A798 TR

An Act concerning common interest communities, supplementing Title 46 of the Revised Statutes and amending various parts of the statutory law.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

ARTICLE 1.

IN GENERAL

1. (New section) This act shall be known and may be cited as the "New Jersey Uniform Common Interest Ownership Act."

2. (New section) The Legislature finds and declares:

a. Associations that manage common interest communities provide business, community and quasi-governmental services. The corporate model utilized by most common interest community associations does not fully recognize the quasi-governmental functions performed by such associations. This issue was addressed in recommendations made by the Assembly Task Force to Study Homeowners' Associations in its 1998 report.

b. Unit owners in common interest communities are entitled to: participate in governing the community association by attending meetings, serving on committees and standing for election; access appropriate association books and records; live in a community where the property is maintained according to established standards; receive fair treatment regarding financial and other association obligations; and have available and a fair and effective method of resolving disputes.

c. Unit owners within a common interest community are responsible for maintaining their property according to established standards; voting in community elections and on other issues; paying association assessments and charges on time; and ensuring that those who reside in or visit their dwellings adhere to all rules and regulations.

d. Members of governing boards have a responsibility to fulfill their fiduciary duties to the community; exercise sound business judgment; follow established management practices; balance the needs and obligations of the community as a whole with those of individual owners and residents; conduct open, fair and well publicized elections; encourage input from residents on issues affecting them personally and the community as a whole; conduct business in a transparent manner when feasible and appropriate; allow owners access to appropriate community records when
requested; and provide complete and timely disclosure of personal and financial conflicts of interest related to their actions.

e. The laws of the State of New Jersey, as they currently exist, do not uniformly apply to all forms of common interest ownership communities, leading to disparate application of the law depending on the form of ownership.

f. Accordingly, the Legislature finds it in the public interest that: (1) associations and owners be required to comply with standards and procedures that further the goals set forth above;

(2) a fair and efficient system for resolving disputes between owners and associations be implemented; and

(3) a uniform framework for association law be established for all forms of common interest ownership associations.

3. (New section) As used in P.L. , c. (C. ) (pending before the Legislature as this bill), unless specifically provided otherwise:

"Affiliate of a declarant" means any person who controls, is controlled by or is under common control with a declarant.

A person "controls" a declarant if the person,

(1) is general partner, officer, director, or employer of the declarant,

(2) directly or indirectly, or acting in concert with one or more other persons or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 10 percent of the voting interest necessary to elect a majority of the directors of the declarant, or

(3) has contributed more than 10 percent of the capital of the declarant.

A person "is controlled by" a declarant if the declarant,

(1) is a general partner, officer, director, or employer of the person,

(2) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 10 percent of the voting interest in the person,

(3) controls in any manner the election of a majority of the directors of the person, or

(4) has contributed more than 10 percent of the capital of the person.

Control does not exist if the powers described in this definition are held solely as security for an obligation and are not exercised. A lender acting primarily to obtain or protect a security interest and who does not engage in active participation of the management of the property, as defined in section 52 of P.L. , c. (C. ) (pending before the Legislature as this bill), is not an affiliate of a declarant.

"Allocated interests" means the following interest allocated to each unit:

(1) in a condominium, the undivided interest in the common elements, the common expense liability, and votes in the association;

(2) in a cooperative, the common expense liability and the ownership interest and votes in the association; and

(3) in a planned community, the common expense liability and votes in the association.

"Assigns" means any person to whom rights of a unit owner have been validly transferred by lease, mortgage or otherwise.

"Association" or "unit owners' association" means the unit owners' association organized under section 48 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Bylaws" means the governing regulations adopted under P.L. , c. (C. ) (pending before the Legislature as this bill), or any act repealed by P.L. , c. (C. ) (pending before the Legislature as this bill), for the regulation or management of an association.

""Commissioner" means the Commissioner of Community Affairs unless otherwise specified.

"Common elements" means,

(1) in the case of a condominium or cooperative, all portions of the common interest community other than the units;

(2) in a planned community, any real estate within a planned community which is owned or leased by the association, other than a unit; and

(3) in all common interest communities, any other interests in real estate for the benefit of unit owners which are subject to the declaration, and all other elements of any improvement necessary to the existence, management, operation, maintenance, and safety of the common interest community or normally in common use, including any equipment or improvements necessary for fire safety, including, but not limited to, sprinkler and alarm systems.

"Common expenses" means expenditures made by, or financial liabilities of, the association, together with any allocations to reserves.

"Common expense liability" means the liability for common expenses allocated to each unit pursuant to section 30 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Common interest community" and "common interest property" mean real estate with respect to which a person, by virtue of ownership of a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance, or improvement of other real estate described in a declaration. For the purposes of this definition "ownership of a unit" does not include holding a leasehold interest of less than 20 years in a unit, including renewal options.

"Common receipts" means all income to an association, including rent or other charges derived from leasing or licensing the use of the common elements, funds collected from unit owners as common expenses, fines or late fees, and receipts designated as common by the provisions of the master deed, declaration or bylaws.

"Condominium" means a common interest community in which portions of the real estate are designated for separate ownership and the remainder of the real estate is designated for common ownership solely by the owners of those portions. A common interest community is not a condominium unless the undivided interests in the common elements are vested in the unit owners.

"Conversion building" means a building that at any time before creation of the common interest community was occupied wholly or partially by persons other than purchasers and by persons who occupied with the consent of purchasers.

"Cooperative" means a common interest community in which the real estate is owned by an association, each of whose members is entitled by virtue of ownership interest in the association to exclusive possession of a unit.

"Customary association assessment" means an assessment payable in periodic installments to the association for regular and usual operating and common area expenses pursuant to the association's annual budget. The customary association assessment shall not include any late charges, fines, penalties, interest, or any fees or costs for the collection or enforcement of the assessment or any lien arising from the assessment, or any special assessment. The periodic installments must be due no less frequently than quarter-annually and the assessment, and any of its component parts given priority by this subsection must be acceptable to the Federal National Mortgage Association so as to not disqualify an otherwise superior mortgage from purchase by the Federal National Mortgage Association as a first mortgage.

"Dealer" means a person in the business of selling units for his own account.

"Declarant" means any person or group of persons acting in concert who,

(1) as part of a common promotional plan, offers to dispose of his or its interest in a unit not previously disposed of, or

(2) reserves or succeeds to any special declarant right.

"Declaration" means any instruments, however designated, that create a common interest community, including any amendments to those instruments and including, in the case of condominiums, the master deed creating the condominium.

"Department" means the Department of Community Affairs, unless otherwise specified.

"Development rights" means any right or combination of rights reserved by a declarant in the declaration to,

(1) add real estate to a common interest community;

(2) create units, common elements, or limited common elements within a common interest community;

(3) subdivide units or convert units into common elements; or

(4) withdraw real estate from a common interest community.

"Dispose" or "disposition" mean a voluntary transfer to a purchaser of any legal or equitable interest in a unit, but the terms do not include the transfer or release of a security interest.

"Executive board" means the body, regardless of name, designated in the declaration to act on behalf of the association.

"Identifying number" means a symbol or address that identifies only one unit in a common interest community.

"Leasehold common interest community" means a common interest community in which all or a portion of the real estate is subject to a lease, the expiration or termination of which will terminate the common interest community or reduce its size.

"Limited common element" means a portion of the common elements allocated by the declaration or by operation of subsection b. or d. of section 25 of P.L. , c. (C. ) (pending before the Legislature as this bill) for the exclusive use of one or more, but fewer than all, of the units.

"Master association" means an organization described in section 44 of P.L. , c. (C. ) (pending before the Legislature as this bill), whether or not it is also an association described in section 48 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Master deed" means a master deed recorded pursuant to law in effect prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) as an instrument to create a condominium.

"Offering" means every inducement, solicitation or attempt to encourage a person to acquire an interest in a unit if undertaken for gain or profit.

"Person" means an individual, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or other legal or commercial entity. In the case of a land trust, however, "person" means the beneficiary of the trust rather than the trust or the trustee.

"Planned community" means a common interest community that is not a condominium or a cooperative. A condominium or cooperative may be part of a planned community.

"Proprietary lease" means an agreement with an association pursuant to which a member is entitled to exclusive possession of a unit in a cooperative.

"Purchaser" means a person, other than a declarant or a dealer, who by means of a voluntary transfer acquires a legal or equitable interest in a unit other than, (1) a leasehold interest, including renewal options, of less than 20 years, or (2) as security for an obligation.

"Quorum" means the number of persons required to be present at a meeting of an association or an executing board pursuant to section 57 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Real estate" means any leasehold or other estate or interest in, over or under land, including structures, fixtures and other improvements and interests that by custom, usage or law pass with a conveyance of land, though not described in the contract of sale or instrument of conveyance. The term includes parcels with or without upper or lower boundaries and spaces that may be filled with air or water.

"Residential purposes" means use for dwelling or recreational purposes, or both.

"Rules" means the rules for the regulation or management of a common interest community as adopted by an association.

"Security interest" means an interest in real estate or personal property, created by contract or conveyance, which secures payment or performance of an obligation. The term includes a lien created by a mortgage, deed of trust, trust deed, security deed, contract for deed, land sales contract, lease intended as security, assignment of lease or rents intended as security, pledge of an ownership interest in an association, and any other consensual lien or title retention contract intended as security for an obligation.

"Special declarant rights" means rights reserved for the benefit of a declarant to:

(1) complete improvements indicated on plats and plans filed with the declaration pursuant to section 32 of P.L. , c. (C. ) (pending before the Legislature as this bill) or, in a cooperative, to complete improvements described in the public offering statement pursuant to the requirements of "The Planned Real Estate Development Full Disclosure Act," P.L.1977 c. 419 (C.45:22A-21 et seq.);

(2) exercise any development right pursuant to section 33 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(3) maintain sales offices, management offices, signs advertising the common interest community, and models pursuant to section 39 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(4) use easements through the common elements for the purpose of making improvements within the common interest community or within real estate which may be added to the common interest community pursuant to section 40 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(5) make the common interest community subject to a master association as defined in section 44 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(6) merge or consolidate a common interest community with another common interest community of the same form of ownership as defined in section 45 of P.L. , c. (C. ) (pending before the Legislature as this bill); or

(7) appoint or remove any officer of the association or any master association or any executive board member during any period of declarant control pursuant to subsection d. of section 51 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Surplus" means the excess of all common receipts over all common expenses.

"Time share" includes both "fee simple" and "right to use" time share interests and means:

(1) an "interval estate" meaning a combination of an estate for years in a unit, during the term of which title rotates among the time share owners, coupled with a vested undivided fee simple interest in the remainder in the unit as established by the declaration creating the interval estate; or

(2) a "time span estate" meaning a combination of an undivided interest in a present estate in fee simple in a unit established by the declaration creating the time span estate, coupled with the exclusive right to possession and occupancy of the unit during a regularly recurring period.

"Unit" means a physical portion of the common interest community designated for separate ownership or occupancy, the boundaries of which are described pursuant to paragraph (4) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill).

"Unit owner" means a declarant or other person who owns a unit, or a lessee of a unit in a leasehold common interest community whose lease expires simultaneously with any lease the expiration or termination of which will remove the unit from the common interest community, but does not include a person having an interest in a unit solely as security for an obligation. In a condominium or planned community, the declarant is, as of the date of the recording of the declaration, the owner of any unit created by the declaration. In a cooperative, the declarant is treated as the owner of any unit to which allocated interests have been allocated pursuant to section 30 of P.L. , c. (C. ) (pending before the Legislature as this bill) until that unit has been conveyed to another person.

4. (New section) The provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), except as expressly provided therein, may not be varied by agreement, and rights conferred by it may not be waived. A declarant may not act under a power of attorney, or use any other device, to evade the limitations or prohibitions of P.L. , c. (C. ) (pending before the Legislature as this bill) or the declaration. Provisions of any power of attorney or other device intended to evade the limitations or prohibitions of P.L. , c. (C. ) (pending before the Legislature as this bill) or the declaration shall be void as against public policy.

5. (New section) a. In a cooperative, a unit owner's interest in a unit and its allocated interests shall be deemed to be personal property. The documents creating the ownership rights of a cooperative unit owner and the bylaws of the cooperative shall be construed as integrated documents incapable of being separated or distinguished from each other. The transfer of any interest in a cooperative shall be by means of a document recorded in the county in which the cooperative is located. The transfer document shall contain the following information:

(1) name of the cooperative;

(2) unit designation;

(3) reference to the last prior transfer of the unit, if previously transferred;

(4) full name and address of the transferor and transferee of the unit;

(5) executed and acknowledged consent of the cooperative executive board authorizing and approving the transfer or assignment;

(6) number of shares transferred;

(7) statement of the full consideration paid for the cooperative unit which includes the purchase price paid plus the amount derived from application of the percent of ownership held in conjunction with the unit to the unpaid balance of the fee or leasehold mortgage encumbering the entire structure as of the date of the transfer or assignment; and

(8) all other matters, consistent with P.L. , c. (C. ) (pending before the Legislature as this bill), which the parties may deem appropriate.

Nothing in this section shall be construed to affect the treatment of cooperative interests pursuant to the "2004 Homestead Property Tax Rebate Act," sections 1 through 10 of P.L.1990, c.61 (C.54:4-8.57 through 54:4-8.66), sections 3, 14 through 16, 18, and 19 of P.L.1999, c.63 (C.54:4-8.58a and C.54:4-8.66a through C.54:4-8.66e) and the imposition of realty transfer fees as permitted by law.

b. In a condominium or planned community:

(1) If there is any unit owner other than a declarant, each unit that has been created, together with its interest in the common elements, constitutes for all purposes a separate parcel of real estate. A unit shall be deemed created once it has been subjected to the declaration for the common interest community by the recordation of either the declaration or an amendment to the declaration.

(2) If there is any unit owner other than a declarant, each unit shall be separately taxed and assessed, and no separate tax or assessment may be rendered against any common elements for which a declarant has reserved no development rights.

c. Any portion of the common elements for which the declarant has reserved any development right shall be separately taxed and assessed against the declarant, and the declarant alone shall be liable for payment of those taxes.

d. If there is no unit owner other than a declarant, the real estate comprising the common interest community may be taxed and assessed in any manner provided by law.

6. (New section) a. No local housing code, maintenance code or other local ordinance or regulation, whether adopted prior to or after the date of P.L. , c. (C. ) (pending before the Legislature as this bill), shall impose any requirement upon any structure in a common interest community which would not be imposed upon a physically identical development under a different form of ownership.

b. The condominium or cooperative form of ownership shall not be prohibited through any zoning or land use law, or shall any such law impose a requirement upon a condominium or cooperative which would not be imposed upon a physically identical development under a different form of ownership.

c. Except as provided in subsections a. and b. of this section, the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not invalidate or modify any provision of any ordinance, rule or regulation governing the use of real estate in this State.

7. (New section) a. If a unit is acquired by eminent domain or part of a unit is acquired by eminent domain leaving the unit owner with a remnant that may not practically or lawfully be used for any purpose permitted by the declaration, the award shall include compensation to the unit owner for that unit and its allocated interests, whether or not any common elements are acquired. Upon acquisition, unless the decree otherwise provides, that unit's allocated interests shall be reallocated to the remaining units in proportion to their allocated interests before the taking, and the association shall promptly prepare, execute and record an amendment to the declaration reflecting the reallocations. Any remnant of a unit remaining after part of a unit is taken under this subsection shall thereafter be deemed a common element.

b. Except as provided in subsection a. of this section, if part of a unit is acquired by eminent domain, the award shall compensate the unit owner for the reduction in value of the unit and its interest in the common elements, whether or not any common elements are acquired. Upon acquisition, unless the decree otherwise provides,

(1) that unit's allocated interests shall be reduced in proportion to the reduction in the size of the unit, or on any other basis specified in the declaration, and

(2) the portion of the allocated interests divested from the partially acquired unit shall be reallocated to that unit and to the remaining units in proportion to their interests before the taking, with the partially-acquired unit participating in the reallocation on the basis of its reduced allocated interests.

c. If part of the common elements is acquired by eminent domain, the portion of the award attributable to the common elements taken shall be paid to the association. Unless the declaration provides otherwise, any portion of the award attributable to the acquisition of a limited common element shall be equally divided among the owners of the units to which that limited common element was allocated at the time of acquisition.

d. The executive board of the association, on behalf of the association and all affected unit owners, shall have the power to amend the declaration to reallocate interests in accordance with this section. The executive board shall reallocate the interests by amending the declaration and recording the amendment together with the court decree in every county in which any portion of the common interest community is located.

8. (New section) Unless displaced by particular provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), the principles of law and equity, including the law of corporations and unincorporated associations, the law of real property, and the law relative to capacity to contract, principal and agent, eminent domain, estoppel, fraud, misrepresentation, duress, coercion, mistake, receivership, substantial performance, or other validating or invalidating causes shall supplement the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

9. (New section) P.L. , c. (C. ) (pending before the Legislature as this bill) is a general act intended as a unified coverage of its subject matter and so no part of it shall be construed to be impliedly repealed by subsequent legislation if that construction can be reasonably avoided.

10. (New section) P.L. , c. (C. ) (pending before the Legislature as this bill) shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of P.L. , c. (C. ) (pending before the Legislature as this bill).

11. (New section) a. If any provision of P.L. , c. (C. ) (pending before the Legislature as this bill) or the application thereof to any person or circumstances is held invalid, the invalidity shall not affect other provisions or applications of P.L. , c. (C. ) (pending before the Legislature as this bill) which can be given effect without the invalid provisions or applications, and to this end the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) are severable.

b. In interpreting the terms of P.L. , c. (C. ) (pending before the Legislature as this bill) it is intended that, (1) any action, power or right of an association, executive board, declarant, or unit owner which is not expressly prohibited by P.L. , c. (C. ) (pending before the Legislature as this bill) or other law, and (2) any provision of a declaration which is not in conflict with P.L. , c. (C. ) (pending before the Legislature as this bill) or other law, shall be authorized under P.L. , c. (C. ) (pending before the Legislature as this bill).

12. (New section) a. A court, upon finding as a matter of law that a contract or contract clause relative to real estate owned or to be owned under a form of common interest ownership was unconscionable at the time the contract was made, may either refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or limit the application of any unconscionable clause in order to avoid an unconscionable result.

Whenever it is claimed, or appears to the court, that a contract or any contract clause is or may be unconscionable, the parties, in order to aid the court in making the determination, shall be afforded a reasonable opportunity to present evidence as to:

(1) the commercial setting of the negotiations;

(2) whether a party has knowingly taken advantage of the inability of another party reasonably to protect his interests by reason of physical or mental infirmity, illiteracy, inability to understand the language of the agreement, or similar factors; and

(3) the effect and purpose of the contract or clause.

b. There shall be a rebuttable presumption of unconscionability with respect to leases involving a common interest community, including, but not limited to, leases concerning the use by unit owners of parking, recreational or other common facilities or areas. The presumption may be rebutted by a lessor through the presentation of evidence demonstrating the existence of facts and circumstances sufficient to justify and validate a lease which would otherwise appear to be unconscionable under the provisions of this section. A rebuttable presumption of unconscionability shall arise if one or more of the following elements exist, but the failure of a lease to contain any of the following elements shall neither preclude a determination of its unconscionability nor raise a presumption of its conscionability:

(1) None of the persons executing the lease were, at the time of the lease execution, elected by unit owners other than the declarant;

(2) The lease requires either the association or the unit owners to pay real estate taxes on the real estate described in the lease;

(3) The lease requires either the association or the unit owners to insure buildings or other facilities on the real estate described in the lease against fire or any other hazard;

(4) The lease requires either the association or the unit owners to perform some or all maintenance obligations pertaining to the real estate or facilities located upon the real estate described in the lease;

(5) The lease requires either the association or the unit owners to pay rents to the lessor for a period of 10 years or more;

(6) The lease provides that failure of the lessee to make payments of rents due under the lease either creates, establishes or permits establishment of a lien upon individual units to secure claims for rent;

(7) The lease requires an annual rental which exceeds 20 percent of the appraised value of the leased real estate as improved; provided, that for purposes of this paragraph, "annual rental" means the amount due during the first 12 months of the lease from all units regardless of whether the units were in fact occupied or sold during that period, and "appraised value" means the appraised value placed upon the leased real estate the first tax year after the sale of a unit in the common interest community;

(8) The lease provides for a periodic rental increase based upon reference to a price index;

(9) The lease, declaration or other common interest community document requires that every transferee of a unit must assume the obligations under the lease.

c. When any parking, recreational or other common facility or area has been leased for the use of the unit owners for 20 years or more, the association or the unit owners shall have the option of renewing the lease for the parking, recreational or other common facility or area or of buying that facility or area and real estate at a conscionable price.

d. No contract for the sale of a unit executed on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), or any declaration or association bylaws adopted on or after that effective date, shall contain a clause or provision affording the declarant or the association the right of first refusal to buy a unit upon resale, gift or devise by a unit owner. No declaration or association bylaw, whenever adopted, shall be amended on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) to include any such clause or provision affording the right of first refusal. This section shall not apply to the State of New Jersey or any political subdivision of this State, or to any department, division, office, agency, or bureau thereof, or any authority or instrumentality created thereby, when a right of first refusal is required by State or federal law.

13. (New section) Every contract or duty governed by P.L. , c. (C. ) (pending before the Legislature as this bill) shall impose an obligation of good faith in its performance or enforcement.

