COMMUNITY ASSOCIATION ALERT: IMPORTANT UPDATES TO THE RADBURN ACT
Last week, the New Jersey Department of Community Affairs (“DCA”) adopted regulations and alterations to its rules regarding implementation of the Planned Real Estate Development Full Disclosure Act (“PREDFDA”) and the Radburn Amendments (N.J.A.C. § 5:26-1.1, et seq.). As a result of these updates, immediate changes regarding how community associations operate have come into effect.
Some of the alterations and additions to the DCA’s rules and regulations are minimal: only codifying the way most associations already operated. For example, the DCA regulations previously included language making it clear that an association’s master deed, declaration of covenants, and other instruments of creation bind its behavior. New language extends these restrictions to include the association’s bylaws.
Some of the changes, though, are significantly more important. These rules and regulations will impact the manner in which you conduct your elections. These rules and regulations are currently in effect.
Below is a summary of the significant alterations and additions to the DCA’s regulations. As the DCA’s rules and regulations are numerous, the below list is not exhaustive. There are likely additional changes not listed below that are of particular importance to your community, specifically.
The Powers and Abilities of Associations
The DCA added language directly making a developer’s appointees to the executive board liable to unit owners. This change places more of a burden on these board members: This addition emphasizes that developer appointees are not just responsible to the developer, but the unit owners as well. Additionally, the DCA added a paragraph requiring developers to make copies of the association’s financial information (i.e., its annual audit) available for inspection and reproduction by the owners or their representatives. Those owners who can access this information are not required to be in good standing or eligible to vote.
Further, the DCA added language emphasizing that, just because a developer retains one unit as a rental, it does not mean the developer is entitled to an automatic seat on the executive board. Likewise, the developer can hold only one (1) membership interest for each unit it has registered but not yet sold. Further, once a developer has stopped selling units in the regular course of business, that developer will no longer be entitled to an automatic seat on the executive board. Notably, because “regular course of business” is an undefined term in the regulations, this restriction is vague and perhaps circumventable.
Unit owners become members of an association once they accept the deed. They remain members so long as they hold title to a unit. The change emphasizes that a unit owner is considered in good standing, and can vote in board elections, nominate a candidate, and vote to amend bylaws providing the unit owner:
- Is current in all payments,
- Is complying with any judgments for unpaid fees,
- Is complying with any settlements for unpaid fees, or
- Has requested or will be participating in either Alternative Dispute Resolution ("ADR") or a court proceeding over the matter affecting the unit owner’s good standing.
Further, tenants may only vote in board elections only if the bylaws permit tenants to vote with the consent for the owner leasing the unit to the tenant. However, even absent that sort of language in the bylaws, if the association has been allowing tenants to vote, it may continue to do so, if the unit owner provides consent to the tenant. Alternatively, bylaws may allow the owner to designate a tenant as “voting eligible.” However, any designation of the tenant as “voting eligible” must be in writing (e.g., in the lease agreement, through a separate contract between the tenant and the owner, etc.).
Those tenants who vote shall have the same right as the unit owner from which they lease. The tenants vote in place of the unit owner, though, not in addition to the unit owner. Additionally, a tenant cannot vote if the leasing owner is not in good standing.
Executive Board Elections
Developers cannot vote in these elections if they have a seat on the board. Associations are not permitted to limit or restrict voting participation from low- or moderate-income housing units.
Associations must hold elections at least once every four (4) years. If the bylaws do not set the frequency of elections, the association must hold an election every two (2) years. Similarly, no board member’s term may exceed four (4) years. If an association fails to hold an election, members may force an election. Members may submit to any board member a petition signed by at least 25% of the members in good standing (unless the bylaws dictate a larger quorum). In such an event, the election must be held within ninety (90) days after the board member receives the petition.
All ballots must now have an option for write-in candidates. There must be as many spaces on the ballot for write-in candidates as there are sears up for election. If a write-in candidate, who is otherwise not eligible to be on the board, nonetheless wins an election, the candidate will not be elected. In such a case, the write-in candidate’s seat will go to the eligible candidate receiving the next-highest number of votes.
Any ballot box for physical ballots must always be secured. Likewise, counting of the ballots must occur publicly, and the ballots themselves must be open for inspection by any member for at least ninety (90) days following the election. Any voting must be anonymous. Electronic voting may continue, providing the association follows all election regulations, anonymity is maintained, and a neutral, third-party administers the voting.
For those associations with less than fifty (50) units, the association must send a notice of the election and the method of voting between fourteen (14) and thirty (30) days from the election. At least fourteen (14) days before the election, the association must notify those residents who are not in good standing of their status and the reason why. The notice must state that the residents are permitted to contest their standing by requesting ADR. Additionally, the association must provide its members with the opportunity to review each candidate’s qualifications.
For those associations with more than fifty (50) units, the association must send a notice calling for nominations between thirty (30) and sixty (60) days before sending out the notice of election. The notice for nominations must specify the process for submitting nominations. Members must have at least fourteen (14) days to submit nominations; if the notice does not specify the deadline, then members may submit nominations up to at least one (1) day before the notice of election.
