that of the Association that [was] impacted.”  Consequently, it emphasized that a private property owner, even in the community association environment, is “protected under due process standards from untoward interference with or confiscatory restrictions upon [its property’s] reasonable use” and the New Jersey Constitution “affirmatively grants the homeowner free speech and assembly rights that may be exercised on that property.” 

In conclusion, the Court, asserting that “[w]e do not interfere lightly with private property rights,” found that the minor restrictions on these particular residents’ “expressional activities [were] not unreasonable or oppressive, and [their] Association [was] not acting as a municipality.”  It felt that the Association’s restrictions on signs, the community room, and access to its newspaper were reasonable “concerning the time, place, and manner of” such restrictions.  According to the Court, the residents had “other means of expression beyond the Association’s newspaper.”  Each of them could “walk through the neighborhood, ring the doorbells of their neighbors, and advance their views.”  Further, as found by the lower court, residents could “distribute their own newspaper to [other] residents and [had] done so.”  They can also vote, “run for office, and participate through the elective process in the decision-making of the Association.” 

Lastly, the Court pointed out that its holding did not suggest “that residents of a homeowners’ association may never successfully seek constitutional redress against a governing association that unreasonably infringes their free speech rights.”  Further, residents in community association developments are protected by the business judgment rule from arbitrary decision-making and, an association’s governing body has “a fiduciary relationship to the unit owners, comparable to the obligation that a board of directors of a corporation owes to its stockholders.”  Two other protections noted by the New Jersey Supreme Court were New Jersey statutory protections that limit the powers and duties of associations and “traditional principles of property law – principles that specifically account for the rights afforded under [New Jersey] constitution’s free speech and association clauses.”  Further, “restrictive covenants on real property that violate public policy are void as unenforceable.

Editor’s Comment: Note that this is not exactly a ringing endorsement of the power of New Jersey private community associations to regulate speech activities as they wish.  Bt it is an acknowledgement that New Jersey jurisprudence in this area departs dramatically from that of most other states, so the precedential impact of this decision, in either direction, is somewhat limited.

Note also that the Restatement of Servitudes also authorizes judges to invoke their own view of what constitutes appropriate “public policy” in deciding whether to enforce private restrictions.  Earlier drafts of the Restatement expressly invoked the Bill of Rights as relevant standards by which to judge public policy.  The final product is more restrained, but certainly would support an argument in other jurisdictions similar to the approach taken in New Jersey, and could elevate unit owner speech to a protected status. 

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