14. (New section) a. The remedies provided by P.L. , c. (C. ) (pending before the Legislature as this bill) shall be liberally administered to the end that the aggrieved party is put in as good a position as if the other party had fully performed. Consequential, special or punitive damages, however, shall not be awarded except as specifically provided in P.L. , c. (C. ) (pending before the Legislature as this bill) or by other rule of law.

b. Any right or obligation declared by P.L. , c. (C. ) (pending before the Legislature as this bill) shall be enforceable by judicial proceeding.

15. (New section) a. As used in this section:

"Index" means the changes in the Consumer Price Index compiled by the Bureau of Labor Statistics, United States Department of Labor for the following series: Urban Wage Earners and Clerical Workers (CPI-W); U.S. City Average, All Items and 1982-84 = 100.

"Reference base index" means the average index level of the 36-month period encompassing 1982,1983 and 1984.

b. From time to time, the dollar amounts specified in section 18 of P.L. , c. (C. ) (pending before the Legislature as this bill), section 50 of P.L. , c. (C. ) (pending before the Legislature as this bill), subsection a. of section 64 of P.L. , c. (C. ) (pending before the Legislature as this bill) , subsections a. and f. of section 66 of P.L. , c. (C. ) (pending before the Legislature as this bill) , and subsections c. and d. of section 86 of P.L. , c. (C. ) (pending before the Legislature as this bill), shall be adjusted, as provided in subsections c. and d. of this section.

c. The dollar amount specified in section 18 of P.L. , c. (C. ) (pending before the Legislature as this bill) and any amount stated in the declaration pursuant to that section, and the dollar amounts specified in subsection c. of section 66 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be adjusted on July 1 of each year if the percentage of change, calculated to the nearest whole percentage point, between the index at the end of the preceding year and the reference base index is 10 percent or more; however,

(1) that portion of the percentage change in the index in excess of a multiple of 10 percent shall be disregarded and the dollar amount shall be adjusted only in multiples of 10 percent of the dollar amount in effect on the date of enactment;

(2) the dollar amount shall not be adjusted if the amount required by this section is that currently in effect pursuant to P.L. ,
c. (C. ) (pending before the Legislature as this bill) as a result of earlier application of this section; and

(3) in no event shall the dollar amount be adjusted below the amount in effect on the date of enactment.

d. If the index is revised after January, 1988, the percentage of adjustment pursuant to this section shall be calculated on the basis of the revised index. If a revision of the index changes the reference base index, a revised reference base index shall be determined by multiplying the reference base index then applicable by the rebasing factor furnished by the Bureau of Labor Statistics. If the index is superseded, the index referred to in this section shall be the one represented by the Bureau of Labor Statistics as reflecting most accurately the changes in the purchasing power of the dollar for consumers.

16. (New section) a. The provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply to all common interest communities created within this State after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. Except as provided in sections 18, 19, and 20 of P.L. , c. (C. ) (pending before the Legislature as this bill), the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply to all common interest communities created within this State prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill). The applicability of P.L. , c. (C. ) (pending before the Legislature as this bill) to common interest communities in existence prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not affect the priority of any lien recorded prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) or impair the obligations under any contract made prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill). Any action relating to a common interest community that occurred prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be governed by the law in effect at the time of the action. Notwithstanding any provision of P.L. , c. (C. ) (pending before the Legislature as this bill) superseding or repealing any other law, the rights of unit owners and all other affected parties existing under any prior law are preserved, and shall be enforceable under P.L. , c. (C. ) (pending before the Legislature as this bill) unless expressly superseded by P.L. , c. (C. ) (pending before the Legislature as this bill).

c. Pursuant to section 102 of P.L. , c. (C. ) (pending before the Legislature as this bill), any master declaration filed under "The Cooperative Recording Act of New Jersey," P.L.1987, c.381 (C.46:8D-1 et seq.) will be deemed a declaration under P.L. , c. (C. ) (pending before the Legislature as this bill) and will be subject to the terms of section 19 of P.L. , c. (C. ) (pending before the Legislature as this bill). All cooperatives created after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be created in accordance with section 24 of P.L. , c. (C. ) (pending before the Legislature as this bill).

17. (New section) Except as provided in section 20 of P.L. , c. (C. ) (pending before the Legislature as this bill), all cooperatives shall be subject to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

18. (New section) a. If a planned community:

(1) contains fewer than 10 units; or

(2) provides, in its declaration, that the annual average common expense liability of all units restricted to residential purposes, exclusive of optional user fees and any insurance premiums paid by the association, may not exceed $300, as adjusted pursuant to section 15 of P.L. , c. (C. ) (pending before the Legislature as this bill), the planned community shall be subject only to sections 5, 6, 7, 24 and 65 of P.L. , c. (C. ) (pending before the Legislature as this bill), unless the declaration provides that the community shall be subject to P.L. , c. (c ) (pending before the Legislature as this bill) in its entirety.

b. The exemption provided in paragraph (2) of subsection a. of this section shall apply only if:

(1) The declarant has a reasonable basis for concluding that the maximum stated assessment will be sufficient to pay the expenses of the planned community;

(2) The declaration provides that the assessment may not be increased during the period of declarant control without the consent of all unit owners;

(3) The declarant provides to the New Jersey Department of Community Affairs an itemized budget setting forth the dollar amount allocable to each category of expense; and

(4) The planned community is otherwise qualified to receive an exemption pursuant to section 5 of "The Planned Real Estate Development Full Disclosure Act," P.L. 1977, c.419(C.45:22A-25).

19. (New section) All preexisting common interest communities shall be controlled by all of the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill); however, such associations shall be permitted to maintain existing provisions of a declaration, bylaws or plats or plans of those common interest communities to the extent those provisions are not in conflict with the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill). For example, a common interest community that has consistently maintained in its master deed or declaration and bylaws a definition of common elements which differs from the definition provided in P.L. , c. (C. ) (pending before the Legislature as this bill) shall be permitted to maintain such a definition provided that other provisions of P.L. , c. (C ) (pending before the Legislature as this bill) are not violated by maintaining that definition.

A common interest community may apply to the commissioner for an exemption from the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill). The commissioner may grant the exemption if it appears:

a. governing documents, deeds and other information indicate that the property does not qualify as a common interest community as defined pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill); or

b. the limited nature of the common or shared elements of the community are such that inclusion of the community under all of the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) is not warranted. Notwithstanding an exemption granted by the commissioner under this subsection, an association shall remain responsible for the maintenance of any common or shared elements, and the powers and responsibilities granted pursuant to sections 48 through 72 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply to such an association.

20. (New section) If a cooperative or planned community created within this State before the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) contains fewer than 10 units and is not subject to any development rights, it shall be subject only to sections 5, 6 and 7 of P.L. , c. (C. ) (pending before the Legislature as this bill), unless the declaration is amended to provide that the small pre-existing cooperative or planned community shall be subject to all sections of P.L. , c. (C. ) (pending before the Legislature as this bill).

21. (New section) a. Notwithstanding any law or regulation to the contrary, the declaration, bylaws or plats and plans of any common interest community created before the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) may be amended to conform to it. Pursuant to section 50 of P.L. , c. (C. ) (pending before the Legislature as this bill), an executive board may vote to amend any of the above documents without obtaining unit owner approval.

b. Except as provided in subsection a. of section 21 of P.L. , c. (C. ) (pending before the Legislature as this bill), an amendment to the declaration, bylaws or plats and plans authorized by this section must be adopted in conformity with any procedures and requirements for amending the instruments specified in those instruments or, if there are none, in conformity with section 41 of P.L. , c. (C. ) (pending before the Legislature as this bill). If an amendment grants to any person any rights, powers or privileges under P.L. , c. (C. ) (pending before the Legislature as this bill), all correlative obligations, liabilities and restrictions imposed by P.L. , c. (C. ) (pending before the Legislature as this bill) shall also apply to that person.

22. (New section) a. As used in this section, "nonresidential common interest community" means a common interest community in which all units are restricted exclusively to nonresidential purposes.

b. A nonresidential common interest community shall not be subject to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) unless the declaration otherwise provides.

c. The declaration of a nonresidential common interest community may provide that P.L. , c. (C. ) (pending before the Legislature as this bill) in its entirety applies to the community or that only sections 5, 6 and 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) apply.

d. If a nonresidential common interest community has opted to be subject to P.L. , c. (C. ) (pending before the Legislature as this bill) in its entirety, then the declaration may also require, subject to section 12 of P.L. , c. (C. ) (pending before the Legislature as this bill) that:

(1) Notwithstanding the provisions of section 52 of P.L. , c. (C. ) (pending before the Legislature as this bill), any management contract, employment contract, lease of recreational or parking areas or facilities, and any other contract or lease between an association and a declarant or an affiliate of a declarant, shall continue in force after the declarant turns over control of the association; and

(2) Notwithstanding the provisions of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), purchasers of units may be required to execute proxies, powers of attorney, or similar devices in favor of the declarant regarding particular matters enumerated in those instruments.

e. A common interest community that contains units restricted exclusively to nonresidential purposes and other units which may be used for residential purposes shall not be subject to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) unless the units that may be used for residential purposes would comprise a common interest community in the absence of the nonresidential units, or the declaration provides that P.L. , c. (C. ) (pending before the Legislature as this bill) applies as provided in subsections c. or d. of this section.

23. (New section) The provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not apply to common interest communities which are governed by the "Real Estate Sales Full Disclosure Act," P.L.1989, c.239 (C.45:15-16.27 et seq.).

ARTICLE 2

CREATION, ALTERATION AND TERMINATION OF

COMMON INTEREST COMMUNITIES

24. (New section) A common interest community may be created pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) only by recording a declaration executed in the same manner as a deed and, in a cooperative, by conveying the real estate subject to that declaration to the association. The declaration shall be recorded in every county in which any portion of the common interest community is located and must be indexed in the grantee's index in the name of the common interest community and the association and in the grantor's index in the name of each person executing the declaration.

25. (New section) Except as provided by the declaration:

a. If walls, floors, or ceilings are designated as boundaries of a unit, then all lath, furring, wallboard, plasterboard, plaster, paneling, tiles, wallpaper, paint, finished flooring, and any other materials constituting any part of the finished surfaces thereof shall be a part of the unit, and all other portions of the walls, floors, or ceilings shall be a part of the common elements.

b. If any chute, flue, duct, wire, conduit, bearing wall, bearing column, or any other fixture lies partially within and partially outside the designated boundaries of a unit, then any portion thereof serving only that unit shall be a limited common element allocated solely to that unit, and any portion thereof serving more than one unit or any portion of the common elements shall be a part of the common elements.

c. Subject to subsection b., all spaces, interior partitions, and other fixtures and improvements within the boundaries of a unit shall be a part of the unit.

d. Any shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios, and all exterior doors, windows, skylights, or other fixtures designed to serve a single unit, but located outside the unit's boundaries, shall be limited common elements allocated exclusively to that unit.

26. (New section) a. All provisions of the declaration and bylaws shall be severable.

b. The Rule Against Perpetuities shall not apply. Any provision of a declaration or of bylaws, rules, or regulations adopted pursuant to paragraph (2) of subsection a. of section 49 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not be subject to or held to be in violation of any principle of law against perpetuities or restraints on alienation.

c. In the event of a conflict between the provisions of the declaration and the bylaws, the declaration shall prevail except to the extent the declaration is inconsistent with P.L. , c. (C. ) (pending before the Legislature as this bill).

d. Title to a unit and common elements shall not be rendered unmarketable or otherwise affected by reason of failure of the declaration to comply with P.L. , c. (C. ) (pending before the Legislature as this bill).

27. (New section) A description of a unit which sets forth the name of the common interest community, the recording data for the declaration, the county and municipality in which the common interest community is located, and the identifying number of the unit, shall be a legally sufficient description of that unit and all rights, obligations, and interests appurtenant to that unit which were created by the declaration or bylaws.

28. (New section) a. The declaration shall contain:

(1) The names of the common interest community and the association and a statement that the common interest community is either a condominium, cooperative, or planned community;

(2) The name of every county in which any part of the common interest community is situated;

(3) A legally sufficient description of the real estate included in the common interest community;

(4) In a condominium or planned community, a description of the boundaries of each unit created by the declaration, including the unit's identifying number, its size or number of rooms, and its location within a building if it is within a building containing more than one unit;

(5) A description of any limited common elements, other than those specified in subsections b. and d. of section 25 of P.L. , c. (C. ) (pending before the Legislature as this bill), together with a statement that they may be so allocated;

(6) A description of any real estate, except real estate subject to development rights, that may be allocated subsequently as limited common elements, other than limited common elements specified in subsections b. and d. of section 25 of P.L. , c. (C. ) (pending before the Legislature as this bill), together with a statement that they may be so allocated;

(7) A description of any development rights and other special declarant rights reserved by the declarant, together with a legally sufficient description of the real estate to which each of those rights applies, and a time limit within which each of those rights must be exercised;

(8) If any development right may be exercised with respect to different parcels of real estate at different times, a statement to that effect together with (a) either a statement fixing the boundaries of those portions and regulating the order in which those portions may be subjected to the exercise of each development right or a statement that no assurances are made in those regards, and (b) a statement as to whether, if any development right is exercised in any portion of the real estate subject to that development right, that development right must be exercised in all or in any other portion of the remainder of that real estate;

(9) Any other conditions or limitations under which the rights described in paragraph (8) may be exercised or will lapse;

(10) An allocation to each unit of the allocated interests in the manner described in section 30 of P.L. , c. (C. ) (pending before the Legislature as this bill) ;

(11) Any restrictions (a) on alienation of the units, including any restrictions on leasing which exceed the restrictions on leasing units that executive boards may impose pursuant to subsection d. of section 49 of P.L. , c. (C. ) (pending before the Legislature as this bill), and (b) on the amount for which a unit may be sold or on the amount that may be received by a unit owner on sale, condemnation, or casualty loss to the unit or to the common interest community, or on termination of the common interest community;

(12) The recording data for recorded easements and licenses appurtenant to or included in the common interest community or to which any portion of the common interest community is or may become subject by virtue of a reservation in the declaration; and

(13) All matters required by sections 29 through 32 of P.L. , c. (C. ) (pending before the Legislature as this bill), section 40 of P.L. , c. (C. ) (pending before the Legislature as this bill), and subsection d. of section 51 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. The declaration may contain any other matters the declarant considers appropriate, including any restrictions on the uses of a unit or the number or other qualifications of persons who may occupy units.

29. (New section) a. Any lease the expiration or termination of which may terminate the common interest community or reduce its size shall be recorded. Every lessor of such leases in a condominium or planned community shall sign the declaration. The declaration shall state:

(1) The recording data for the lease;

(2) The date on which the lease is scheduled to expire;

(3) A legally sufficient description of the real estate subject to the lease;

(4) Any right of the unit owners to redeem the reversion and the manner whereby those rights may be exercised, or a statement that they do not have those rights;

(5) Any right of the unit owners to remove any improvements within a reasonable time after the expiration or termination of the lease, or a statement that they do not have those rights; and

(6) Any rights of the unit owners to renew the lease and the conditions of any renewal, or a statement that they do not have those rights.

b. After the declaration for a leasehold condominium or leasehold planned community is recorded, neither the lessor nor the lessor's successor in interest may terminate the leasehold interest of a unit owner who makes timely payment of a unit owner's share of the rent and otherwise complies with all covenants which, if violated, would entitle the lessor to terminate the lease. A unit owner's leasehold interest in a condominium or planned community shall not be affected by failure of any other person to pay rent or fulfill any other covenant.

c. Acquisition of the leasehold interest of any unit owner by the owner of the reversion or remainder shall not merge the leasehold and fee simple interests unless the leasehold interests of all unit owners subject to that reversion or remainder are acquired.

d. If the expiration or termination of a lease decreases the number of units in a common interest community, the allocated interests shall be reallocated in accordance with subsection a. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) as if those units had been taken by eminent domain. Reallocations shall be confirmed by an amendment to the declaration which shall be prepared, executed and recorded by the association.

30. (New section) a. The declaration shall allocate to each unit:

(1) In a condominium, a fraction or percentage of undivided interests in the common elements and in the common expenses of the association as enumerated in subsection c. of section 63 of P.L. , c. (C. ) (pending before the Legislature as this bill), and a portion of the votes in the association;

(2) In a cooperative, an ownership interest in the association, a fraction or percentage of the common expenses of the association as enumerated subsection c. of section 63 of P.L. , c. (C. ) (pending before the Legislature as this bill), and a portion of the votes in the association; and

(3) In a planned community, a fraction or percentage of the common expenses of the association as enumerated in subsection c. of section 63 of P.L. , c. (C. ) (pending before the Legislature as this bill), and a portion of the votes in the association.

b. The declaration shall state the formulas used to establish allocations of interests. Those allocations shall not discriminate in favor of units owned by the declarant or an affiliate of the declarant.

c. If units may be added to or withdrawn from the common interest community, the declaration shall state the formulas to be used to reallocate the allocated interests among all units included in the common interest community after the addition or withdrawal.

d. The declaration may provide: (1) that different allocations of votes shall be made to the units on particular matters specified in the declaration; (2) for cumulative voting only for the purpose of electing members of the executive board; and (3) for class voting on specified issues affecting the class if necessary to protect valid interests of the class. A declarant shall not utilize cumulative or class voting for the purpose of evading any limitation imposed on declarants by P.L. , c. (C. ) (pending before the Legislature as this bill) and units shall not constitute a class because they are owned by a declarant.

e. Except for minor variations due to rounding, the sum of the common expense liabilities and, in a condominium, the sum of the undivided interests in the common elements allocated at any time to all the units shall each equal one, if stated as a fraction, or 100 percent, if stated as a percentage. In the event of a discrepancy between an allocated interest and the result derived from application of the pertinent formula, the allocated interest shall prevail.

f. In a condominium, the common elements shall not be subject to partition, and any purported conveyance, encumbrance, judicial sale, or other voluntary or involuntary transfer of an undivided interest in the common elements made without the unit to which that interest is allocated shall be void.

g. In a cooperative, any purported conveyance, encumbrance, judicial sale, or other voluntary or involuntary transfer of an ownership interest in the association made without the possessory interest in the unit to which that interest is related shall be void.

h. Except to the extent that the declaration provides for limited common elements, it shall provide that the right of a unit owner to the use of the common elements is a right in common with all other unit owners.

31. (New section) a. Except for the limited common elements described in subsections b. and d. of section 25 of P.L. , c. (C. ) (pending before the Legislature as this bill), the declaration shall specify to which unit or units each limited common element is allocated. An allocation shall not be altered without the consent of the unit owners whose units are affected.

b. Except as the declaration otherwise provides, a limited common element shall be reallocated by an amendment to the declaration executed by the unit owners between or among whose units the reallocation is made. The persons executing the amendment shall provide a copy thereof to the association, which shall record it. The amendment shall be recorded in the names of the parties and the common interest community.

c. A common element not previously allocated as a limited common element shall be so allocated only pursuant to provisions in the declaration made in accordance with paragraph (7) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill). The allocations shall be made by amendments to the declaration.

32. (New section) a. Plats and plans shall be a part of the declaration and shall be required for all common interest communities except cooperatives. Separate plats and plans shall not be required if all of the information required by this section is contained in either a plat or plan. Each plat and plan shall be clear and legible and contain a certification that the plat or plan contains all of the information required by this section.

b. Each plat shall show or project:

(1) The name and a survey or general schematic map of the entire common interest community;

(2) The location and dimensions of all real estate not subject to development rights, or subject only to the development right to withdraw, and the location and dimensions of all existing improvements within that real estate;

(3) A legally sufficient description of any real estate subject to development rights, labeled to identify the rights applicable to each parcel;

(4) The extent of any encroachments by or upon any portion of the common interest community;

(5) To the extent feasible, a legally sufficient description of all easements serving or burdening any portion of the common interest community;

(6) Except as provided in subsection h. of this section, the approximate location and dimensions of any vertical unit boundaries not shown or projected on plans recorded pursuant to subsection d. of this section and that unit's identifying number;

(7) The location with reference to an established datum of any horizontal unit boundaries not shown or projected on plans recorded pursuant to subsection d. of this section and that unit's identifying number;

(8) A legally sufficient description of any real estate in which the unit owners will own only an estate for years, labeled as "leasehold real estate";

(9) The distance between non-contiguous parcels of real estate comprising the common interest community;

(10) The approximate location and dimensions of any porches, decks, balconies, garages, or patios allocated as limited common
elements, and also a narrative description of any other limited common elements; and

(11) In the case of real estate not subject to development rights, all other matters customarily shown on land surveys.

c. A plat also shall show the intended location and dimensions of any contemplated improvement to be constructed anywhere within the common interest community. Any contemplated improvement shown shall be labeled either "MUST BE BUILT" or "NEED NOT BE BUILT".

d. Except as provided in subsection h. of this section, to the extent not shown or projected on the plats, plans of the units shall show or project:

(1) The approximate location and dimensions of the vertical boundaries of each unit, and that unit's identifying number;

(2) The approximate location of any horizontal unit boundaries, with reference to an established datum, and that unit's identifying number; and

(3) The approximate location of any units in which the declarant has reserved the right to create additional units or common elements as enumerated in subsection c. of section 33 of P.L. , c. (C. ) (pending before the legislature as this bill), identified appropriately.

e. Unless the declaration provides otherwise, the horizontal boundaries of part of a unit located outside a building shall have the same elevation as the horizontal boundaries of the inside part, and need not be depicted on the plats and plans.

f. Upon exercising any development right, the declarant shall record either new plats and plans necessary to conform to the requirements of subsections a., b., and d. of this section, or new certifications of plats and plans previously recorded if those plats and plans otherwise conform to the requirements of those subsections.

g. Any certification of a plat or plan required by this section shall be made by a professional surveyor, architect or engineer who has been licensed by this State.

h. Plats and plans need not show the location and dimensions of the units' boundaries or their limited common elements if:

(1) The plat shows the location and dimensions of all buildings containing or comprising the units; and

(2) The declaration includes other information that shows or contains a narrative description of the general layout of the units in those buildings and the limited common elements allocated to those units.