Again, for those associations with more than fifty (50) units, the association must send a notice of the election and the method of voting between fourteen (14) and sixty (60) days from the election. The notice must contain a copy of the ballot and (if permitted by the bylaws) proxy forms and absentee ballots. As before, the candidates must be listed in alphabetical order, formatted consistently, and without indicating who is an incumbent.
Additionally, at least thirty (30) days before the election, the association must notify those residents who are not in good standing of their status and the reason why. The notice must state that the residents are permitted to contest their standing by requesting ADR. Associations must allow members to rectify their standing until at least five (5) business days before the election.
As before, bylaws may provide for representation on the board with different types of units electing different board members (e.g., one seat on the board reserved for a unit owner from the north side of the association, and one seat reserved for a member of the south side of the association). Now, however, if affordable units represent a minority of the units in an association, at least one (1) seat on the board must be reserved for election by owners of affordable units.
Members of commercial units in an association may not represent a majority of the board. Except for the developer’s representatives, no more than one (1) resident from a single unit may simultaneously serve on the board. Furthermore, no individual or entity (aside from the developer) may hold more than one (1) seat on the board. In other words, even if a corporation owns five units in an association, no more than one representative of the corporation may serve on the board at a time.
Appointments, Removals, and Executive Board Vacancies
Board members can be removed only: in accordance with the bylaws, or by the remainder of the board for good cause that directly impacts that member’s ability to serve. The board cannot remove an elected member for merely disagreeing with the majority or for violating a confidentiality agreement unless first providing ADR. Even then, the ADR must determine that the board member in question committed a breach that adversely affected the interests of the association, not just the other members of the board.
A board member elected by unit-owners may be removed via a special election, providing members submit a petition supporting removal signed by 51% of the association. The association must hold a special election within sixty (60) days of receipt of the petition. If an annual election is supposed to occur within those sixty (60) days, then the special election must occur at the annual election. Additionally, the association must provide notice of the special election at least fourteen (14) days before the meeting. For obvious reasons, the special meeting must be scheduled on a reasonable day and time so that the majority of members can participate. The ballot must conform to the new rules summarized above. The instructions may allow for members to send their ballots via fax, email, or other electronic means. However, the instructions cannot require that the ballot be submitted more than one (1) business day before the meeting.
As before, the board may appoint people to fill board vacancies. However, any position filled by appointment (save for a developer’s appointment) must then be up for election within one (1) year following the appointment. Extending a board member’s existing term is prohibited.
The DCA has made changes to open meeting requirements. No longer do regulations require newspaper notice. However, an association must post an annual meeting schedule with the meeting’s time, date, and location. All meetings must be noticed at least seven (7) days before the meeting (except for emergency meetings). The association: must post this notice in at least one location on the property that is accessible to all owners at all times; must be on the association's website and included in any newsletter; or must be personally delivered to each member by mail, hand-delivery, or electronically. With that said, members may waive notice in writing. The notice must state the meeting’s time date and location, as well as the agenda.
As previously stated, associations may hold emergency meetings with less than seven (7) days' notice. However, such meetings are limited to matters that will cause substantial harm if the association does not address them urgently. Aside from the fact that associations may hold them with less than seven (7) days’ notice, the remaining posting requirements for emergency meetings are the same as all other meetings.
The board must take minutes of all meetings. Boards may adopt a policy for comments from members, but the policy must be uniform. Additionally, an explanation for a matter's basis and cost must accompany anything subject to a binding vote. The explanation and cost must be the meeting’s minutes. Further, the association can only take binding votes in open meetings and must do so in a manner that does not disclose confidences. Associations may not take binding votes at closed meetings.
Closed meetings are separate from open meetings and require a separate notice. However, an association may incorporate a closed meeting as part of an open meeting. In such a case, the closed portion of the meeting must be convened either before the open portion or at the end of the open meeting portion of the agenda.
Complaints and Penalties
Members may file complaints regarding the conduct of an election with the DCA using a form available on its website. The complaints must be submitted to the DCA at least ten (10) business days before the election, so the DCA can intervene in the election if necessary. Additionally, the DCA can penalize and issue fines against associations that are not complying with the new regulations.
As said before, there are a lot of new regulations. Many of them codify what was already part of PREDFDA, many of them add new details. These changes can be daunting and complex. We highly recommend that community associations work closely with their attorneys to make sure they are complying with the new procedures, especially now as the regulations unfold.
If you would like assistance for your community in adapting to these new provisions, we at Griffin Alexander, P.C., can help. Do not hesitate to contact us with any of your concerns.
Stay strong, safe, and healthy,
Griffin Alexander, P.C.
The information in this Client Alert is provided solely for information purposes. It should not be construed as legal advice on any specific matter and is not intended to create an attorney-client relationship. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based upon particular circumstances. Each legal matter is unique, and prior results do not guarantee a similar outcome.
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