by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
The following item came from information crossposted by Don Buck from the HOA list. Thanks to Don and congratulations to the HOA List for getting whatever status it was that it sought in the recent flurry of announcements and vote solicitations.
CONDOMINIUMS; ASSOCIATIONS; CONTROL OF COMMON ELEMENTS: Even where Declaration provides that Association board has absolute discretion in determining whether to approve unit renovations carried out by unit owners that affect the common elements or limited common elements, Association board nevertheless has a duty not to unreasonably withhold consent. Billig v. Buckinghoham Towers Condo. Assoc. I, Inc., 671 A.2d 623 (N.J. Super. 1996).
Owners desired to change the air conditioning of their unit. Originally, the unit was cooled by a central air conditioning system affecting all units in the structure. Owners arranged for the disconnection of the existing system and the installation of an independent system served by their own unit's electrical service (billed directly to the unit owners). The installation involved the drilling of some relatively small holes through window frames to connect to two small compressors located on the unit balconies. Although the opinion is vague on the point, it appears that the frames constituted common elements and the balconies limited common elements.
The Declaration provided that:
"No . . . air conditioning unit . . . which in any way alters the mechanical or electrical systems of the apartment or the building shall be installed in any apartment unit without the prior written approval of the Board of Directors or the Managing Agent or the manager as to the type, location and manner of installation of such appliance, which approval may be granted or refused in the sole discretion of the Board of Directors or the Managing Agent or the manager."Owners did not seek permission from anyone before commencing installation, and shortly after installation began there ensued a bitter controversy, fueled apparently by a personality conflict between one of the owners and the building manager, among others. Construction stopped, and the owner sought permission from the Association board, but permission was never given. Subsequently, despite considerable opposition pressure from the Board and the manager, the owner did manage to complete installation, and this suit ensued by the Association to compel its removal. The owner cross complained for damages.
The trial court ordered removal of the new air conditioning and restoration of the old system. The appeals court, however, reversed, holding that the Board had been unreasonable in failing to fully investigate the true impact of the new installation on the integrity of the building and its systems.
Had the Board made such investigation, the court observed, it would have discovered that the new air conditioning system had virtually no negative impact of any kind on the structural integrity of the building or the building's air conditioning, electrical, or other systems. Further, the new system was virtually undetectable, either by sight or sound, and had no negative impact on neighboring units or on the condominium project itself. Consequently, the court concluded, the Board could not reasonably have rejected the application for approval of the system; and, since the Board had the duty to act reasonably with regard to applications for approval in such cases, the Board had a duty to approve unit owners request. Therefore, the appeals court reversed the order to remove the system.
In a move that confuses the editor, who is unversed in pleading and practice generally, and certainly in New Jersey, the court held that the unit owners could not pursue their damages claim, which was pending as part of the appeal, unless the Association continue to pursue its own claim, which was not part of the decision under review. The court observed that the damages were caused by the unreasonable conduct of both sides, and that no useful purpose would be served in following through on the damages claims.
Comment 1: Of course, one is tempted to conclude that the decision must be correct, for to vest autocratic unreviewable discretion in a volunteer homeowner's association board seems to be asking for trouble. Because condominium associations are not true democracies, not equipped with all of the polticial checks and balances, or the staff support and budget, that commonly exist with public planning and regulatory agencies, there is special reason to be concerned about the objectivity and accuracy of their decisions. The best way to protect unit owners is with wide judicial review of the reasonableness of their actions.
On the other hand, of course, are the undeniable facts that extended litigation over these matter rarely does either side a lot of good, that Association Boards likely have a better perspective on these minor rights adjustments than a court is likely to have, and that the contract among the condominium owners vested unbridled discretion in the Board precisely for these reasons.
In this case, for instance, the court concluded that unhooking the unit owner's system from the central system did not violence to the integrity of the overall building air conditioning. But one would assume that unhooking one half or more of the units would have such an effect. At what point is the Board permitted to draw the line, if not at the first application?
Comment 2: Although in this case the Board apparently has "dodged the bullet" on the damages claim, the issue is still out there in other cases. Giving broad judicial review to board determinations of the type involved here certainly sets up potential liability suits against directors who simply make a good faith mistake. Directors usually are unpaid amateurs with no staff support and limited time to devote to their jobs. If we want good people to serve, is it adviseable to render them, or the Association, liable for "unreasonable" decisions?
Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Laprica Mims at the ABA. (312) 988 6233.
Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.