33. (New section) a. To exercise any development right reserved under paragraph (7) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill), the declarant shall prepare, execute and record an amendment to the declaration pursuant to section 40 of P.L. , c. (C. ) (pending before the Legislature as this bill) and, in a condominium or planned community, comply with section 32 of P.L. , c. (C. ) (pending before the Legislature as this bill). The declarant shall be the unit owner of any units thereby created. The amendment to the declaration shall assign an identifying number to each new unit created, and, except in the case of subdivision or conversion of units described in subsection b. of this section, reallocate the allocated interests among all units. The amendment shall describe any common elements and any limited common elements thereby created and, in the case of limited common elements, designate the unit to which each is allocated to the extent required by section 31 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. Development rights may be reserved within any real estate added to the common interest community if the amendment adding that real estate includes all matters required by sections 28 or 29 of P.L. , c. (C. ) (pending before the Legislature as this bill), as the case may be, and, in a condominium or planned community, the plats and plans include all matters required by section 32 of P.L. , c. (C. ) (pending before the Legislature as this bill). This provision does not extend the time limit on the exercise of development rights imposed by the declaration pursuant to paragraph (8) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill).

c. Whenever a declarant exercises a development right to subdivide or convert a unit previously created into additional units, common elements, or both:

(1) If the declarant converts the unit entirely to common elements, the amendment to the declaration shall reallocate all the allocated interests of that unit among the other units as if that unit had been taken by eminent domain pursuant to section 7 of P.L. , c. (C. ) (pending before the legislature as this bill); and

(2) If the declarant subdivides the unit into two or more units, whether or not any part of the unit is converted into common elements, the amendment to the declaration shall reallocate all the allocated interests of the unit among the units created by the subdivision in any reasonable manner prescribed by the declarant.

d. If the declaration provides, pursuant to paragraph (7) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the legislature as this bill), that all or a portion of the real estate is subject to a right of withdrawal:

(1) If all the real estate is subject to withdrawal, and the declaration does not describe separate portions of real estate subject to that right, none of the real estate shall be withdrawn after a unit has been conveyed to a purchaser; and

(2) If any portion is subject to withdrawal, it shall not be withdrawn after a unit in that portion has been conveyed to a purchaser.

34. (New section) Subject to the provisions of the declaration and other provisions of law, including, but not limited to the code adopted pursuant to the "State Uniform Construction Code Act," P.L.1975, c.217(C.52:27D-119 et seq.), an owner:

a. May make any improvements or alterations to his unit that do not impair the structural integrity or mechanical systems or lessen the support of any portion of the common interest community;

b. Shall not change the appearance of the common elements, or the exterior appearance of a unit or any other portion of the common interest community, without permission of the association; or

c. After acquiring an adjoining unit or an adjoining part of an adjoining unit, may remove or alter any intervening partition or create apertures therein, even if the partition in whole or in part is a common element, if those acts do not impair the structural integrity or mechanical systems or lessen the support of any portion of the common interest community. Removal of partitions or creation of apertures under this paragraph shall not be an alteration of boundaries.

35. (New section) a. Subject to the provisions of the declaration and other provisions of law, the boundaries between adjoining units may be relocated by an amendment to the declaration upon application to the association by the owners of those units. If the owners of the adjoining units have specified a reallocation between their units of their allocated interests, the application shall state the proposed reallocations. Unless the executive board determines, within 30 days, that the reallocations are unreasonable, the association shall prepare an amendment that identifies the units involved and states the reallocations. The amendment shall be executed by those unit owners, contain words of conveyance between them, and, on recordation, be indexed in the name of the grantor and the grantee, and in the grantee's index in the name of the association.

b. Subject to the provisions of the declaration and other provisions of law, boundaries between units and common elements may be relocated to incorporate common elements within a unit by an amendment to the declaration upon application to the association by the owner of the unit who proposes to relocate a boundary. Unless the declaration provides otherwise, the amendment shall be approved only if persons entitled to cast at least 67 percent of the votes in the association, including 67 percent of the votes allocated to units not owned by the declarant, agree to the action. The amendment shall describe any fees or charges payable by the owner of the affected unit in connection with the boundary relocation and the fees and charges shall be assets of the association. The amendment shall be executed by the unit owner of the unit whose boundary is being relocated and by the association, contain words of conveyance between them, and on recordation be indexed in the name of the unit owner and the association as grantor or grantee, as appropriate.

c. The association in a condominium or planned community shall prepare and record plats or plans as necessary to show the altered boundaries of affected units, and their dimensions and identifying numbers. The association in a cooperative shall prepare and record amendments to the declaration, including any plans, as necessary to show or describe the altered boundaries of affected units, and their dimensions and identifying numbers.

36. (New section) If a unit in a cooperative is sold, conveyed, voluntarily or involuntarily encumbered, or otherwise transferred by a unit owner, the interest in that unit which is sold, conveyed, encumbered, or otherwise transferred shall be the right to possession of that unit under a proprietary lease, coupled with the allocated interests of that unit, and the association's interest in that unit shall not be thereby affected.

37. (New section) a. If the declaration expressly so permits, a unit may be subdivided into two or more units. Subject to the provisions of the declaration and other relevant provisions of law, upon application of a unit owner to subdivide a unit, the association shall prepare, execute and record an amendment to the declaration, including in a condominium or planned community the plats and plans, subdividing that unit.

b. The amendment to the declaration shall be executed by the owner of the unit to be subdivided and shall assign an identifying number to each unit created and reallocate the allocated interests formerly allocated to the subdivided unit to the new units in any reasonable manner prescribed by the owner of the subdivided unit.

38. (New section) The existing physical boundaries of a unit or the physical boundaries of a unit reconstructed in substantial accordance with the description contained in the original declaration shall be its legal boundaries, rather than the boundaries derived from the description contained in the original declaration, regardless of vertical or lateral movement of the building or minor variance between those boundaries and the boundaries derived from the description contained in the original declaration. This section shall not relieve a unit owner of liability in case of his willful misconduct or relieve a declarant or any other person of liability for failure to adhere to any plats or plans or, in a cooperative, to any representation in the public offering statement.

39. (New section) Unless the declaration provides otherwise, a declarant may maintain sales offices, management offices, and models in units or on common elements in the common interest community. In a cooperative or condominium, any sales office, management office, or model not designated as a unit by the declaration shall be a common element. If a declarant ceases to be a unit owner, he shall cease to have any rights with regard to such office or model unless it is removed promptly from the common interest community in accordance with a right to remove which has been reserved in the declaration. Subject to any limitations in the declaration, a declarant may maintain signs on the common elements advertising the common interest community.

40. (New section) a. Subject to the provisions of the declaration, a declarant shall possess an easement through the common elements as may be reasonably necessary for the purpose of discharging the declarant's obligations or exercising special declarant rights, whether arising under P.L. , c. (C. ) (pending before the Legislature as this bill) or reserved in the declaration.

b. In a planned community, subject to the provisions of paragraph (6) of subsection a. of section 49 of P.L. , c. (C. ) (pending before the Legislature as this bill), and section 60 of P.L. , c. (C. ) (pending before the Legislature as this bill), unit owners shall have an easement,

(l) in the common elements for purposes of access to their units, and

(2) to use the common elements and all real estate that must become common elements pursuant to paragraph (6) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill); for all other purposes.

41. (New section) a. Except in cases of amendments that may be executed by a declarant under subsection f. of section 32 of P.L. , c. (C. ) (pending before the Legislature as this bill) or section 33 of P.L. , c. (C. ) (pending before the Legislature as this bill); or by the association under section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill), subsection d. of section 29 of P.L. , c. (C. ) (pending before the Legislature as this bill), subsection c. of section 31 of P.L. , c. (C. ) (pending before the Legislature as this bill), subsection a. of section 35 of P.L. , c. (C. ) (pending before the Legislature as this bill); or by certain unit owners under subsection b. of section 31 of P.L. , c. (C. ) (pending before the Legislature as this bill), subsection a. of section 35 of P.L. , c. (C. ) (pending before the Legislature as this bill), subsection b. of section 37 of P.L. , c. (C. ) (pending before the Legislature as this bill), or subsection b. of section 40 of P.L. , c. (C. ) (pending before the Legislature as this bill); or by the executive board in accordance with subsection b. of section 51 of P.L. , c. (C. ) (pending before the Legislature as this bill), and except as limited by subsection d. of this section, the declaration, including any plats and plans, shall be amended only by vote or agreement of unit owners of units representing at least 67 percent of a quorum of the members, which quorum may not be less than 50 percent of the membership in the association qualified to vote, provided the proposed amendment does not seek to prohibit a previously permitted use in a unit. In the case of an amendment that seeks to prohibit a previously permitted use in a unit, the amendment must be approved by a vote of at least 67 percent of the total allocated votes in the association. The declaration may specify a smaller number only if all of the units are restricted exclusively to non-residential use.

b. An action to challenge the validity of an amendment adopted by an association pursuant to this section, other than an action by a governmental official or entity authorized to do so by statute or regulation adopted pursuant to statute, shall not be brought more than one year after the amendment is recorded.

c. Every amendment to a declaration shall be recorded in every county in which any portion of the common interest community is located and shall be effective only upon recordation. An amendment, except an amendment pursuant to subsection a. of section 35 of P.L. , c. (C. ) (pending before the Legislature as this bill), shall be indexed in the grantee's index in the name of the common interest community and the association and in the grantor's index in the name of the parties executing the amendment.

d. Except to the extent expressly permitted or required by other provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), an amendment shall not create or increase special declarant rights, increase the number of units or change the boundaries of any unit or the allocated interests of a unit in the absence of unanimous consent of the unit owners.

e. Amendments to the declaration required by P.L. , c. (C. ) (pending before the Legislature as this bill) to be recorded by the association shall be prepared, executed, recorded, and certified on behalf of the association by any officer of the association designated for that purpose or, in the absence of designation, by the president of the association.

f. Within 12 months following assumption by the owners of control of the executive board, and at six-year intervals thereafter, the executive board shall re-examine the bylaws, declaration and rules of the association and present such proposed amendments as the executive board may deem appropriate, as well as any amendments proposed by initiative signed by persons eligible to cast at least 20 percent of the votes, for approval by vote of the unit owners; provided, however, that any such proposed amendment shall be unambiguous and consistent with applicable law and with the provisions of the governing documents that are not proposed to be amended. Notwithstanding the terms of the declaration or bylaws, an amendment to an existing bylaw, rule or declaration, except an amendment that proposes to prohibit a previously permitted use, may be adopted pursuant to this section by the lesser of: (1) a majority of votes that are entitled to be cast by all unit owners; or (2) 67 percent of the votes actually cast, where not less than a majority of the eligible votes have been cast. An amendment that proposes to prohibit a previously permitted use may be adopted only in accordance with the terms of subsection a of section 41 of P.L. , c. (C. ) (pending before the Legislature as this bill). At least 30 days advance notice of any referendum, including the text of any new bylaw or amendment or repeal of an existing provision to be voted on, shall be given to all unit owners by registered or certified mail, or by personal delivery. Changes to declarations, bylaws and rules shall be applied prospectively and shall not be construed as depriving any unit owner of a right exercised prior to the time that the change is made; provided, however, that any right relating to personal property, a physical improvement or a pet that was exercised prior to the adoption of any change to the declaration, bylaws or rules shall apply only to the specific item of personal property, physical improvement or pet existing or present at the unit on the effective date of the change. An item of personal property or a physical improvement that violates the terms of a change to the declaration, bylaws or rules shall not continue to be maintained after suffering damage to more than 50 percent of its value.

g. The time limits specified in the declaration pursuant to paragraph (8) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill) within which reserved development rights must be exercised shall be extended, and additional development rights may be created, if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by the declarant, agree to that action. The agreement shall be effective 30 days after an amendment to the declaration reflecting the terms of the agreement is recorded, unless all the persons holding the affected special declarant rights or security interest in those rights:

(1) record a written objection within that 30-day period, in which case the amendment shall be void; or

(2) consent in writing at the time the amendment is recorded, in which case the amendment shall be effective when recorded.

42. (New section) a. Except in the case of a taking of all the units by eminent domain pursuant to section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) or in the case of foreclosure against a cooperative of a security interest that has priority over the declaration of that cooperative, a common interest community may be terminated only by agreement of unit owners of units to which at least 80 percent of the votes in the association are allocated, or any larger percentage that the declaration specifies. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to nonresidential uses.

b. An agreement to terminate shall be evidenced by the execution of a termination agreement, or ratifications thereof, in the same manner as a deed, by the requisite number of unit owners. The termination agreement shall specify a date after which the agreement will be void unless it is recorded before that date. A termination agreement and all ratifications thereof shall be recorded in each county in which a portion of the common interest community is situated and shall be effective only upon recordation.

c. In the case of a condominium or planned community containing only units having horizontal boundaries described in the declaration, a termination agreement may provide that all of the common elements and units of the common interest community shall be sold following termination. If, pursuant to the agreement, any real estate in the common interest community is to be sold following termination, the termination agreement shall set forth the minimum terms of the sale.

d. In the case of a condominium or planned community containing any units not having horizontal boundaries described in the declaration, a termination agreement may provide for sale of the common elements, but it shall not require that the units be sold following termination, unless the declaration as originally recorded provided otherwise or all the unit owners consent to the sale.

e. The association, on behalf of the unit owners, may contract for the sale of real estate in a common interest community, but the contract shall not be binding on the unit owners until approved pursuant to subsections a. and b. of this section. If any real estate is to be sold following termination, title to that real estate, upon termination, shall vest in the association as trustee for the holders of all interests in the units. Thereafter, the association shall have all powers necessary and appropriate to effect the sale. Until the sale has been concluded and the proceeds thereof distributed, the association shall continue in existence with all of the powers it had before termination. Proceeds of the sale shall be distributed to unit owners and lien holders as their interests may appear, in accordance with subsections h., i., and j. of this section. Unless otherwise specified in the termination agreement, and as long as the association holds title to the real estate, each unit owner and the unit owner's successors in interest shall have an exclusive right to occupancy of the portion of the real estate that formerly constituted the unit. During the period of that occupancy, each unit owner and the unit owner's successors in interest shall remain liable for all assessments and other obligations imposed on unit owners by P.L. , c. (C. ) (pending before the Legislature as this bill) or the declaration.

f. In a condominium or planned community, if the real estate constituting the common interest community is not to be sold following termination, title to the common elements and, in a common interest community containing only units having horizontal boundaries described in the declaration, title to all the real estate in the common interest community shall vest in the unit owners upon termination as tenants in common in proportion to their respective interests as provided in subsection j. of this section, and any liens encumbering those units shall survive and be applicable to the property so vested. While the tenancy in common exists, each unit owner and the unit owner's successors in interest shall have an exclusive right to occupancy of the portion of the real estate that formerly constituted the unit.

g. Following termination of a common interest community, the proceeds of any sale of real estate, together with the assets of the association, shall be held by the association as trustee for unit owners and holders of liens on the units as their interests may appear.

h. Following termination of a condominium or planned community, creditors of the association holding liens on the units, which were recorded, filed or otherwise perfected according to law, before termination, may enforce those liens in the same manner as any lien holder. All other creditors of the association shall be treated as if they had perfected liens on the units immediately before termination.

i. In a cooperative, the declaration may provide that all creditors of the association shall have priority over the interests of unit owners and creditors of unit owners. In that event, following termination, creditors of the association holding liens on the cooperative which were recorded, filed or otherwise perfected according to law before termination, may enforce their liens in the same manner as any lien holder, and any other creditor of the association shall be treated as if the creditor had perfected a lien against the cooperative immediately before termination. Unless the declaration provides that all creditors of the association have that priority:

(1) The lien of each creditor of the association which was perfected against the association before termination shall become, upon termination, a lien against each unit owner's interest in the unit as of the date the lien was perfected;

(2) Any other creditor of the association shall be treated upon termination as if the creditor had perfected a lien against each unit owner's interest immediately before termination;

(3) The amount of the lien of an association's creditor described in paragraphs (1) and (2) of this subsection against each of the unit owners' interest shall be proportionate to the ratio which each unit's common expense liability bears to the common expense liability of all of the units;

(4) The lien of each creditor of each unit owner which was perfected before termination shall continue as a lien against that unit owner's unit as of the date the lien was perfected; and

(5) The assets of the association shall be distributed to all unit owners and all lien holders as their interests may appear in the order described in this section. Creditors of the association shall not be entitled to payment from any unit owner in excess of the amount of the creditor's lien against that unit owner's interest.

j. The respective interests of unit owners referred to in subsections e., f., g., h., and i. of this section shall be as follows:

(1) Except as provided in paragraph (2) of this subsection, the respective interests of unit owners shall be the fair market values of their units, allocated interests and any limited common elements immediately before the termination, as determined by one or more independent appraisers selected by the association. The decision of the independent appraisers shall be distributed to the unit owners and shall become final unless disapproved, within 30 days after distribution, by unit owners of units to which 25 percent of the votes in the association are allocated. The proportion of any unit owner's interest to that of all unit owners shall be determined by dividing the fair market value of that unit owner's unit and its allocated interests by the total fair market values of all the units and their allocated interests.

(2) If any unit or any limited common element is destroyed to the extent that an appraisal of the fair market value thereof before destruction cannot be made, the interests of all unit owners shall be: (a) in a condominium, their respective common element interests immediately before the termination:, (b) in a cooperative, their respective ownership interests immediately before the termination, and (c) in a planned community, their respective common expense liabilities immediately before the termination.

k. In a condominium or planned community, except as provided in subsection l. of this section, foreclosure or enforcement of a lien or encumbrance against the entire common interest community shall not, of itself, terminate the common interest community, and foreclosure or enforcement of a lien or encumbrance against a portion of the common interest community, other than withdrawable real estate, shall not withdraw that portion from the common interest community. Foreclosure or enforcement of a lien or encumbrance against withdrawable real estate, or against common elements that have been subjected to a security interest by the association under section 64 of P.L. , c. (C. ) (pending before the Legislature as this bill), shall not, of itself, withdraw, that real estate from the common interest community, but the person taking title thereto may require from the association, upon request, an amendment excluding the real estate from the common interest community.

l. In a condominium or planned community, if a lien or encumbrance against a portion of the real estate comprising the common interest community has priority over the declaration, and the lien or encumbrance has not been partially released, then the parties foreclosing the lien or encumbrance, upon foreclosure, may record an instrument excluding the real estate subject to that lien or encumbrance from the common interest community.

m. No agreement or governmental action to be taken which will result in the termination of a common interest community with common elements to remain after such termination, shall be effective unless there shall be provision made for the maintenance of those common elements.

43. (New section) a. The declaration may require that all or a specified number or percentage of the lenders who hold security interests encumbering the units or who have extended credit to the association approve specified actions of the unit owners or the association as a condition to the effectiveness of those actions, but no requirement for approval shall operate to,

(1) deny or delegate control over the general administrative affairs of the association by the unit owners or the executive board, or

(2) prevent the association or the executive board from commencing, intervening in, or settling any litigation or proceeding, or

(3) prevent any insurance trustee or the association from receiving and distributing any insurance proceeds except pursuant to section 61 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. A lender who has extended credit to an association secured by an assignment of income pursuant to paragraph (14) of subsection a. of section 49 P.L. , c. (C. ) (pending before the Legislature as this bill) or an encumbrance on the common elements pursuant to section 60 of P.L. , c. (C. ) (pending before the Legislature as this bill) may enforce its security agreement in accordance with its terms, subject to the requirements of P.L. , c. (C. ) (pending before the Legislature as this bill) and other law.

44. (New section) a. If the declaration provides that any of the powers described in section 49 of P.L. , c. (C. ) (pending before the Legislature as this bill) are to be exercised by, or may be delegated to, a profit or nonprofit corporation that exercises those or other powers on behalf of one or more common interest communities or for the benefit of the unit owners of one or more common interest communities, all provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) applicable to unit owners' associations shall apply to any such corporation, except as modified by this section.

b. Unless it is acting in the capacity of an association described in section 48 of P.L. , c. (C. ) (pending before the Legislature as this bill), a master association may exercise the powers set forth in paragraph (2) of subsection a. of section 49 of P.L. , c. (C. ) (pending before the Legislature as this bill) only to the extent expressly permitted in the declarations of common interest communities which are part of the master association or expressly described in the delegations of power from those common interest communities to the master association.

c. If the declaration of any common interest community provides that the executive board may delegate certain powers to a master association, the members of the executive board shall have no liability for the acts or omissions of the master association with respect to those powers following delegation.

d. The rights and responsibilities of unit owners with respect to the unit owners' association as set forth in sections 49, 50, 51, 56, 57, 58 and 60 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply, in the conduct of the affairs of a master association, only to persons who elect the board of a master association, whether or not those persons are otherwise unit owners within the meaning of P.L. , c. (C. ) (pending before the Legislature as this bill).

e. Regardless of the fact that a master association also may be an association, as described in section 48 of P.L. , c. (C. ) (pending before the Legislature as this bill), the certificate of incorporation, or other instrument creating the master association, and the declaration of each common interest community, the powers of which are assigned by the declaration or delegated to the master association, shall provide that the executive board of the master association shall be elected after the period of declarant control in any of the following ways:

(1) All of the unit owners of each of the common interest communities subject to the master association may elect all of the members of the master association's executive board.

(2) All of the members of the executive boards of all common interest communities subject to the master association may elect all members of the master association's executive board.

(3) All of the unit owners of each common interest community subject to the master association may elect specified members of the master association's executive board.

(4) All of the members of the executive board of each common interest community subject to the master association may elect specified members of the master association's executive board.

45. (New section) a. Any two or more common interest communities of the same form of ownership, by agreement of the unit owners as provided in subsection b. of this section, may be merged or consolidated into a single common interest community. In the event of a merger or consolidation, unless the agreement otherwise provides, the resultant common interest community shall be the legal successor, for all purposes, of all of the pre-existing common interest communities, and the operations and activities of all associations of the pre-existing common interest communities shall be merged and consolidated into a single association that shall hold all of the powers, rights, obligations, assets, and liabilities of the pre-existing associations.

b. An agreement of two or more common interest communities to merge or consolidate pursuant to subsection a. of this section shall be evidenced by an agreement prepared, executed, recorded, and certified by the president of the association of each of the pre-existing common interest communities following approval by the owners of units to which are allocated the percentage of votes in each common interest community required to terminate that common interest community. The agreement shall be recorded in each county in which a portion of the common interest community is located and shall not be effective until recorded.

c. When a merger of two or more common interest communities involves the merger of two or more nonprofit corporations, the corporations shall comply with all of the requirements of N.J.S.15A:10-1.

d. Every merger or consolidation agreement shall provide for the reallocation of the allocated interests in the pre-existing associations among the units of the resultant common interest community either (1) by stating the reallocations or the formulas upon which they are based or

(2) by stating the percentage of overall allocated interests of the new common interest community that shall be allocated to all. All of the units comprising each of the pre-existing common interest communities, and providing that the portion of the percentages allocated to each unit formerly comprising a part of the pre-existing common interest community shall be equal to the percentages of allocated interests allocated to that unit by the declaration of the pre-existing common interest community.

46. (New section) In a planned community, if the right is originally reserved in the declaration, the declarant, in addition to any other development right, may amend the declaration at any time during as many years as are specified in the declaration for adding additional real estate to the planned community without describing the location of that real estate in the original declaration. The amount of real estate added to the planned community pursuant to this section shall not exceed 10 percent of the real estate described in paragraph (3) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill) and the declarant shall not in any event increase the number of units in the planned community beyond the number stated in the original declaration pursuant to paragraph (4) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill), unless unit owners, other than the declarant, that represent at least 51 percent of the votes in the association, vote to approve: a. the addition of real estate in excess of 10 percent of the real estate described in paragraph (3) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill), or b. a number of units in excess of the number stated in the original declaration pursuant to paragraph (4) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill).

47. (New section) a. The declaration for a common interest community may state that it is a master planned community if the declarant has reserved the development right to create at least 300 units that may be used for residential purposes and has obtained preliminary site plan or subdivision approval permitting the declarant to construct at least 300 residential units pursuant to the "Municipal Land Use Law," P.L.1975, c.291 (C.40:55D-1 et seq.).

b. If the requirements of subsection a. of this section are satisfied, the declaration for the master planned community need not state a maximum number of units and need not contain any of the information required by paragraphs (3) through (13) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill) until the declaration is amended under subsection c. of this section.

c. At the time each unit in a master planned community is conveyed to a purchaser, the declaration must contain,

(1) a sufficient legal description of the unit and all portions of the master planned community in which any other units have been conveyed to a purchaser; and

(2) all of the information required by paragraphs (3) through (13) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill) with respect to that real estate.

d. Notwithstanding any other provision of P.L. , c. (C. ) (pending before the Legislature as this bill):

(1) The only real estate in a master planned community which shall be subject to P.L. , c. (C. ) (pending before the Legislature as this bill) is that which comprises:

(a) units that have been declared or which are being offered for sale; and

(b) any other real estate described pursuant to subsection c. of this section;

(2) Other real estate that is or may become part of the master planned community shall be subject only to other applicable laws and to any other restrictions and limitations that appear of record; and

(3) If the public offering statement conspicuously identifies the fact that the community is a master planned community, the disclosure requirements contained in sections 73 through 88 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply only with respect to units that have been declared or are being offered for sale in connection with the public offering statement and to the real estate described in subsection c. of this section.

e. The limitations contained in section 46 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not apply to a master planned community.

f. Subject to the requirements of unconscionability in section 12 of P.L. , c. (C. ) (pending before the Legislature as this bill) and good faith in section 13 of P.L. , c. (C. ) (pending before the Legislature as this bill), the period of declarant control of the association for a master planned community shall terminate in the manner set forth in section 51 of P.L. , c. (C. ) (pending before the Legislature as this bill), at such earlier time as may be specified in the declaration, or as the declarant specifies in a recorded instrument after delivering written notice to all the unit owners in the same manner as notice is required for an amendment to the declaration.

ARTICLE 3

MANAGEMENT OF THE COMMON INTEREST COMMUNITY

48. (New section) A unit owners' association shall be formed on or before the date of recording of the declaration. The membership of the association at all times shall consist exclusively of all of the unit owners or, following termination of the common interest community, of all of the former unit owners entitled to distributions of proceeds under section 42 of P.L. , c. (C. ) (pending before the Legislature as this bill) or their heirs, successors or assigns. An association shall be organized as a for-profit or nonprofit corporation, trust, or partnership.

Process may be served upon a unit owners' association by serving the president or chief executive officer of the association or by serving the agent designated for service of process. Service of process upon the association shall not constitute service of process upon any individual unit owner.

49. (New section) a. An association, acting through its executive board, and in addition to any specific requirements contained in other provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), shall be responsible for the performance of the following duties:

(1) The maintenance, repair, replacement, cleaning, and sanitation of the common elements.

(2) The adoption, distribution, amendment, and enforcement of rules governing the use and operation of the common interest community.

(3) Whether or not incorporated, the association shall be an entity that shall act through its officers and may enter into contracts, bring suit and be sued. If the association is not incorporated, it may be deemed to be an entity existing pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) and a majority of the members of the executive board or of the association, as the case may be, shall constitute a quorum for the transaction of business. Process may be served upon the association by serving any officer of the association or by serving the agent designated for service of process. Service of process upon the association shall not constitute service of process upon any individual unit owner.

(4) The association shall have access to each unit from time to time during reasonable hours, and upon five days' prior written notice stating the reason that access is required, for,

(a) the maintenance, repair or replacement of any common elements therein or accessible therefrom;

(b) the repair, replacement or inspection of common elements in compliance with an order of a State or local agency having jurisdiction;

(c) for the maintenance of the common elements in accordance with a policy that has been approved by the executive board;

(d) inspection to ensure compliance with requirements of State or local code enforcing agencies or insurance carriers or underwriters; or

(e) emergency repairs necessary to prevent damage to common elements or to any other unit or units (the foregoing being individually or in the aggregate referred to as a "permitted right of entry"); provided, however, that the association shall not require a unit owner to provide a unit key to any person. Nothing herein shall prohibit the association from having immediate access to a unit in case of an emergency. A unit owner who refuses to provide a unit access key to an association that requests one for a permitted right of entry shall be responsible for all reasonable costs of the association to obtain access to the unit; provided, however, that the association shall secure the unit after the purpose of any entry has been satisfied and shall, to that end, utilize the services of a licensed locksmith, the cost of which services shall be included in the reasonable cost of obtaining access, and further provided that prior or concurrent notice of any entry without a key shall be given to the police department having jurisdiction. The association may charge the unit owner for the repair of any common element damaged by the unit owner or his tenant.

(6) The association may purchase units in the common interest community and otherwise acquire, hold, lease, mortgage, and convey the same. It may also lease or license the use of common elements in a manner not inconsistent with the rights of unit owners.

(7) An executive board of an association and any community management personnel contracted by an association, shall be responsible for safeguarding and preserving all common elements within the common interest community, so as to comply with all applicable laws and to protect the investment made by the owners of the lots, parcels, units, or interests subject to the jurisdiction of the association and also shall enforce rules requiring the proper maintenance of such common elements. Executive boards and community managers shall comply with all rules that may be adopted by the commissioner, including, but not limited to, accounting procedures and financial and common property facility management requirements, provided such rules shall not include substantive requirements not otherwise set forth in P.L. , c. (C. ) (pending before the Legislature as this bill).

b. Except as provided in subsection c. of this section, and subject to the provisions of the declaration, the bylaws or other statute of this State, an association may:

(1) adopt and amend bylaws and rules and regulations, provided that any rules or regulations adopted by resolution of an association shall be recorded in the same place as the bylaws;

(2) adopt and amend budgets for revenues, expenditures and reserves and may collect assessments for common expenses from unit owners, provided, that with respect to the adoption of budgets for revenues, expenditures and reserves in common interest communities of 100 or more units, a copy of any proposed budget shall be available at a meeting of the executive board at least one month prior to the meeting at which the executive board is scheduled to vote on the budget;

(3) hire and discharge managing agents and other employees, agents and independent contractors;

(4) institute, defend or intervene in litigation or administrative proceedings in its own name on matters affecting the common interest community;

(5) make contracts and incur liabilities, subject to the provisions of section 71 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(6) regulate the use, maintenance, repair, replacement, cleaning and modification of common elements, including, if authorized under the by-laws, the right to suspend the use of the common elements, including, without limitation, parking spaces or recreational facilities, whenever a unit owner is delinquent in the payment of common expenses;

(7) cause additional improvements to be made as a part of the common elements;

(8) acquire, hold, encumber and convey in its own name any right, title or interest to real estate or personal property, but (a) common elements in a condominium or planned community shall only be conveyed or subjected to a security interest pursuant to section 60 of P.L. , c. (C. ) (pending before the Legislature as this bill), and (b) part of a cooperative shall only be conveyed, or all or part of a cooperative shall only be subjected to a security interest, pursuant to section 60 of P.L. , c. (C. ) (pending before the Legislature as this bill). The association may also acquire or enter into agreements whereby it acquires leaseholds, memberships or other possessory or use interests in lands or facilities including, but not limited to, country clubs, golf courses, marinas, and other recreational facilities, whether or not contiguous to the common interest community property, intended to provide for the enjoyment, recreation or other use or benefit of the unit owners. If fully described in the declaration or bylaws, the fees, costs and expenses of acquiring, maintaining, operating, repairing, and replacing any such memberships, interests and facilities shall be common expenses. If not so described in the declaration or bylaws as originally recorded, no such membership interest or facility shall be acquired except pursuant to amendment of, or supplement to, the declaration or bylaws duly adopted as provided therein and in P.L. , c. (pending before the Legislature as this bill). In the absence of such amendment or supplement, if some but not all unit owners desire any such acquisition and agree to assume among themselves all costs of acquisition, maintenance, operation, repair, and replacement thereof, the association may acquire or enter into an agreement to acquire the same as limited common elements appurtenant only to the units of those unit owners who have agreed to bear the costs and expenses thereof. Such costs and expenses shall be assessed against and collected from the consenting unit owners in the proportions in which they share as among themselves in the common expenses in the absence of some other unanimous agreement among themselves. No other unit owner shall be charged with any such cost or expense; provided, however, that nothing herein shall preclude the extension of the interests in such limited common elements to additional unit owners by subsequent agreement with all those unit owners then having an interest in such limited common elements. Thereafter, any such costs or expenses shall be paid only by the consenting unit owners and their grantees, heirs and assigns;

(9) grant easements, leases, licenses, and concessions through or over the common elements;

(10) impose and receive any payments, fees or charges for the use, rental or operation of the common elements, other than limited common elements described in subsections b. or d. of section 25 of P.L. , c. (C. ) (pending before the Legislature as this bill), and for services provided to unit owners;

(11) levy and collect assessments duly made by the association for a share of common expenses or any other moneys duly owed the association, upon proper notice to the appropriate unit owner, together with interest thereon, late fees and reasonable attorney's fees, if authorized by the declaration or bylaws, and subject to the provisions of section 50 of P.L. , c. (C. ) (pending before the Legislature as this bill). A unit owner may contest the validity of any assessment levied by an association for the purpose of funding construction of any improvement by bringing an action in lieu of prerogative writs in the Superior Court within 45 days after the association gives notice of the assessment to unit owners;

(12) impose reasonable charges for the preparation and recordation of amendments to the declaration, resale certificates required by section 77 of P.L. , c. (C. ) (pending before the Legislature as this bill), or statements of unpaid assessments;

(13) provide for the indemnification of its officers and executive board and maintain directors' and officers' liability insurance;

(14) assign its right to future income, including the right to receive common expense assessments, but only to the extent the declaration expressly so provides;

(15) notwithstanding the provisions of the "Prudent Investor Act," P.L.1997, c.26 (C.3B:20-11.1 et seq.), or any other law to the contrary, invest the assets of the association and the proceeds thereof, in good faith and with that degree of diligence, care and skill which ordinary prudent persons would exercise under similar circumstances in like positions. In discharging their duties, members of the executive board shall not be liable if, acting in good faith, they rely upon the opinion of counsel for the association or upon written reports setting forth financial data concerning the association and prepared by an independent public account or certified public accountant or firm of accountants or upon financial statements, books of account or reports of the association represented to them to be correct by the chief executive officer, the officer of the association having charge of its books of account, or the persons presiding at a meeting of the executive board;

(16) exercise any other powers conferred by the declaration or bylaws in accordance with P.L. , c. (C. ) (pending before the Legislature as this bill);

(17) exercise all other powers that may be exercised in this State by legal entities of the same type as the association, if not prohibited by P.L. , c. (C. ) (pending before the Legislature as this bill) or any other law of the State; and

(18) exercise any other powers necessary and proper for the governance and operation of the association, if not prohibited by P.L. , c. (C. ) (pending before the Legislature as this bill) or any other law of this State.

The executive board of every association shall discharge its powers in a manner that is not inconsistent with furthering the health, safety and general welfare of the residents of the common interest community, fostering community values of fairness, mutual respect and responsibility, and safeguarding the value of the residents' investment in their properties.

c. The declaration shall not impose limitations on the power of the association to deal with the declarant which are more restrictive
than the limitations imposed on the power of the association to deal with other persons.

d. The association may adopt rules with respect to units that may be used for residential purposes to:

(1) prevent any use of, or behavior in, residential units which violates the declaration or adversely affects the use and enjoyment of other units or the common elements by other unit owners; or

(2) reasonably restrict the leasing of residential units so long as the rules are designed to meet the then-current underwriting requirements adopted by institutional lenders who regularly lend money secured by first mortgages on units in common interest communities, or regularly purchase those mortgages. Otherwise, an association shall not regulate any use of, or behavior in, units unless empowered to do so by the declaration or P.L. , c. (C. ) (pending before the Legislature as this bill).

e. If a tenant of a unit owner violates the declaration, bylaws or rules or regulations of the association, in addition to exercising any of its powers against the unit owner, an association may:

(1) exercise directly against the tenant the powers described in section 50 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(2) after giving notice to the tenant and the unit owner and an opportunity to be heard, levy reasonable fines against the tenant for the violation; and

(3) enforce any rights against the tenant for the violation which the unit owner as landlord might have exercised under the lease in accordance with State law, or which the association might have exercised directly against the unit owner, or both.

f. The rights granted under paragraph (3) of subsection e. may be exercised only if the tenant or unit owner fails to cure the violation within 10 days after the association notifies both the tenant and unit owner of that violation.

g. Unless a lease otherwise provides, this section shall not,

(1) affect rights that a unit owner may have to enforce a lease or that the association has under other law; or

(2) permit an association to enforce a lease to which it is not a party in the absence of a violation of the declaration or bylaws or the association's rules or regulations.

50. (New section) If authorized by the declaration or bylaws, the association may impose reasonable fines upon unit owners for failure to comply with provisions of the declaration, bylaws or rules and regulations, subject to the following provisions:

A fine for a violation or a continuing violation of the declaration, bylaws or rules and regulations shall not exceed $25 per day for each violation; $50 per day for a second violation of the same nature within a one-year period following the issuance of the notice of fine for the first violation or, if it is contested, of a final determination upholding the first fine; and $100 per day for each violation of the same nature after the second violation within a one-year period following the issuance of the notice of fine for the second violation or, if it is contested, of a final determination upholding the second fine. An initial fine shall be imposed only after a warning notice has been issued to notify the owner to cease or correct the violation and that notice has not been complied with.

On roads, streets, parking areas, driveways, or other roadways with respect to which Title 39 of the Revised Statutes is in effect under section 1 of P.L.1945, c.284 (C.39:5A-1), an association may impose fines only for violations not subject to enforcement by State or local police.

A fine shall not be imposed unless the unit owner is given written notice of the action taken and of the alleged basis for the action, and is advised of the right to participate in an alternative dispute resolution procedure in accordance with section 86 of P.L. , c. (C. ) (pending before the Legislature as this bill). A unit owner who does not believe that the mediation phase of the alternative dispute resolution procedure has satisfactorily resolved the matter and who does not agree to continue the procedure as binding arbitration shall not be prevented from seeking a judicial remedy in a court of competent jurisdiction. No lien shall be recorded concerning a fine imposed by an association after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) unless: (1) the right to the lien has been established pursuant to a determination by a court of competent jurisdiction, or (2) the fine imposition has been authorized through alternative dispute resolution proceedings pursuant to section 86 of P.L. , c. (C. ) (pending before the Legislature as this bill), or (3) the unit owner has been notified by the association, by personal service or by registered or certified mail, return receipt requested, of the unit owner's right to have the dispute resolved through alternative dispute resolution proceedings and has not requested such proceedings within 30 days of receipt of such notice or has, after requesting such proceedings, failed or refused to participate in them or discontinued such participation. If service is made by registered or certified mail, the date of receipt shall be deemed to be the date the mail is accepted or three days following the date of mailing, whichever comes first.

51. (New section) a. Except as provided in the declaration, the bylaws, subsection b. of this section, or other provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), an executive board may act in all instances on behalf of the association. In the performance of their duties, officers and members of an executive board shall act in good faith and exercise honest judgment in lawful and legitimate furtherance of the association's purposes.

Notwithstanding the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) or any other law, an individual convicted of a crime of the first or second degree, or a crime of a fiduciary nature of any degree while serving as an officer or member of an executive board shall be deemed to have resigned that position immediately upon entry of judgment of conviction. An individual who has been convicted of a crime of the first or second degree, or a crime of a fiduciary nature of any degree prior to an election to serve as an officer or member of an executive board, shall disclose, in writing on the ballot, such a conviction if it occurred within a three- year period prior to the election. The election of a person who does not disclose shall be void from its inception.

b. An executive board shall not act on behalf of the association to:

(1) amend the declaration pursuant to section 41 of P.L. , c. (C. ) (pending before the Legislature as this bill), except when necessary to render an inconsistent portion of the declaration to be consistent with applicable law, but only to the extent necessary to achieve consistency;

(2) terminate the common interest community under section 42 of P.L. , c. (C. ) (pending before the Legislature as this bill); or

(3) elect members of the executive board or determine the qualifications, powers, duties, or terms of office of executive board members pursuant to subsection f. of this section; however, the executive board may fill vacancies in its membership until the next annual meeting of the membership at which a quorum is present, at which time the membership shall elect a member to fill the vacancy for the then unexpired portion of the term that was vacated.

c. Within 30 days after the adoption of a budget for a common interest community, the executive board shall provide a copy of the budget to all of the unit owners.

d. Subject to subsection e. of this section, the declaration may provide for a period of declarant control of the association, during which a declarant, or persons designated by him, may appoint and remove the officers and members of the executive board. Regardless of the period provided in the declaration, a period of declarant control of the executive board shall terminate no later than the earlier of: (1) 60 days after conveyance of 75 percent of the lots, parcels, units, or interests that may be created to unit owners other than a declarant;

(2) two years after all declarants have ceased to offer units for sale in the ordinary course of business;

(3) two years after any right to add new units was last exercised; or

(4) if, at a duly held meeting of the association, the majority of the unit owners appearing in person or by proxy vote to assume control, the date the declarant, after giving written notice to unit owners, records an instrument voluntarily surrendering all rights to control activities of the association. A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of that period, but in that event the declarant may require, for the duration of the period of declarant control, that specified actions of the association or executive board, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective.

e. Not later than 60 days after conveyance to unit owners, other than a declarant, of 25 percent of the lots, parcels, units, or interests that may be created, at least one member and not less than 25 percent of the members of the executive board shall be elected by unit owners other than a declarant. Not later than 60 days after conveyance to unit owners other than a declarant of 50 percent of the lots, parcels, units or interests that may be created, not less than 40 percent of the members of the executive board shall be elected by unit owners other than a declarant. Not later than 60 days after conveyance of 75 percent of the lots, parcels, units, or interests that may be created, not less than 60 percent of the members of the executive board shall be elected by the unit owners other than declarant; except that the declarant may retain the selection of one executive board member so long as there are any units remaining unsold in the regular course of business. The percentages specified in this section shall be calculated upon the basis of the whole number of units entitled to membership in the association.

f. Except as otherwise provided in subsection e. of section 44 of P.L. , c. (C. ) (pending before the Legislature as this bill), but not later than the termination of any period of declarant control, the unit owners shall elect an executive board of at least three members, a majority of whom shall be unit owners. The executive board shall elect the officers. The executive board members and officers shall take office upon election.

g. Upon assumption by the owners of control of the executive board of the association, the declarant shall forthwith deliver to the association all property of the unit owners, and all items and documents pertinent to the association, such as, but not limited to, a copy of the master declaration, declaration of covenants and restrictions, documents of creation of the association, bylaws, minute book including all minutes, any rules and regulations, association funds and an accounting therefor, that includes capital accounts and contributions, all personal property, insurance policies, government permits, a membership roster, all contracts and agreements relative to the association, resignations of officers and members of the governing board or other form of administration who are required to resign because the developer is required to relinquish control of the association, all tangible personal property that is property of the association and is either represented by the developer to be part of the common elements or ostensibly part of the common elements, and an inventory of that property. Within 60 days of completion of construction or remodeling of improvements, the declarant shall provide the association with a copy of the plans and specifications utilized in the construction or remodeling of improvements and the supplying of equipment to the common interest community, and utilized in the construction and installation of all mechanical components serving the improvements and the site. The declarant also shall provide the association with a certificate in affidavit form of the developer, his agent, or an architect or engineer authorized to practice in this State that such plans and specifications represent, to the best of their knowledge and belief, the actual plans and specifications utilized in the construction and improvement of the common interest property and for the construction and installation of the mechanical components serving the improvements.

h. An association, when controlled by the owners, shall not take any action that would be detrimental to the sale of units by the declarant, and shall continue the same level of maintenance, operation and services as immediately prior to the unit owners' assumption of control, until the last unit is sold.

i. Notwithstanding any provision of a declaration or bylaws to the contrary, the unit owners, by a two-thirds vote of all persons present and entitled to vote at any meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant.

j. The members of the executive board appointed by the declarant shall be liable as fiduciaries for their acts or omissions.

k. Not more than 60 days after the time that unit owners, other than the developer, elect a majority of the members of the executive board or other form of administration of an association, the developer shall relinquish control of the association and the unit owners shall accept control. Simultaneously, the developer shall deliver to the association all property of the unit owners and of the association held or controlled by the developer, including, but not limited to, the following items, if applicable, as to each common interest community operated by the association:

(1) A photocopy of the declaration and all amendments thereto, certified by affidavit of the developer, or by an officer or agent of the developer, as being a complete copy of the actual declaration.

(2) A certified copy of the association's articles of incorporation, or if not incorporated, then copies of the documents creating the association.

(3) A copy of the bylaws.

(4) The minute books, including all minutes, and other books and records of the association, if any.

(5) Any rules and regulations which have been promulgated by the executive board.

(6) Resignations of officers and members of the executive board or other form of administration who are required to resign because the developer is required to relinquish control of the association.

(7) An accounting for all association funds, including capital accounts and contributions.

(8) Association funds or control thereof.

(9) All tangible personal property that is property of the association, represented by the developer to be part of the common elements or ostensibly part of the common elements, and an inventory of that property.

(10) A copy of the plans and specifications utilized in the construction or remodeling of improvements and the supplying of equipment to and in the common interest community and utilized in the installation of all mechanical components serving the improvements and the site, along with a certificate in affidavit form of the developer, his agent or an architect or engineer authorized to practice in this State, that such plans and specifications represent, utilized in the construction and improvement of the common interest community property and for the construction and installation of the mechanical components serving the improvements.

(11) Insurance policies.

(12) Copies of any certificates of occupancy which may have been issued for the common interest property.

(13) Any other permits issued by governmental bodies having jurisdiction over the common interest property that were issued in connection with the development of the common interest property.

(14) All written warranties of the contractor, subcontractors, suppliers, and manufacturers, if any, that are still effective.

(15) A roster of unit owners and their addresses and telephone numbers as shown on the developer's records.

(16) Leases of the common elements and other leases to which the association is a party.

(17) Employment contracts, management contracts, maintenance contracts, contracts for the supply of equipment or materials, service contracts in which the association is one of the contracting parties, and maintenance contracts and service contracts in which the association or the unit owners have an obligation or responsibility, directly or indirectly to pay some or all of the fee or charge of the person or persons performing the service.

(18) All other contracts to which the association is a party.

52. (New section) a. A special declarant right created or reserved under P.L. , c. (C. ) (pending before the Legislature as this bill) shall be transferred only by an instrument evidencing the transfer and recorded in each county in which any portion of the common interest community is located. The instrument shall not be effective unless executed by the transferee.

b. Upon the transfer of any special declarant right, the liability of a transferor declarant shall be as follows:

(1) A transferor shall not be relieved of any obligation or liability arising before the transfer and shall remain liable for warranty obligations imposed upon him by P.L. , c. (C. ) (pending before the Legislature as this bill). Lack of privity shall not deprive any unit owner of standing to maintain an action to enforce any obligation of the transferor.

(2) If a successor to any special declarant right is an affiliate of a declarant, as that term is defined in section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill), the transferor shall be jointly and severally liable with the successor for any obligations or liabilities of the successor relating to the common interest community.

(3) If a transferor retains any special declarant rights, but transfers other special declarant rights to a successor who is not an affiliate of the declarant, the transferor shall be liable for any obligations or liabilities imposed on a declarant by P.L , c. (C. ) (pending before the Legislature as this bill) or by the declaration relating to the retained special declarant rights and arising after the transfer.

(4) A transferor shall have no liability for any act or omission or any breach of a contractual or warranty obligation arising from the exercise of a special declarant right by a successor who is not an affiliate of the transferor.

c. Unless otherwise provided in a mortgage instrument, deed of trust or other agreement creating a security interest, in the case of a foreclosure of a security interest, sale by a trustee under an agreement creating a security interest, tax sale, judicial sale, or sale under federal Bankruptcy Code or receivership proceedings of any units owned by a declarant or of real estate in a common interest community subject to development rights, a person acquiring title to all of the property being foreclosed or sold, upon his request, shall succeed to all special declarant rights related to that property held by that declarant or holder of development rights; otherwise the person acquiring title shall succeed only to those or to any rights reserved in the declaration pursuant to section 39 of P.L. , c. (C. ) (pending before the Legislature as this bill) and held by that declarant to maintain models, sales offices and signs. The judgment or instrument conveying title shall provide for transfer of only those special declarant rights requested.

d. Upon foreclosure of a security interest, sale by a trustee under an agreement creating a security interest, tax sale, judicial sale, or sale under federal Bankruptcy Code or receivership proceedings of all interests in a common interest community owned by a declarant:

(1) The declarant shall cease to have any special declarant rights, and

(2) The period of declarant control shall terminate unless the judgment or instrument conveying title provides for the transfer of all special declarant rights held by that declarant to a successor declarant.

e. The liabilities and obligations of a person who succeeds to special declarant rights shall be as follows:

(1) A successor to any special declarant right who is an affiliate of a declarant shall be subject to all obligations and liabilities imposed on the transferor by P.L. , c. (C. )(pending before the Legislature as this bill) or by the declaration.

(2) A successor to a sole right reserved in the declaration to maintain models, sales offices, and signs under section 39 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not exercise any other special declarant right and shall not be subject to any liability or obligation as a declarant except the obligation to provide a public offering statement and any liability arising as a result thereof.

(3) A successor to all special declarant rights held by a transferor who succeeded to those rights pursuant to a deed or other instrument of conveyance in lieu of foreclosure or a judgment or instrument conveying title under subsection c. of this section, may declare in a recorded instrument the intention to hold those rights solely for transfer to another person. Thereafter, until transferring all special declarant rights to any person acquiring title to any unit or real estate subject to development rights owned by the successor, or until recording an instrument permitting exercise of all those rights, that successor shall not exercise any of those rights other than any right held by his transferor to control the executive board in accordance with subsection d. of section 51 of P.L. , c. (C. ) (pending before the Legislature as this bill) for the duration of any period of declarant control, and any attempted exercise of those rights shall be void. So long as a successor declarant may not exercise special declarant rights under this subsection, the successor declarant shall not be subject to any liability or obligation as a declarant other than liability for his acts and omissions under subsection d. of section 51 of P.L. , c. (C. ) (pending before the Legislature as this bill).

(4) A successor to any special declarant right, other than a successor described in paragraphs (1), (2) or (3) of this subsection shall be subject to the obligations and liabilities imposed by P.L. , c. (C. ) (pending before the Legislature as this bill) or the declaration:

(a) On a declarant which relate to the successor's exercise or non-exercise of special declarant rights; or

(b) On his transferor, other than:

(i) misrepresentations by any previous declarant;

(ii) warranty obligations on improvements made by any previous declarant, or made before the common interest community was created;

(iii) breach of any fiduciary obligation by any previous declarant or his appointees to the executive board; or

(iv) any liability or obligation imposed on the transferor as a result of the transferor's acts or omissions after the transfer.

f. Nothing in this section shall subject any successor to a special declarant right to any claims against, or other obligations of, a transferor declarant, other than claims and obligations arising under P.L. , c. (C. ) (pending before the Legislature as this bill) or the declaration.

g. (1) Notwithstanding any provision of this section or any other law to the contrary, a lender who makes a loan of money, or who maintains an indicia of ownership primarily to protect a security interest in property subject to P.L. , c. (C. ) (pending before the Legislature as this bill) for a loan made by the lender or a predecessor in interest, the proceeds of which are used or may be used by the borrower to finance the design, manufacture, construction, repair, modification, or improvement of real or personal property for sale or lease to others, shall not as a result of its actions as a lender be liable for any loss or damage occasioned by any defect or deficiency in the real or personal property so designed, manufactured, constructed, repaired, modified, or improved or for any loss or damage resulting from the failure of the borrower to use due care in the design, manufacture, construction, repair, modification, or improvement of such real or personal property, unless:

(a) the lender or holder has knowingly been a party to misrepresentations with respect to such real or personal property; or (b) the lender or holder of the security interest actively participates in the management of the property.

(2) For the purpose of this section, the following shall apply:

(a) (i) "Active participation in the management" or "participation in the management" means actual participation in the construction of the property or management or operational affairs of the property by the lender and shall not include the mere capacity, or ability to influence, or the unexercised right to control the property or its management or operations. A holder of security interest shall be considered to be in active participation in the management, only if the lender exercises control at a level comparable to that of a manager of the property, such that the lender has assumed or manifested responsibility, for the overall management of the property encompassing the day-to-day decision making with respect to all, or substantially all, of the operational, as opposed to financial or administrative, aspects of the property. Operational aspects of the property shall include functions such as that of community manager, construction manager, operations manager, chief operating officer or chief executive officer. Financial or administrative aspects shall include functions such as that of credit manager, accounts payable or receivable manager, or both, personnel manager, controller, chief financial officer or similar functions.

(ii) Unless a lender is otherwise deemed to be an affiliate under this section, no act or omission prior to the time that indicia of ownership are held primarily to protect a security interest shall constitute evidence of participation in management.

(iii) Actions that are consistent with holding ownership indicia primarily to protect a security interest shall not constitute participation in management for purposes of P.L. , c. (C. ) (pending before the Legislature as this bill). The authority for the lender to make such actions may, but need not, be contained in contractual or other documents specifying requirements for financial, environmental, or other warranties, covenants, conditions, representations or promises from the borrower. Loan policing and work-out activities shall cover and include all activities up to foreclosure and its equivalents.

(b) "Lender" means a person who maintains indicia of ownership primarily to protect a security interest. A lender shall include the initial lender, such as a loan originator, any subsequent holder of the security interest, such as a successor-in-interest or subsequent purchaser, a guarantor of an obligation, surety or any other person who holds ownership indicia primarily to protect a security interest, or a receiver or other person who acts on behalf of for the benefit of a lender.

(c) "Indicia of ownership" means evidence of a security interest, evidence of an interest in real or personal property securing a loan or other obligation, including any legal or equitable title to real or personal property acquired incident to foreclosure and its equivalents. Evidence of such interests shall include, but is not limited to, mortgages, security agreements, deeds of trust, liens, surety bonds and guarantees of obligations, title held pursuant to lease financing transaction in which the lessor does not select initially the leased property, hereinafter "lease financing transaction," legal or equitable title obtained pursuant to foreclosure and their equivalents. Evidence of such interests shall also include assignments, pledges or other rights to or other forms of encumbrance against property that are held primarily to protect a security interest. A person is not required to hold title or a security interest in order to maintain indicia of ownership.

(d) "Primarily to protect a security interest" means that the holder's indicia of ownership are held primarily for the purpose of securing payment or performance of an obligation, but does not include indicia of ownership held primarily for investment purposes, or ownership indicia held primarily for purposes other than as a protection for a security interest. A holder will be deemed to maintain indicia of ownership primarily to protect a security interest even when the holder has secondary reasons for maintaining indicia of ownership.

h. A lender who engages in policing activities prior to foreclosure shall remain within the exemptions provided in subsection g. of this section provided that the lender does not, by such activities, participate in the management of the property, or is not otherwise determined to be an affiliate of the declarant. Such policing activities shall include, but are not limited to, requiring the borrower to comply or come into compliance with applicable federal, State and local laws, rules and regulations during the term of the security interest; securing or exercising authority to monitor or inspect the property during the term of the security interest; or taking other actions to adequately police the loan or security interest, such as requiring a borrower to comply with any of its warranties, covenants, conditions, representations or promises.

i. A lender who engages in work-out activities prior to foreclosure and its equivalents shall remain within the exemption provided that the lender does not by such action participate in the management of the property. For the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill), "work-out activities" means those actions by which a lender, at any time prior to foreclosure and its equivalents, seeks to: prevent, cure or mitigate a default by the borrower or obligor; or preserve or prevent the diminution of the value of the security. Work-out activities include, but are not limited to: restructuring or renegotiating the terms of the security interest; requiring payment of the additional rent or interest; exercising forbearance; requiring or exercising rights pursuant to an assignment of accounts or other amounts owing to an obligor; requiring or exercising rights pursuant to an escrow agreement pertaining to amounts owing to an obligor; providing specific or general financial or other advice, suggestions, counseling or guidance; and exercising any right or remedy the lender is entitled to by law or under any warranties, covenants, conditions, representations or promises from the borrower.

53. (New section) Except as provided in section 22 of P.L. , c. (C. ) (pending before the Legislature as this bill), any contract or agreement affecting the use, maintenance, management, or access of the common elements entered into between the declarant and itself or a company owned, operated or controlled by the declarant or in which it has a financial interest prior to non-declarant unit owners being entitled to elect a majority of the executive board, shall not be entered into for a period in excess of one year. The contracts or agreements shall not be renewed for periods in excess of one year and the association may, at the end of any one-year period, terminate any further renewals or extensions thereof.

This section shall not apply to:

Any lease the termination of which would terminate the common interest community or reduce its size, unless the real estate subject to that lease was included in the common interest community for the purpose of avoiding the right of the association to terminate a lease under this section, or a proprietary lease.

54. (New section) a. The bylaws of an association, which shall initially be recorded with the declaration, shall provide:

(1) the number of members of the executive board and the titles of the officers of the association;

(2) election by the executive board of a president, treasurer, secretary, and any other officers of the association the bylaws may specify;

(3) the qualifications, powers and duties, terms of office, and manner of electing and removing executive board members and officers and filling vacancies;

(4) which, if any, of its powers the executive board or officers may delegate to other persons or to a managing agent;

(5) which of its officers may prepare, execute, certify, and record amendments to the declaration on behalf of the association;

(6) a method for amending the bylaws;

(7) for alternative dispute resolution in accordance with the terms of section 86 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(8) a method for the adoption, amendment and enforcement of reasonable administrative rules and regulations relating to the operation, use, maintenance, and enjoyment of the units and of the common elements, including limited common elements.

b. Subject to the provisions of the declaration, the bylaws may provide for any other matters the association deems necessary and appropriate. No amendment to a bylaw shall be effective until recorded in the same office as existing bylaws.

55. (New section) a. Except to the extent provided by the declaration, subsection b. of this section, or subsection h. of section 61 of P.L. , c. (C. ) (pending before the Legislature as this bill), an association shall be responsible for the maintenance, repair, cleaning, and replacement of the common elements, and each unit owner shall be responsible for maintenance, repair and replacement of the owner's unit. Subject to the terms of paragraph 4 of subsection a. of section 49 of P.L. , c. (C. ) (pending before the Legislature as this bill), each unit owner shall afford to the association and the other unit owners, and to their agents or employees, such access through the owner's unit as reasonably necessary for those purposes. If damage is inflicted on the common elements or on any unit through which access is taken, the entity
responsible for the damage shall be liable for the prompt repair thereof.

b. In addition to the liability that a declarant as a unit owner has under P.L. , c. (C. )(pending before the Legislature as this bill), the declarant alone shall be liable for all expenses in connection with real estate subject to development rights. A unit owner or owner of another portion of the common interest community shall not be subject to a claim for payment of development rights expenses. Unless the declaration provides otherwise, any income or proceeds from real estate subject to development rights shall inure to the declarant.

c. In a planned community, if all development rights have expired with respect to any real estate, the declarant shall remain liable for all expenses of that real estate unless, upon expiration, the declaration provides that the real estate shall become common elements or units.

56. (New section) a. A meeting of the unit owners' association shall be held at least annually. Special meetings of an association may be called by the president, a majority of the executive board, or by unit owners having 20 percent, or any lower percentage specified in the bylaws, of the votes in the association. Not less than 10 or more than 60 days in advance of any unit owners' association meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or placed in the United States mail in a prepaid envelope to the proper mailing address of each unit or to any other mailing address designated in writing by the unit owner. The notice of any meeting shall state the time and place of the meeting and the items on the agenda, including the general nature of any proposed amendment to the declaration or bylaws, any budget changes, and any proposal to remove an officer or member of the executive board.

b. Meetings of the executive board of an association shall be held at least once every three months throughout the calendar or fiscal year, and as often as necessary in order to conduct the business of the association. Except as otherwise provided in this section, all meetings of the membership or the executive board of any association shall be open to all members of the association. The executive board shall establish an agenda for each meeting. Copies of the agenda, to the extent known, shall be available at least 48 hours before the meeting for distribution to unit owners, and all unit owners who attend the meeting shall be given a reasonable opportunity to comment on matters under consideration by the executive board or otherwise of concern to unit owners. A board shall not be obligated to allow the period that is substantially devoted to the making of comments by unit owners to exceed, in the aggregate, 45 minutes in any one meeting; provided, however, that all persons having an interest in a proposed budget, a proposed amendment to the rules or bylaws, or any proposal to sell or lease any of the common elements shall be given an opportunity to make comments, subject to the right of the chair to limit or exclude comment or testimony that is repetitive or irrelevant.

Working sessions of an executive board at which no votes shall be taken shall be permitted and such meetings shall be open to attendance by unit owners. An executive board shall not be required to allow comments from unit owners at working sessions, but shall be required to arrange for a meeting place large enough to accommodate the anticipated number of unit owners wishing to observe a working session, whenever practicable.

Audio recordings for personal use by unit owners in attendance shall be permitted at meetings open to the unit owners; provided, however, that, in the event that it is not the practice of the association to record all meetings, a unit owner wishing to record a meeting shall give at least one business day's prior notice to the executive board of his or her intention to record the meeting. If such notice has not been given and the executive board has not made provision for the recording of the meeting, the executive board may prohibit the unit owner from recording the meeting.

c. (1) Notwithstanding the provisions of subsection b. of this section, the executive board may exclude or restrict attendance at those meetings, or portions of meetings, dealing with (a) any matter the disclosure of which would constitute an unwarranted invasion of individual privacy; (b) any pending or anticipated litigation or contract negotiations; (c) any matters falling within the attorney-client privilege, to the extent that confidentiality is required in order for the attorney to exercise his ethical duties as a lawyer; or (d) any matter involving the employment, promotion, discipline, or dismissal of a specific officer or employee of the association.

(2) The executive board shall not exclude or restrict attendance at any meeting or portion thereof to discuss any matter described in paragraph (1) of this subsection until it shall first adopt, at a meeting to which all unit owners are permitted to attend, a motion stating: (a) the general nature of the subject to be discussed; and (b) as precisely as possible, a time when and the circumstances under which the discussions conducted in closed session of the executive board may be disclosed to the unit owners.

(3) Minutes shall be taken in any closed session, in the same manner as provided for in subsection b. of this section, but need not be made available until the subject matter of the meeting may be disclosed to the unit owners.

(4) A formal or binding vote shall not be taken at any closed session unless that meeting falls under the exceptions enumerated in paragraph (1) of this subsection. If a vote is taken in a closed session, the fact that a vote was taken (without disclosure of confidential information) shall be confirmed in a public session which is open to all unit owners.

d. Copies of the agenda for an executive board meeting shall be made available to the unit owners at the beginning of each open meeting of the executive board.

e. All meetings of the unit owners and executive board meetings shall be held at the community property, or, if there is no suitable meeting facility at the community, at a suitable meeting facility elsewhere in the municipality or, if there is no such suitable facility, in an adjoining municipality, or within 10 miles of the community.

f. Adequate notice shall be given to all unit owners of the time and place of all meetings required to be open to all unit owners. In order to constitute "adequate notice," such notice shall be in writing and shall be given at least 48 hours in advance, giving the time, date, location, and agenda of the meeting. Such notice shall be:

(1) prominently posted in at least one location within the common interest community where it is accessible at all times to all unit owners;

(2) published in the community newsletter, if any, provided the publication schedule of the newsletter permits the notice to be published in adequate time for the meeting; and

(3) filed with the person responsible for administering the business office of the association. If the business office of the association is in the common interest community, the notice shall be posted prominently in that office.

In addition to these requirements, notices concerning meetings at which the budget or a rule or bylaw change will be discussed shall be mailed or hand delivered to each unit owner at least 48 hours in advance of the meeting. A unit owner may authorize the association to forward notices by electronic mail in lieu of receiving notices by regular mail.

At least once each year, within seven days following the annual meeting of the association, the executive board shall post, and maintain posted throughout the year at the prominent place accessible to all unit owners at which notices are posted, publish in the community newsletter, if any, and file with the person responsible for administering the business office of the association, a schedule of the times, dates and locations of all regular meetings of the executive board that are to be held during the succeeding year. Notice of any revision of the schedule shall be given in the same manner as the original notice of the schedule.

g. Minutes shall be taken at all meetings. Such minutes shall completely and accurately reflect all actions taken at the meeting. Approved copies of minutes shall be made available to unit owners within five business days after the date of approval of the minutes upon a request for a copy thereof. A permanent record of all approved minutes shall be maintained by the association at its business office, where they shall be available for review by all unit owners, except that minutes of a closed session may be withheld from such review for a reasonable period of time when necessitated by the reason for which the meeting was closed, or may be provided in redacted form by removing confidential information as necessary.

h. Within 30 days following an open meeting, the executive board shall provide all unit owners with a notice describing any adoption or amendment of a rule or bylaw that was approved at the meeting. No new rule or bylaw, or amendment to an existing rule or bylaw, shall take effect until such notice has been given to all unit owners. This notice shall be provided in the same manner as the "adequate notice" of a meeting required pursuant to subsection f. above. Additionally, all unit owners shall have the right to inspect all documents voted upon at a meeting, including amendments to the rules and bylaws, the annual budget, sale and lease of common elements, and contracts entered into by the association prior to any such action taking effect. These provisions shall not be construed to require that minutes, whether approved or unapproved, be made available prior to any action taking effect.

57. (New section) a. Unless the bylaws provide otherwise, a quorum shall be deemed to be present throughout any meeting of the association if persons entitled to cast 20 percent of the votes that may be cast for election of the executive board are present in person or by proxy at the beginning of the meeting.

b. Unless the bylaws specify a larger percentage, a quorum shall be deemed to be present throughout any meeting of the executive board if persons entitled to cast 50 percent of the votes on that board are present at the beginning of the meeting.

58. (New section) a. If only one of several owners of a unit is present at a meeting of the association, that owner shall be entitled to cast all the votes allocated to that unit. If more than one of the owners are present, the votes allocated to that unit shall be cast only in accordance with the agreement of a majority in interest of the owners, unless the declaration expressly provides otherwise. It shall be considered majority agreement if any one of the owners casts the votes allocated to that unit without protest being made promptly to the person presiding over the meeting by any of the other owners of the unit.

b. Votes allocated to a unit may be cast pursuant to a proxy duly executed by a unit owner. A proxy vote in connection with the election of members to the executive board shall be subject to section 69 of P.L. , c. (C. ) (pending before the Legislature as this bill). Unless the declaration or bylaws provide otherwise, in connection with any other matter to be voted upon by the unit owners, a proxy may be a general proxy permitting the proxy agent to cast the vote in the proxy agent's discretion. If a proxy is permitted to be a general proxy pursuant to the terms of this subsection b., and is given to an officer of the association who is identified in the proxy by corporate title, the proxy agent shall cast the vote given by the proxy as determined by a majority vote of the executive board. If a unit is owned by more than one person, each owner of the unit may vote, unless the additional vote would violate the terms of the declaration, or register protest to the casting of votes by the other owners of the unit through a duly executed proxy. A proxy shall be void if it is not dated.

c. An association shall provide that those unit owners wishing to cast anonymous ballots shall be provided a method to do so, provided that the association may utilize reasonable methods to verify that ballots are being cast only by unit owners having the right to do so in accordance with P.L. , c. (C. ) (pending before the Legislature as this bill), the declaration and the bylaws. If a unit is owned by more than one person, each owner of the unit may vote through a duly executed anonymous ballot, unless the additional ballot would violate the terms of the declaration and provided that the association adopts procedures to ensure that the total number of ballots cast for each unit does not exceed the permitted number of ballots under the declaration. A unit owner may revoke a ballot executed pursuant to this section only by actual notice of revocation to the person presiding over a meeting of the association and provided the ballot may be identified as that of the unit owner seeking to revoke it.

d. If the declaration requires that votes on specified matters affecting the common interest community be cast by lessees rather than unit owners of leased units:

(1) the provisions of subsections a. and b. of this section shall apply to lessees as if they were unit owners;

(2) unit owners who have leased their units to other persons shall not cast votes on those specified matters; and

(3) lessees shall be entitled to notice of meetings, access to records, and other rights respecting those matters as if they were unit owners. Unit owners shall also be given notice, in the manner provided in section 56 of P.L. , c. (C. ) (pending before the Legislature as this bill), of all meetings at which lessees are entitled to vote.

e. No votes allocated to a unit owned by the association shall be cast.

f. Any vote permitted under P.L. , c. (C. ) (pending before the Legislature as this bill) may, at the election of the executive board, be made electronically provided that (1) the association is able to verify that the vote is cast by a unit owner having the right to do so, and (2) the ballot may be cast anonymously or, when that is not reasonably practicable, the identity of the unit owner and selection indicated on any ballot shall be known only to a person or persons appointed to count the ballots, which person or persons shall not be a member of the executive board and who shall subscribe to an oath not to divulge the identity of, or selection indicated by, any unit owner. If the anonymity of an electronic ballot cannot be guaranteed, electronic voting shall be permitted provided that a unit owner is given the option of casting an anonymous written ballot. A unit owner voting by electronic means shall be deemed to be present at a meeting provided that the unit owner elects a proxy pursuant to subsection b. of this section. In such event, the proxy may provide that the unit owner's vote will be as directed in the unit owner's electronic ballot.

g. The declarant shall not be permitted to cast any votes allocated to unsold lots, parcels, units, or interests, in order to amend the declaration, bylaws or any other document, for the purpose of changing the permitted use of a lot, parcel, unit, or interest, or for the purpose of reducing the common elements or facilities.

59. (New section) a. A unit owner, except as an officer of the association, shall have no authority to act for or bind the association. An association, however, may assert tort claims concerning the common elements and facilities of the development as if the claims were asserted directly by the unit owners individually.

b. A unit owner shall not be liable for an injury or damage arising out of the condition or use of the common elements, other than as provided elsewhere in P.L. , c. (C. ) (pending before the Legislature as this bill) concerning a unit owners' intentional or negligent acts. The association or a unit owner other than the declarant shall not be liable for that declarant's torts in connection with any part of the common interest community which that declarant has the responsibility to maintain.

c. An action alleging a wrongful act by an association, including an action arising out of the condition or use of the common elements, may be maintained against the association but shall not be maintained against any unit owner. If the wrongful act occurred during any period of declarant control and the association has given the declarant reasonable notice of and an opportunity to defend against the action, the declarant who then controlled the association shall be liable to the association or to any unit owner for: (1) all losses not covered by insurance suffered by the association or that unit owner arising from that wrongful act, and (2) all costs that the association would not have incurred but for the wrongful act, including any breach of contract remedies. Whenever a declarant is liable to the association under this section, the declarant also shall be liable for all expenses of litigation, including reasonable attorney's fees , incurred by the association.

d. Any statute of limitations affecting an association's right of action against a declarant under P.L. , c. (C. ) (pending before the Legislature as this bill) shall be tolled until the period of declarant control terminates. A unit owner shall not be precluded from maintaining an action contemplated by this section because he is a unit owner or a member or officer of the association. Liens resulting from judgments against the association shall be governed by section 64 of P.L. , c. (C. ) (pending before the Legislature as this bill).

e. When the bylaws provide, an association shall not be liable in any civil action brought by or on behalf of a unit owner to respond in damages as a result of bodily injury to the unit owner occurring on the common elements of the association. An association shall not be liable for the exercise of discretion, when, in the face of competing demands, it determines whether and how to utilize and apply existing resources, including those allocated for equipment, facilities and personnel, unless a court concludes that the determination of the association was palpably unreasonable. This subsection shall not grant immunity to any association causing bodily injury to a unit owner on the association's common elements by its willful, wanton or grossly negligent act of commission or omission.

60. (New section) a. In a condominium or planned community, portions of the common elements may be conveyed or subjected to a security interest by the association if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by a declarant, or any larger percentage the declaration specifies, agree to that action; but all owners of units to which any limited common element is allocated shall agree in order to convey that limited common element or subject it to a security interest. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to non-residential uses. Proceeds of the sale shall be an asset of the association, but the proceeds of a sale of limited common elements shall be distributed equitably among the owners of units to which the limited common elements were allocated.

b. Part of a cooperative may be conveyed and all or part of a cooperative may be subjected to a security interest by the association if persons entitled to cast at least 80 percent of the votes in the association, including 80 percent of the votes allocated to units not owned by a declarant, or any larger percentage the declaration specifies, agree to that action; but, if fewer than all of the units or limited common elements are to be conveyed or subjected to a security interest, then all unit owners of those units, or the units to which those limited common elements are allocated, shall agree in order to convey those units or limited common elements or subject them to a security interest. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to nonresidential uses. Proceeds of the sale shall be an asset of the association. Any purported conveyance or other voluntary transfer of an entire cooperative, unless made pursuant to section 42 of P.L. , c. (C. ) (pending before the Legislature as this bill), shall be void.

c. An agreement to convey common elements in a condominium or planned community, or to subject them to a security interest, or in a cooperative, an agreement to convey any part of a cooperative or subject it to a security interest, shall be evidenced by the execution of an agreement, or ratifications thereof, in the same manner as a deed, by the requisite number of unit owners. The agreement shall specify a date after which the agreement will be void unless recorded. The agreement and all ratifications thereof shall be recorded in each county in which a portion of the common interest community is situated, and shall be effective only upon recordation.

d. An association, on behalf of the unit owners, may contract to convey an interest in a common interest community pursuant to subsection a. of this section, but the contract shall not be enforceable against the association until approved pursuant to subsections a., b., and c. of this section. Thereafter, the association shall have all of the powers necessary and appropriate to effect the conveyance or encumbrance, including the power to execute deeds or other instruments.

e. Unless made pursuant to this section, any purported conveyance, encumbrance, judicial sale, or other voluntary transfer of common elements or of any other part of a cooperative shall be void.

f. A conveyance or encumbrance of common elements or of a cooperative pursuant to this section shall not deprive any unit of its rights of access and support.

g. Unless the declaration otherwise provides, if the holders of a first security interest on 80 percent of the units which are subject to security interests on the day the unit owners' agreement under subsection c. is recorded, consent in writing:

(1) a conveyance of common elements pursuant to this section shall terminate both the undivided interests in those common elements allocated to the units and the security interests in those undivided interests held by all persons holding security interests in the units; and

(2) an encumbrance of common elements pursuant to this section shall have priority over all preexisting encumbrances on the undivided interest in those common elements held by all persons holding security interests in the units.

h. The consent by holders of first security interests on units described in subsection g. of this section, or a certificate of the secretary affirming that those consents have been received by the association, may be recorded at any time before the date on which the agreement under subsection c. becomes void. Consents or certificates so recorded shall be valid from the date they are recorded for purposes of calculating the percentage of consenting first security interest holders, regardless of late sales or encumbrances on those units. Regardless of the consent of the required percentage of first security interest holders, a conveyance or encumbrance of common elements shall not affect interests having priority over the declaration, or created by the association after the declaration was recorded.

i. In a cooperative, the association may acquire, hold, encumber, or convey a proprietary lease without complying with this section.

j. The effects of foreclosure of security interests granted pursuant to this section shall be governed by section 42 of P.L. , c. (C. ) (pending before the Legislature as this bill).

61. (New section) a. Commencing not later than the date of the first conveyance of a unit to a person other than a declarant, the association shall maintain, to the extent reasonably available:

(1) property insurance on the common elements and, in a planned community, also on property that must become common elements and all structural portions of the common interest community, insuring against all risks of direct physical loss commonly insured against or, in the case of a conversion building, against fire and extended coverage perils. Unless the association's declaration provides otherwise, the coverages under the property insurance shall be based upon replacement cost. If the declaration or bylaws do not provide for replacement cost insurance, the total amount of insurance after application of any deductibles shall not be less than 80 percent of the actual cash value of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations, and other items normally excluded from property policies;

(2) liability insurance, including medical payments insurance, in an amount determined by the executive board but not less than any amount specified in the declaration, covering all occurrences commonly insured against for death, bodily injury and property damage arising out of or in connection with the use, ownership or maintenance of the common elements and, in cooperatives, also of all units;

(3) directors' and officers' insurance; and

(4) any other insurance required by the declaration, association's bylaws or applicable law.

b. In the case of a building that is part of a cooperative or that contains units having horizontal boundaries described in the declaration, the insurance maintained under paragraph (1) of subsection a., to the extent reasonably available, shall include coverage of the units, but need not include improvements and betterments installed by unit owners.

c. If the insurance described in subsections a. and b. of this section is not reasonably available, the association promptly shall cause notice of that fact to be hand-delivered or placed in the United States mail in a prepaid envelope to all unit owners. The declaration may require the association to carry any other insurance, and the association in any event may carry any other insurance it considers appropriate to protect the association or the unit owners.

d. Insurance policies carried pursuant to subsections a. and b. of this section shall provide that:

(1) each unit owner is an insured person under the policy with respect to liability arising out of the owner's interest in the common elements or membership in the association;

(2) the insurer waives its right to subrogation under the policy against any unit owner or member of the owner's household;

(3) no act or omission by any unit owner, unless acting within the scope of his authority on behalf of the association, will void the policy or be a condition to recovery under the policy;

(4) there is other insurance in the name of a unit owner covering the same risk covered by the policy; and,

(5) the association's policy provides primary insurance.

e. Any loss covered by the property policy under paragraph (1) of subsection a. and under subsection b. of this section shall be adjusted with the association, but the insurance proceeds for that loss shall be payable, if in excess of $50,000, to any insurance trustee designated for that purpose, or otherwise to the association, and not to any holder of a security interest. The insurance trustee or the association shall hold any insurance proceeds in trust for the association, unit owners, and holders of a security interest or any lien holders as their interests may appear. Subject to the provisions of subsection h. of this section, the proceeds shall be disbursed first for the repair or restoration of the damaged property, and the association, unit owners, and holders of a security interest or any lien holders shall not be entitled to receive payment of any portion of the proceeds unless there is a surplus of proceeds after the property has been completely repaired or restored, or the common interest community is terminated.

f. An insurance policy issued to the association shall not prevent a unit owner from obtaining insurance for his own benefit.

g. An insurer that has issued an insurance policy under this section shall issue certificates or memoranda of insurance to the association and, upon written request, to any unit owner or holder of a security interest. The insurer issuing the policy shall not cancel or refuse to renew the policy until 30 days after notice of the proposed cancellation or non-renewal has been mailed to the association, and to each unit owner and each holder of a security interest to whom a certificate or memorandum of insurance has been issued, at their respective last known addresses.

h. (1) Any portion of the common interest community for which insurance is required under this section which is damaged or destroyed shall be repaired or replaced promptly by the association unless,

(a) the common interest community is terminated, in which case the provisions of section 42 of P.L. , c. (C. ) (pending before the Legislature as this bill) apply,

(b) repair or replacement would be illegal under any State statute or local ordinance governing health or safety, or

(c) 80 percent of the unit owners, including any owner of a unit or assigned limited common element that will not be rebuilt, vote not to rebuild. The cost of repair or replacement in excess of insurance proceeds and reserves shall be a common expense.

(2) If the entire common interest community is not repaired or replaced,

(a) the insurance proceeds attributable to the damaged common elements shall be used to restore the damaged area to a condition compatible with the remainder of the common interest community, and

(b) except to the extent that other proceeds will be distributed under subparagraph (b) of paragraph (11) of subsection a. of section 28 of P.L. , c. (C. ) (pending before the Legislature as this bill), (i) the insurance proceeds attributable to units and limited common elements that are not rebuilt shall be distributed first to the holders of a security interest as their interests may appear, unless the mortgage instrument provides otherwise, and to unit owners whose units are not encumbered by security interests, and then, if any surplus remains, first to owners of those units and the owners of the units to which those limited common elements were allocated as their interests may appear, and (ii) the remainder of the proceeds shall be distributed to all other unit owners or lien holders, as their interests may appear, as follows: in a condominium, in proportion to the common element interests of all the units and, in a cooperative or planned community, in proportion to the common expense liabilities of all the units. If the unit owners vote not to rebuild any unit, that unit's allocated interests shall be automatically reallocated upon the vote as if the unit had been condemned under subsection a. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill), and the association promptly shall prepare, execute and record an amendment to the declaration reflecting the reallocations.

i. The provisions of this section may be varied or waived in the case of a common interest community in which all units are restricted to non-residential use.

62. (New section) Unless otherwise provided in the declaration, any surplus funds of an association remaining from common receipts after payment of or provision for common expenses and any prepayment of reserves shall be paid to the unit owners in proportion to their common expense liabilities or credited to them to reduce their future common expense assessments.

63. (New section) a. Until an association makes a common expense assessment, the declarant shall pay all common expenses. After an assessment has been made by an association, assessments shall be made at least annually, based on a budget which shall be adopted at least annually by the association.

b. Except for assessments under subsections c., d. and e. of this section, all common expenses shall be assessed against all the units in accordance with the allocations set forth in the declaration pursuant to subsections a. and b. of section 30 of P.L. , c. (C. ) (pending before the Legislature as this bill). Any past due common expense assessment or installment thereof shall bear interest at a rate to be established by the association not exceeding 18 percent per year.

c. Unless the declaration provides otherwise:

(1) Any common expense associated with the maintenance, repair or replacement of a limited common element shall be assessed against the units to which that limited common element is assigned, equally, or in any other proportion the declaration provides;

(2) Any common expense or portion thereof benefiting fewer than all of the units shall be assessed exclusively against the units benefited; provided, however, that expenses to repair, maintain or replace general common elements shall, in the absence of unit owner misconduct, be deemed to benefit all units; and

(3) The costs of insurance shall be assessed in proportion to risk and, if separately metered, the costs of utilities shall be assessed in proportion to usage.

d. Assessments to pay a judgment against the association pursuant to subsection a. of section 65 of P.L. , c. (C. ) (pending before the Legislature as this bill) may be made only against the units in the common interest community at the time the judgment was entered, in proportion to their common expense liabilities.

e. If any common expense is caused by the misconduct of any unit owner, the association may assess that expense exclusively against that owner's unit, provided that alternate dispute resolution as required pursuant to section 87 P.L. , c. (C. ) (pending before the Legislature as this bill) is provided prior to assessment.

f. If common expense liabilities are reallocated, common expense assessments and any installment thereof not yet due shall be recalculated in accordance with the reallocated common expense liabilities.

64. (New section) a. If a unit owner shall fail to pay any assessment or other monies duly owed the association, the association shall have a lien on the unit for the amount of any such unpaid assessment or other moneys. Upon proper notice to the unit owner indicating the amount and basis of the lien, the association may, simultaneously or thereafter, record a notice of the lien in the amount of the delinquent assessment or other monies duly owed the association together with interest thereon and, if authorized by the declaration or bylaws, late fees, those fines authorized pursuant to section 50 of P.L. , c. (C. ) (pending before the Legislature as this bill) or pursuant to a determination by a court of competent jurisdiction and, subject to the provisions of paragraph 11 of subsection a. of section 49 of P.L. , c. (C. ) (pending before the Legislature as this bill), reasonable attorney's fees ; provided, however, that an association shall not record a lien in which the unpaid assessment consists solely of late fees. A lien for an assessment shall be effective when due. Any other lien shall be effective from and after the time of recording, in the public records of the county in which the unit is located, of a claim of lien stating the description of the unit, the name of the record owner, the amount due, and the date when due. Such claim of lien shall include only sums that are due and payable when the claim of lien is recorded and shall be signed and verified by an officer or agent of the association. Upon full payment of all sums secured by the lien, the party making payment shall be entitled to have the lien canceled or discharged of record by the association, upon payment of the recording fee and a discharge preparation fee to the association in an amount not exceeding $50, and to receive the canceled document or discharge. Except as set forth in subsection b. of this section, all such liens shall be subordinate to any lien for past due and unpaid property taxes, the lien of any first mortgage to which the unit is subject and to any other lien recorded prior to the time of recording of the claim of lien.

b. A lien recorded under subsection a. of this section, to the extent it is the result of a customary association assessment that became due for the six-month period prior to the recording of the lien and in the absence of any provision permitting the acceleration of common expense fees, shall have a priority over prior recorded mortgages and other liens, except for liens for unpaid property taxes or federal taxes, in accordance with this subsection.

(1) Such a lien shall be subordinate to any liens or encumbrances recorded before the declaration and, in a cooperative, shall be subordinate to any liens and encumbrances that the association creates, assumes or takes title to the cooperative property subject to.

(2) Such a lien shall be subordinate to a first mortgage recorded against a condominium unit prior to April 1, 1996, or a first mortgage against any other type of common interest unit, other than a cooperative, recorded prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

(3) With respect to a particular mortgage, in order to have the priority set forth in this subsection, the lien of the association shall have been recorded prior to:

(a) the filing with the proper county recording office of a lis pendens giving notice of an action to foreclose a mortgage on that unit; or

(b) receipt by the association of a summons and complaint in an action to foreclose a mortgage on that unit, if no lis pendens has been filed.

(4) Whenever more than one association lien has been filed, either because an association files more than one lien or more than one association having the right to do so files liens, the total lien priority for each association shall not be greater than the six-month priority described in this subsection. Priority between associations, whenever more than one association files a lien, shall be determined by the date of recording of the lien, with the earlier recorded lien having priority over later recorded liens.

(5) The priority granted to a lien under this section shall expire on the first day of the 60th month next following the date of recording of an association's lien, provided that subsequent lien filings shall have the priority otherwise set forth in this section upon the expiration of any prior lien filing, subject to the expiration period set forth in this subsection.

(6) When recording a lien that may be granted priority pursuant to this subsection, an association shall notify, in writing, any holder of a first mortgage lien on the property of the filing of the association lien. An association that exercises a good faith effort, but which is unable to ascertain the identity of a holder of a prior recorded mortgage on a unit, shall be deemed in substantial compliance with this paragraph. The notice required herein shall be deemed to have been properly made if mailed, by certified mail, with proper postage prepaid, to the address set forth on the recorded mortgage or, when the mortgage has been assigned, to the address indicated on the assignment of mortgage, unless the first mortgage holder or assignee has, in writing, specified a different address to the association, whereupon notice shall be deemed adequately made if mailed, postage prepaid, to such address.

(7) Nothing in this section shall prevent the establishment of a more favorable association assessment lien priority with respect to any lienholder other than a first mortgage granted by a bank, savings and loan association or similar institutional lender.

c. If a mortgagee of a first mortgage of record or other purchaser of a unit obtains title to such unit as a result of foreclosure of the first mortgage, such acquirer of title, his successors and assigns shall not be liable for the share of common expenses or other assessments by the association pertaining to such unit or chargeable to the former unit owner which became due prior to acquisition of title as a result of the foreclosure. Any remaining unpaid share of common expenses and other assessments, except assessments derived from late fees or fines, shall be deemed to be common
expenses collectible from all of the remaining unit owners including such acquirer, his successors and assigns.

d. Liens for unpaid assessments may be foreclosed by suit brought in the name of the association in the same manner as a foreclosure of a mortgage on real property. The association shall have the power, unless prohibited by the declaration or bylaws, to bid on the unit at foreclosure sale, and to acquire, hold, lease, mortgage, and convey the same. Suit to recover a money judgment for unpaid assessments may be maintained without waiving the lien securing the same. Nothing herein shall alter the status or priority of municipal liens under R.S.54:5-1 et seq.

e. The provisions of this section shall have no effect on the priority or enforcement of association liens that were recorded prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

f. The recording office of any county shall not accept for filing any Notice of Fine concerning fines imposed by an association, unless the lien filing is accompanied by a certification on behalf of the association, by either its attorney or an officer designated by the executive board, that the lien filing is in conformity with section 50 of P.L. , c. (C. ) (pending before the Legislature as this bill) or has been authorized pursuant to a determination of a court of competent jurisdiction. A lien certified by an association, through its attorney or designated officer, to be based on unpaid fees for common expenses, late fees, costs of collection, or interest on such fees or costs shall not be required to be accompanied by such proof.

65. (New section) a. In a condominium or planned community:

(1) Except as provided in paragraph (2) of this subsection, a judgment for money against the association if docketed shall not be a lien on the common elements, but shall be a lien in favor of the judgment lien holder against all of the units in the common interest community at the time the judgment was entered. No other property of a unit owner shall be subject to the claims of creditors of the association.

(2) If the association has granted a security interest in the common elements to a creditor of the association pursuant to section 60 of P.L. , c. (C. ) (pending before the Legislature as this bill), the holder of that security interest shall exercise its right against the common elements before its judgment lien on any unit may be enforced.

(3) Whether perfected before or after the creation of the common interest community, if a lien, other than a deed of trust or mortgage, but including a judgment lien or lien attributable to work performed or materials supplied before creation of the common interest community, becomes effective against two or more units, the unit owner of an affected unit may pay to the lien holder the amount of the lien attributable to the owner's unit, and the lien holder, upon receipt of payment, promptly shall deliver a release of the lien covering that unit. The amount of the payment must be proportionate to the ratio which that unit owner's common expense liability bears to the common expense liabilities of all unit owners whose units are subject to the lien. After payment, the association may not assess or have a lien against that unit owner's unit for any portion of the common expenses incurred in connection with the released lien.

(4) A judgment against an association shall be indexed in the name of the common interest community and the association and, when so indexed, is notice of the lien against the units.

b. In a cooperative:

(1) If an association receives notice of an impending foreclosure on all or any portion of the association's real estate, the association shall promptly transmit a copy of that notice to each unit owner of a unit located within the real estate to be foreclosed. Failure of the association to transmit the notice shall not affect the validity of the foreclosure.

(2) Whether or not a unit owner's unit is subject to the claims of the association's creditors, no other property of a unit owner shall be subject to those claims.

66. (New section) a. Except as otherwise provided in this section, all records of the association required to be maintained, including but not limited to all books, financial notes, contracts, and financial records, shall be made available for inspection or for copying to unit owners or to their duly authorized representatives, upon written request, within seven business days of receipt of the request and at a charge not to exceed the reasonable cost of reproduction; provided, in the case of records maintained in printed form, in no event shall the charge exceed 20 cents per page reproduced. If a unit owner or duly authorized representative seeks to inspect records, no charge shall be imposed by the association for the first hour of inspection occurring in any one-week period. A reasonable charge based upon actual cost to the association may be imposed for any longer period of inspection time required; provided, that where the inspection time is in excess of two hours in any one-week period, the person maintaining the records on behalf of the association may decline to continue the inspection for more than two hours so long as an appointment for additional inspection time is established for a date within five business days thereafter. The association shall not require a unit owner to state a reason for a request to inspect or copy records. In the event that the records are located off-site or the request involves the production and copying of a large volume of documents in the estimation of the association, the association shall have an additional seven business days to comply. A fee to cover postage may be charged by an association to the person requesting the documents. Nothing in this subsection shall be construed as requiring an association to research its records at the request of a unit owner. The association's obligation to provide records will be satisfied by providing all records within the category of documents where the owner's request may be referenced.

b. An association shall not be required to make available any records the disclosure of which would be an unreasonable violation of the privacy of any unit owner; provided, however, that unpaid common expenses which are overdue by more than 120 days shall not be deemed a private matter. An association shall not be required to make available any records dealing with pending or anticipated litigation or contract negotiations, or with any matter falling within the attorney-client privilege, to the extent that confidentiality is required for the attorney to discharge his or her ethical duties as a lawyer, or with respect to any matter involving the employment, promotion, discipline, or dismissal of a specific officer or employee of the association; provided, however, that the amount of wages, salaries and bonuses paid to, and the value of benefits received by, any such employee or officer, and the qualifications and credentials of any such employee or officer, shall be required to be made available. Any record not required to be made available in accordance with this subsection shall be made available at such time when there shall no longer be a need to maintain confidentiality.

c. Any denial of access to records shall indicate the specific reasons why allowing inspection of the records would violate the rights of any unit owner or otherwise be in violation of subsection b. of this section. A unit owner who is aggrieved by denial of access to records shall have the right to appeal the denial to the commissioner.

d. An association shall maintain detailed financial and business records, including a record of all receipts and expenditures, for a period which complies with customary business standards and procedures and would allow a full and accurate auditing of all records, but in any event for not less than seven years, unless the governing documents of the association require a longer period. All records required to be made available to a purchaser upon resale of a unit shall be made available to a unit owner within one business day upon written request.

e. An association shall maintain, and make available to any unit owner within five business days, a permanent record of all notices and orders issued by any governmental agency having jurisdiction over the association or the common interest community. The record shall also include documentation of all actions taken in response to any such notice or order and shall identify the persons responsible for the matter that gave rise to the notice or order.

f. Every association having gross annual receipts in excess of $75,000 shall have a certified annual audit prepared of its financial books and records, which audit shall be available within 180 days of the expiration of the fiscal year for which it is performed. In the event that the association is unable, for good cause, to make the audit available to unit owners within 180 days of the expiration of the fiscal year, a statement setting forth the reason for the delay shall be issued to the unit owners by the executive board. Every association having gross annual receipts of at least $25,000, but not more than $75,000, shall have such an audit prepared not less frequently than once every three years. All audits shall be prepared by a New Jersey certified public accountant in accordance with generally accepted accounting principles.

g. An association shall provide each unit owner, upon request, with a copy of the most recent annual financial statement of the association within seven days of the request and at no cost to the unit owner.

h. A unit owner may notify the Commissioner of Community Affairs upon the failure of an association to comply with requests made under subsections a., e. or g. of this section. Upon investigation, the commissioner shall have the power to order the compliance of the association with such a request.

67. (New section) With respect to a third person dealing with the association in the association's capacity as a trustee, the existence of trust powers and their proper exercise by the association shall be assumed without inquiry. A third person shall not be bound to inquire whether the association has power to act as trustee or is properly exercising trust powers. A third person, without actual knowledge that the association is exceeding or improperly exercising its powers, shall be fully protected in dealing with the association as if it possessed and properly exercised the powers it purports to exercise. A third person shall not be bound to assure the proper application of trust assets paid or delivered to the association in its capacity as trustee.

68. (New section) a. Subject to the rights of holders of first security interests, an association may collect, from rent due from a tenant to a delinquent unit owner, an amount that is not more than any unpaid common expenses, late fees, interest, and costs of collection, including reasonable attorney's fees , which have been duly assessed against the unit owner. "Delinquent unit owner" means a unit owner who owes common expense fees which are 30 or more days past due.

b. Prior to taking any action permitted by this section, an association shall give written notice, by certified mail, return receipt requested, to the delinquent unit owner at the unit owner's last known address of its intent to collect the rent. The notice shall set forth the exact amount the association claims is due and shall indicate the intent of the association to collect the amount due from rent, along with any other amounts which become due in the future and which remain unpaid for 30 days after becoming due, including any common expense fees lawfully accelerated pursuant to the declaration or bylaws. A copy of the notice shall be sent to the holder of the unit's first security interest of record. Any cost incurred by the association to ascertain the identity of the holder of the first security interest, including the cost of the preparation of a title search, shall constitute additional common expense fees due with respect to the unit.

c. A delinquent unit owner shall have 10 days from receipt of the notice required to be sent pursuant to subsection b. of this section to provide proof of payment or a statement of the grounds upon which the assessment is disputed. Upon the failure of the unit owner to respond within 10 days after receipt of the notice, or within 15 days of mailing if no receipt is obtained, and provided that no notice is received from the holder of the first security interest that it is exercising its right of assignment of rental proceeds, the association shall be entitled to notify and direct each tenant renting a unit from the delinquent unit owner to pay to the association all or a portion of the rent otherwise due the delinquent unit owner. The amount to be applied from the rent shall be limited to the lesser of: (1) the amount as stated in the notice to the delinquent unit owner or, (2) an amount adjusted to reflect any calculation errors sought to be corrected by the unit owner, as stated in the response to the association, if timely sent. No offset shall be allowed for amounts which are unrelated to claims of calculation errors. The association shall have a continuing right to collect the rent from the tenant or tenants until the delinquent sum is satisfied in full.

d. Nothing in this section shall prevent a unit owner or association from seeking a judicial remedy in a court of competent jurisdiction. If a court determines that a unit owner or association intentionally misrepresented or misstated a material fact, then the prevailing party shall be entitled to recover from the other party an amount equal to: (1) reasonable attorney's fees ; (2) three times the unpaid assessment alleged by the association to be due; and (3) if the association is the prevailing party, the common expense fees accruing and remaining unpaid after the date of filing of the action.

e. A holder of a first security interest which is entitled to an assignment of rents and which has exercised its rights by written notice recorded at the county recording office in the county in which the property is located, and by written notice sent by certified mail to the association from which it received notice pursuant to subsection b. of this section, may collect such rents in accordance with an assignment of rents under which it is an assignee.

69. (New section) a. An association shall conduct elections under the auspices of a committee of unit owners, none of whom shall be current board members or candidates for the board, which shall function independently of the executive board, or by using the services of a qualified independent individual or organization taken from a list provided by the department. The committee or independent individual or organization, as the case may be, shall be responsible for determining the eligibility of unit owners to vote or to run for office, for counting ballots and for verifying results. No unit owner shall be disqualified from running for office except for reason of nonpayment of assessments, legal fees, late fees, fines imposed in accordance with section 50 of P.L. , c. (C. ) (pending before the Legislature as this bill) or of a final determination of a violation of the declaration, bylaws or rules of the association, which violation remains uncured at the time of determination of disqualification. The association shall give all unit owners at least 60 days advance notice of the election so as to allow all eligible persons who might be interested in filing as candidates a reasonable opportunity to do so. No person shall be disqualified from voting in an election for any reason other than delinquency in the payment of maintenance charges. Any person who is disqualified from voting or running for office and wishes to challenge that disqualification may appeal the disqualification to the department, which shall investigate and decide the matter. A person who is disqualified and wishes to appeal the disqualification may cast a ballot that shall be kept apart from the other ballots and counted only in the event that the disqualification is overruled on appeal; provided, however, that any such ballot that is kept apart from the other ballots need only be counted if there is any possibility that it might affect the outcome of the election. Unit owners shall be allowed to cast ballots anonymously by mail, in person, or where the association permits, by electronic ballot. A mailed ballot or an electronic ballot shall be deemed to be a proxy for purposes of determining a quorum for the meeting at which the election is conducted. A non-directed proxy ballot may be counted only in voting for an office for which there are not as many listed candidates as there are positions to be filled. All candidates shall be afforded the opportunity to observe the entire process of counting and tabulation of the ballots, either in person or through a designated representative, and shall have access to lists of persons who are eligible to vote and, after the voting has started, to any list of persons who have voted that the association may maintain. Any challenge to the validity of an election shall be submitted to the executive board and to the department within 30 days following the date on which written notice of the results of the election is given to members of the association. Pending the outcome of any such challenge, the persons declared to be elected by the committee, individual or organization responsible for conducting the election shall serve as de facto officers or trustees, as the case may be. Ballots, envelopes, registration records, eligibility lists, proofs of mailing, and other voting materials shall be subject to inspection by all unit owners at the time of the election and shall be sealed after the election and kept unopened, in the custody of a licensed certified public accountant or the organization that conducted the election for not less than 30 days following the election, or until such later time as any challenge to the election brought within that 30-day period has been resolved and the documents are no longer required. Voting materials and procedures shall at all times be subject to inspection and review by the commissioner. The parties to any dispute shall be allowed the opportunity to be present or be represented at any such inspection and review.

b. Upon the written request of any candidate submitted at least 10 days prior to the scheduled election, the commissioner may appoint one or more persons to monitor an election to ensure fairness and accuracy, if previous documented evidence of election problems within an association exists. A candidate may also request the commissioner to investigate any allegations of fraud or abuse in election proceedings. The commissioner shall have power to invalidate any election in which the commissioner finds there to have been fraud or any other abuse of the electoral process, including, but not limited to, denial of equal access to all eligible voters for all candidates. In the event that any association fails or refuses to conduct a fair and open election at such time as elections are required for such association, the commissioner shall order that the election be conducted at such time and under such supervision as the commissioner shall direct, or the commissioner shall conduct the election directly.

c. If, at the time that all nominations are closed, the number of candidates for each office does not exceed the number of open positions for each such office, all candidates may be declared elected without the necessity for further compliance with the provisions of this section. If the association has not formed an election committee or enlisted the services of a qualified independent individual or organization because, immediately prior to the election meeting, no positions were contested, but one or more positions become contested as a result of nominations made at the meeting, an election committee shall be created to conduct the election to the contested position or positions that shall be composed of representatives designated by the candidates.

70. (New section) Notwithstanding any term of P.L. , c. (C. ) (pending before the Legislature as this bill), or of any other law or the governing documents of an association to the contrary, an association shall not be required to enforce a violation of a rule, regulation or restrictive covenant when an association or its employees or agents cannot, in the ordinary discharge of their functions, objectively determine that there exists a violation of such rules, regulations or restrictive covenants. Nothing herein shall prohibit an association from enforcing a violation that it is not required to enforce, provided that the association shall undertake such enforcement pursuant to the terms of P.L. , c. (C. ) (pending before the Legislature as this bill). Any unit owner may enforce the rules, regulations and restrictive covenants of the association through an action filed with a court of competent jurisdiction, or by alternative dispute resolution proceedings in accordance with section 86 of P.L. , c. (C. ) (pending before the Legislature as this bill). Any association refusing to enforce an alleged violation of a rule, regulation or restrictive covenant pursuant to the terms of this section shall have no liability to any unit owner or third party for such refusal.

71. (New section) a. An association, to the extent practicable, shall solicit a minimum of three bids for any contract for services or materials whenever the amount payable by the association in connection with the services or materials exceeds $17,500, or such higher amount as may be established by the Governor as the basic bid threshold amount for local public contracts, in accordance with section 3 of P.L.1971, c.198 (C.40A:11-3), in any 12-month period. An association shall solicit in a uniform manner, containing the required specifications, a minimum of three sealed bids, to be opened only at a publicly announced meeting open to all unit owners, which may be either a meeting of the executive board or of a committee appointed by the executive board. These bidding requirements shall also apply in any case in which the aggregate amount that might be paid to a single entity or a group of entities under common control for different services would exceed the stated thresholds. The thresholds shall not be applicable, however, to payments in excess of the threshold amounts that are necessarily incurred as a result of circumstances not anticipated at the time that the contract was awarded. The association shall award the contract to the vendor who provided the lowest bid, unless the board determines, for good cause that shall be expressly stated at a meeting open to attendance by the owners, that it would be in the best interests of the residents of the common interest community to award the contract to a vendor other than that vendor. The executive board shall have the right to negotiate with vendors for terms more favorable to the association after opening all bids and prior to awarding a contract. The requirements of this section shall not give rise to a cause of action by a vendor who provides a bid to an executive board. No member of an executive board or manager or other person employed by, or acting on behalf of, an association shall make any disclosure that gives an advantage to any bidder or otherwise compromises or interferes with the integrity and fairness of the bidding process.

b. The following contracts shall be exempted from the bidding requirements of this section:

(1) purchase of commodities at retail establishments; provided, however, that at least three prices shall be obtained for all purchases of a single commodity exceeding $1,000;

(2) renewal of an existing contract for services, unless the increase in payments would exceed the greater of five percent or the average increase in the most-recently published Consumer Price Index for Urban Wage Earners issued by the United States Department of Labor and applicable to the New York and Philadelphia regions, or unless the contract had not been bid for at least four years;

(3) professional services of attorneys, accountants, community managers, engineers, and architects; provided, however, that the executive board shall in each instance state supporting reasons for its action in the resolution awarding each contract and shall give notice, stating the nature, duration, service, and amount of the contract and that the resolution and contract are on file and available for inspection by members of the association at the offices of the association, in a manner that may reasonably be expected to enable all members of the association to be informed;

(4) the printing of documents to be used in any legal proceeding;

(5) contracts whenever necessary to prevent or ameliorate an imminent peril to life or property; provided, however, that this exception shall apply only to the extent necessary to eliminate the imminent peril;

(6) doing of work by any employee of the association in the course of such employment;

(7) purchase of perishable foods as a subsistence supply;

(8) supplying of any product or the rendering of any service by a public utility in accordance with tariffs or schedules of charges filed with the public entity having regulatory jurisdiction;

(9) equipment repair service of an emergency or exceptional nature, and necessary parts furnished in connection with such service, under circumstances that would make competitive bidding impracticable or otherwise not in the best interest of the association. A written statement specifying such circumstances shall be maintained as an association record open to examination by homeowners;

(10) the publication of legal s in newspapers;

(11) the acquisition of artifacts or other items of unique intrinsic, artistic or historical character;

(12) goods and services necessary or required to prepare and conduct an election;

(13) insurance, including the purchase of insurance coverage and consultant services, under circumstances that would make competitive bidding impracticable or otherwise not in the best interest of the association. A written statement specifying such circumstances shall be maintained as an association record open to examination by homeowners;

(14) library and educational goods and services;

(15) cooperative or other marketing of recycling materials recovered through a recycling program;

(16) vehicle towing and storage contracts at rates and charges not exceeding those established by the municipality in which the common interest community is located, pursuant to section 1 of P.L.1979, c.101 (C.40:48-2.49);

(17) purchase of steam or electricity;

(18) wastewater treatment services;

(19) expenses for travel and conferences; and

(20) provision or performance of goods or services for the support or maintenance of proprietary computer hardware and software.

c. An association of members in a community having fewer than 30 residential units, through a resolution adopted pursuant to an open meeting and by a unanimous vote of all of the members, may waive any or all of the provisions of this section.

d. Any two or more associations may contract for goods or services jointly in accordance with the provisions of this section.

e. The provisions of this section shall not be applicable to any contract in existence prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

72. (New section) a. Except as otherwise provided in this section, no member of the executive board, or employee or community manager of an association shall have an interest in a business organization or engage in any business, transaction or professional activity, which is in conflict with the proper discharge of his or her duties on behalf of the association, including, but not limited to, having a direct or indirect interest in any contracts for work or materials used by the association, or in any sales, leases or agreements in connection with any lands owned or managed by the association, or in any fees or compensation of any kind paid to or owed to any broker, architect, engineer, vendor or other person doing business with the association. A member of the executive board, or employee or community manager of an association, who has any interest that is actually or potentially in conflict with his or her duties on behalf of the association, may continue in his or her capacity with the association provided that he or she promptly discloses the conflicting relationship at a meeting open to the members of the association and recuses himself or herself from all involvement in the transaction on behalf of the executive board, which recusal shall be duly noted in the minutes of the meeting at which it occurred; provided, however, that a community manager who has recused himself or herself from the process of selecting a vendor with which he or she is affiliated may perform such services as may be required to fulfill the requirements of the contract once it has been duly executed. Failure of a member of an executive board, or an employee or community manager of an association, to comply with this requirement, or failure of a vendor to disclose any such conflicting relationship with any person required to recuse himself or herself who has not done so, shall make the contract voidable by the association.

b. No board member, employee or community manager shall use his or her position to secure or attempt to secure unwarranted privileges for any person.

c. No board member, employee or community manager shall act in his or her capacity as a board member or employee or community manager in any matter in which he or she, a related person, or any other person residing in his or her household or the household of a related person, or any business organization in which any of such persons has an interest, has a direct or indirect financial or personal involvement that might reasonably be expected to impair the objectivity or independence of judgment of the board member, employee or community manager.

d. No executive board of an association shall employ or award a contract to a former member of that executive board until at least one year shall have expired after the end of the former member's service as a member of the executive board.

e. A community manager who is directly or indirectly affiliated with any business entity that provides services or otherwise contracts with any common interest community shall file with the executive board of the association a list of all such affiliated entities, which list shall be updated at least annually and whenever any change occurs. It shall be the obligation of the community manager and of the affiliate to disclose the affiliation relationship at any time that the affiliate submits a bid to an association employing the community manager. If any such affiliate submits a bid to an association, the exemptions set forth in section 71 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not apply and the bids shall be sealed and be opened at an open meeting in the same manner as any other non-exempt bids. All payments to any such affiliate shall be made only after at least two members of the executive board shall have certified that the work was performed in a satisfactory manner and shall either sign off on the invoice or sign the check. Failure of either the community manager or the affiliate to comply with the requirements of this subsection shall render the contract voidable by the association at its option; provided, however, that the contract shall not be voidable if necessary service are rendered, or necessary goods are provided, in an emergency situation in which it is not possible to get prior approval of members of the executive board, and any affiliation relationship that has not previously been disclosed is disclosed as soon thereafter as possible.

ARTICLE 4

PROTECTION OF PURCHASERS

73. (New section) a. Sections 73 through 88 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be applicable to all units subject to P.L. , c. (C. ) (pending before the Legislature as this bill), except as provided in subsection b. of this section.

b. A resale certificate need not be prepared or delivered in the case of a:

(1) gratuitous disposition of a unit;

(2) disposition pursuant to court order;

(3) disposition by a government or governmental agency;

(4) disposition by foreclosure or deed in lieu of foreclosure;

(5) disposition to a dealer;

(6) disposition that may be canceled at any time and for any reason by the purchaser without penalty; or

(7) disposition of a unit restricted to nonresidential use, unless a majority of the voting interests in a common interest community devoted to nonresidential use determines that sections 73 through 88 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall apply, in full or part.

74. (New section) a. Except as provided in subsection b. of this section, a declarant, before offering any interest in a unit to the public, shall prepare a public offering statement conforming to the requirements of section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28).

b. A declarant may transfer responsibility for preparation of all or a part of the public offering statement to a successor declarant pursuant to section 52 of P.L. , c. (C. ) (pending before the Legislature as this bill) or to a dealer who intends to offer units in the common interest community. In the event of any such transfer, the transferor shall provide the transferee with any information necessary to enable the transferee to fulfill the requirements of subsection a. of this section.

c. If a unit is part of a common interest community and is part of another common interest community in connection with the sale of which the delivery of a public offering statement is required under the laws of this State, a single public offering statement conforming to the requirements of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.) as those requirements relate to each regime in which the unit is located, and to any other requirements imposed under the laws of this State, may be prepared and delivered in lieu of providing two or more public offering statements.

75. (New section) P.L. , c. (C. ) (pending before the Legislature as this bill) shall not affect or amend the terms or applicability of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), except as expressly set forth in sections 2, 74 and 76 of P.L. , c. (C. ) (pending before the Legislature as this bill).

76. (New section) If the declaration provides that ownership or occupancy of any units is or may be in time shares, the public offering statement in addition to the information required by section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28) shall disclose the:

a. number and identity of units in which time shares may be created;

b. total number of time shares that may be created;

c. minimum duration of any time shares that may be created; and

d. extent to which the creation of time shares will or may affect the enforceability of the association's lien for assessments provided in section 64 of P.L. , c. (C. ) (pending before the Legislature as this bill).

77. (New section) a. Except in the case of a sale in which delivery of a public offering statement is required pursuant to section 8 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-28) or unless exempt under subsection b. of section 73 of P.L. , c. (C. ) (pending before the Legislature as this bill), a unit owner shall furnish to a purchaser before the earlier of the date of conveyance or transfer of the right to possession of a unit, a copy of the declaration (other than any plats and plans), the bylaws, the rules or regulations of the association, and a certificate containing:

(1) a statement disclosing the effect on the proposed disposition of any right of first refusal or other restraint on the free alienability of the unit held by the association;

(2) a statement setting forth the amount of the periodic common expense assessment currently due and payable from the selling unit owner;

(3) a statement of any other fees payable by the owner of the unit being sold;

(4) a statement of any capital expenditures approved by the association for the current and two next succeeding fiscal years;

(5) a statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects;

(6) the most recently prepared balance sheet and income and expense statement, if any, of the association;

(7) the current operating budget of the association;

(8) a statement of any unsatisfied judgments against the association and the status of any pending suits in which the association is a defendant;

(9) a statement describing any insurance coverage maintained by the association;

(10) a statement as to whether the executive board has given or received written that any existing uses, occupancies, alterations, or improvements in or to the unit or to the limited common elements assigned thereto violate any provision of the declaration;

(11) a statement as to whether the executive board has received written from a governmental agency of any violation of environmental, health, or building code with respect to the unit, the limited common elements assigned thereto, or any other portion of the common interest community which have not been cured;

(12) a statement of the remaining term of any leasehold estate affecting the common interest community and the provisions governing any extension or renewal thereof;

(13) a statement of any restrictions in the declaration affecting the amount that may be received by a unit owner upon sale, condemnation, casualty loss to the unit or the common interest community, or termination of the common interest community;

(14) in a cooperative, an accountant's statement, if any was prepared, as to the deductibility for federal income tax purposes by the unit owner of real estate taxes and interest paid by the association;

(15) a statement describing any pending sale or encumbrance of common elements; and

(16) a statement disclosing the effect on the unit to be conveyed of any restrictions on the owner's right to use or occupy the unit or to lease the unit to another person.

b. The association, within 10 days after a request by a unit owner, shall furnish a certificate containing the information necessary to enable the unit owner to comply with this section. A unit owner providing a certificate pursuant to subsection a. of this section, and any real estate broker or sales agent who provides brokerage services to the unit owner or purchaser shall not be liable to the purchaser for:

(1) any erroneous information provided by the association and included in the certificate, or

(2) any matter related to the common interest community except, with respect to liability between the unit owner and a purchaser, as may otherwise be agreed in writing.

c. A purchaser, other than a purchaser through a foreclosure, shall not be liable for any unpaid assessment or fee greater than the amount set forth in the certificate prepared by the association. A unit owner shall not be liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner, but the purchase contract shall be voidable by the purchaser until the certificate has been provided and for five days thereafter or until conveyance, whichever first occurs.

d. The seller shall notify the association, not less than 30 days prior to the proposed settlement date for the sale, of the names, addresses and telephone numbers of the prospective purchasers. The association shall, upon notification, alert the seller, in writing, to any violations of record that have not been remedied, and shall provide a copy of the to the purchaser. The association shall, within three business days following receipt of a written request from purchaser, mail written notice to the purchaser confirming whether the outstanding violation has been cured. If purchaser fails to confirm that the violation has been cured prior to settlement, the purchaser shall become responsible for curing the violation.

78. (New section) a. In the case of a sale of a unit where delivery of a public offering statement is required pursuant to "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), a seller:

(1) before conveying a unit, shall record or furnish to the purchaser releases of all liens, except:

(a) liens on real estate that a declarant has the right to withdraw from the common interest community, or

(b) that the purchaser expressly agrees to take subject to or assume, and that encumber:

(i) in a condominium, that unit and its common element interest, and

(ii) in a cooperative or planned community, that unit and any limited common elements assigned thereto;

(2) shall provide a surety bond or substitute collateral for, or insurance against, the lien as provided for liens on real estate in the "Construction Lien Law," P.L.1993, c.318 (C.2A:44A-1 et seq.).

b. Before conveying real estate to the association, the declarant shall have that real estate released from:

(1) all liens the foreclosure of which would deprive unit owners of any right of access to or easement of support of their units, and

(2) all other liens on that real estate unless the public offering statement describes certain real estate that may be conveyed subject to liens in specified amounts.

79. (New section) a. A unit may be sold by the sheriff on execution, free of any claim that is not a lien of record for common expenses or other assessments by the association, but any funds derived from that sale remaining after satisfaction of prior liens and charges, but before distribution to the previous unit owner, shall be applied to payment of such unpaid common expenses or other assessments if written notice thereof shall have been given to the sheriff before distribution. Any such unpaid common expenses which shall remain uncollectible from the former unit owner for a period of more than 60 days after such sheriff's sale may be reassessed by the association as common expenses to be collected from all unit owners, including the purchaser who acquired title at the sheriff's sale, his successors and assigns. Unless prohibited by the master deed, declaration or bylaws, the association may bid in and purchase the unit at a sheriff's sale, and acquire, hold, lease, mortgage, and convey the same.

b. Notwithstanding any foreclosure, tax sale or other forced sale of a unit, all applicable provisions of the master deed, declaration and bylaws shall be binding upon any purchaser at such sale to the same extent as they would bind a voluntary grantee, except that such purchaser shall not be liable for the share of common expenses or other assessments by the association pertaining to such unit or chargeable to the former owner which became due prior to such sale except as otherwise provided in subsection a. of this section.

80. (New section) a. Express warranties made by any seller to a purchaser of a unit, if relied upon by the purchaser, shall be created as follows:

(1) Any affirmation of fact or promise which relates to the unit, its use, or rights appurtenant thereto, area improvements to the common interest community that would directly benefit the unit, or the right to use or have the benefit of facilities not located in the common interest community, shall create an express warranty that the unit and related rights and uses will conform to the affirmation or promise.

(2) Any model or description of the physical characteristics of the common interest community, including plans and specifications of or for improvements, shall create an express warranty that the common interest community will conform to the model or description, unless express disclaimers in language in common understanding calling the purchaser's attention to the exclusion of this warranty are displayed on the plans and specifications, or in the model, and are explicitly referenced in the sales contract.

(3) Any description of the quantity or extent of the real estate comprising the common interest community, including plats or surveys, shall create an express warranty that the common interest community will conform to the description, subject to customary tolerances.

(4) A provision that a purchaser may put a unit to a specified use is an express warranty that the specified use is lawful.

b. Neither formal words, such as "warranty" or "guarantee," nor a specific intention to make a warranty, shall be necessary to create an express warranty of quality, but a statement purporting to be merely an opinion or commendation of the real estate or its value shall not create a warranty.

c. Any conveyance of a unit transfers to the purchaser all express warranties of quality made by previous sellers.

d. Nothing in this section shall be construed to impair or negate any warranties which may have been created pursuant to any other law or regulation, including those warranties provided pursuant to "The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.).

81. (New section) a. Unless the limitation period is tolled under section 59 of P.L. , c. (C. ) (pending before the Legislature as this bill) or affected by subsection d. of this section, a judicial proceeding for breach of any obligation arising under section 80 of P.L. , c. (C. ) (pending before the Legislature as this bill), shall be commenced within six years after the cause of action accrues.

b. Subject to subsection c. of this section, a cause of action for breach of warranty of quality, regardless of the purchaser's lack of knowledge of the breach, shall accrue:

(1) as to a unit, at the time the purchaser to whom the warranty is first made enters into possession if a possessory interest was conveyed, or at the time of acceptance of the instrument of conveyance if a non-possessory interest was conveyed; and

(2) as to each common element, at the time the common element is completed or, if later, as to (a) a common element that is added to the common interest community by exercise of development rights, at the time the first unit which was added to the condominium by the same exercise of development rights is conveyed to a bona fide purchaser, or (b) a common element within any other portion of the common interest community, at a time the first unit is conveyed to a bona fide purchaser.

c. If a warranty of quality explicitly extends to future performance or duration of any improvement or component of the common interest community, the cause of action shall accrue at the time the breach is discovered or at the end of the period for which the warranty explicitly extends, whichever is earlier.

d. During the period of declarant control, the association may, pursuant to section 88 of P.L. , c. (C. ) (pending before the Legislature as this bill), authorize an independent committee of the executive board to evaluate and enforce by any lawful means warranty claims involving the common elements, and to compromise those claims. If the committee is so created, the limitation period for claims for these warranties shall begin to run from the date of the first meeting of the committee, regardless of when the period of declarant control terminates.

e. Nothing in this section shall be construed to impair or negate any warranties which may have been created pursuant to any other law or regulation, including those warranties provided pursuant to "The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.).

82. (New section) a. If a declarant or any other person subject to P.L. , c. (C. ) (pending before the Legislature as this bill) fails to comply with any of its provisions or any provision of the declaration or bylaws, any person or class of persons adversely affected by the failure to comply shall have a claim for appropriate relief. Punitive damages may be awarded for a willful failure to comply with P.L. , c. (C. ) (pending before the Legislature as this bill). The court, as appropriate, may award court costs and reasonable attorney's fees .

b. Parties to a dispute arising under P.L. , c. (C. ) (pending before the Legislature as this bill), the declaration, or the bylaws may agree to resolve the dispute by any form of binding or non-binding alternative dispute resolution, but;

(1) a declarant may agree with the association to do so only after the period of declarant control passes, unless the agreement is made with an independent committee of the executive board elected pursuant to section 88 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(2) an agreement to submit to alternative dispute resolution other than that provided under section 86 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be in a writing signed by the parties.

Nothing in this section shall affect the right of a unit owner to submit a matter to alternative dispute resolution pursuant to section 86 of P.L. , c. (C. ) (pending before the Legislature as this bill).

83. (New section) No promotional material shall be displayed or delivered to a prospective purchaser which describes or portrays an improvement that is not in existence unless the description or portrayal of the improvement in the promotional material is conspicuously labeled or identified either as "MUST BE BUILT" or as "NEED NOT BE BUILT."

84. (New section) a. Except for improvements labeled "NEED NOT BE BUILT" the declarant shall complete all recreational and parking facilities or amenities depicted on any site plan or other graphic representation, including any plats or plans prepared pursuant to section 32 of P.L. , c. (C. ) (pending before the Legislature as this bill), whether or not that site plan or other graphic representation is contained in the public offering statement or in any promotional material distributed by or for the declarant.

b. The declarant shall be subject to liability for the prompt repair and restoration, to a condition compatible with the remainder of the common interest community affected by the exercise of rights reserved pursuant to or created by sections 33 through 37, 39 and 40 of P.L. , c. (C. ) (pending before the Legislature as this bill).

85. (New section) In the case of a sale of a unit in which delivery of a public offering statement is required, a contract of sale may be executed, but no interest in that unit may be conveyed until the declaration is recorded and the unit is substantially completed, as evidenced by an independent licensed architect, surveyor or engineer, or by issuance of a certificate of occupancy authorized by law.

86. (New section) a. Every association shall offer an alternative dispute resolution procedure that shall be readily available as a cost-effective alternative to litigation for the resolution of qualified disputes between individual owners and the association, and between different owners. For the purposes of this section, a "qualified dispute" shall be construed broadly, and means those disputes involving the common interest community, the bylaws or the rules of the association. An association shall not be required to offer alternative dispute resolution proceedings for a dispute that is exclusively a personal dispute between two or more parties and which is unrelated to the common elements, or for a dispute regarding collection of an unpaid assessment, or for a dispute that does not involve the actual or prospective imposition of a fine or loss or denial of privileges. Assessments, late fees, and fines for nonpayment of assessments or late fees may be challenged in an alternative dispute resolution proceeding, but only on the grounds that they were not authorized by the governing documents or by law or that the method utilized for imposing them was not consistent with the procedure set forth in the declaration, bylaws or law.

b. Alternative dispute resolution shall be effectuated through implementation of a mediation-arbitration procedure utilizing independent persons trained in both mediation and arbitration. The persons acting as mediators and arbitrators shall comply with the procedural rules established by the commissioner, which shall include sufficient training for mediating and arbitrating disputes in a common interest community and meeting minimum requirements concerning knowledge of common interest community practices and procedures and the statutory and common law affecting common interest communities. Qualifications for volunteer or professional dispute resolvers shall include sufficient training for mediating or arbitrating disputes in a common interest community, requirements for knowledge of community association issues and any other requirements necessary to provide such services

c. With respect to a qualified dispute in connection with which the association is a party, reasonable filing fees may be charged by an association for dispute resolution; provided, however, that such fees shall not exceed $75 for each party, which shall be refundable to a party found to be the prevailing party. With respect to a qualified dispute in which the association is not a party to the
dispute, all fees charged for alternative dispute resolution shall be borne by the owners who are parties to the dispute.

d. The alternative dispute resolution procedure hereby established shall be initiated and processed as follows:

(1) Upon the written request of any owner for resolution of a qualified dispute between the owner and the association, or between owners, the association shall provide dispute resolution in accordance with the terms of this section, the procedural rules of the Department of Community Affairs and those rules of the association that are consistent with this section. Within seven days following receipt of notice from an owner for dispute resolution, or prior to commencing suit, the association shall provide the owner with a list of qualified mediator-arbitrators from the list maintained by the Office of the Ombudsman, which list shall be maintained by the Department of Community Affairs and made promptly available upon request. If any owner who is a necessary party to a dispute resolution fails to respond in writing, within 14 days following the posting in the United States mails, postage prepaid, of the association's notice offering dispute resolution and requesting a response within such time period, which notice was addressed to the owner at the address of record in the business office of the association and at any other address that the owner may have provided in writing for alternative or emergency notification, the owner shall be deemed to have waived the right to participate in dispute resolution and the association shall have no further obligation under this section.

(2) If more than one owner is a party to a qualified dispute and all such owners cannot agree upon the identity of the dispute resolver, the association shall choose from among any of the dispute resolvers selected by any of the owners.

(3) Upon selection of a dispute resolver, the association shall notify the dispute resolver so selected, who shall schedule the mediation-arbitration procedure within 30 days of the dispute resolver's selection.

(4) Dispute resolution shall commence with mediation. If the mediation results in an agreement between the parties to the dispute, the agreement shall be set forth in writing and executed by the parties, and may then be enforced in the Superior Court in the same manner as a binding arbitration award.

(5) If the dispute is not resolved by a written agreement executed by all parties to the dispute, the alternative dispute resolution procedure shall proceed to binding arbitration if all parties so agree in writing. If all parties do not agree in writing that the arbitration shall be binding, then the dispute shall proceed to non-binding arbitration. When all parties have agreed to binding arbitration, it shall be deemed to be an election of remedies and no party to the dispute may commence litigation with regard to the subject matter of the dispute, except as permitted by N.J.S.2A:24-1 et seq.

(6) Each party to arbitration shall have the right to introduce evidence and testimony concerning their position, cross-examine witnesses for the opposing party and present written legal arguments in support of their position.

(7) The dispute resolver shall advise the parties, prior to the commencement of the dispute resolution procedure, whether the parties will immediately proceed to arbitration if mediation is unsuccessful, or whether a separate proceeding will be established for arbitration if the mediation fails to produce a written agreement. If the dispute resolver advises the parties that mediation and arbitration are to be separate proceedings, and the parties do not reach a written agreement during the mediation phase, the dispute resolver shall schedule the arbitration hearing to occur within 30 days of the conclusion of mediation. Each party to the arbitration shall have the right to request one adjournment of the hearing date, provided the adjournment request is made within 10 days of the date of the dispute resolver's notice establishing the date of the hearing. In case of an emergency, and upon good cause shown, the dispute resolver may honor a request for an adjournment that is made more than 10 days after the dispute resolver's notice. Upon a request for an adjournment, the dispute resolver shall reschedule the hearing within 14 days of the original hearing date unless (a) such date would cause a material hardship to one or more parties, whereupon the dispute resolver shall reschedule arbitration for a date certain in the arbitrator's sole discretion, but such date shall only be more than 30 days after the original date set for the arbitration hearing in the event of material hardship due to sickness, injury or death in the immediate family of a party to the dispute; or (b) the parties mutually consent to an alternate date. If any party fails to comply with the dispute resolver's scheduling of the arbitration, the arbitrator shall enter an award in favor of the non-defaulting party or parties.

(8) The dispute resolver shall render a written arbitration award within 14 days following the conclusion of the arbitration hearing. If the arbitrator fails to issue a written award within 14 days, the association shall give notice of such failure to the Department of Community Affairs and to the arbitrator. If the arbitrator fails to issue a written award within a further 16-day period, either party shall have the right to file suit with respect to the subject matter of the arbitration. Nothing herein shall prevent the association from filing a lien with respect to the subject matter of the dispute following the expiration of the 30-day period; provided, however, that the enforcement of any such lien may be stayed by a court having jurisdiction and that, in the event of a ruling by the arbitrator adverse to the association after the end of the 30-day period, the lien shall be discharged by the association at its sole cost and expense.

(9) In the event that a dispute is not resolved through mediation, the dispute resolver shall, in the arbitration proceeding, assess costs against the non-prevailing party; provided, however, that the costs assessed shall not exceed $300, which award of costs shall, in binding and non-binding dispute resolution procedures, be binding.

e. The association shall also provide alternative dispute resolution in any dispute between or among unit owners; provided, however, that when the association is not a party to the dispute, such dispute resolution shall be at the sole cost and expense of the parties.

f. If emergency relief is required, a motion to stay the alternative dispute proceedings may be filed in the Superior Court. The motion shall be accompanied by a verified petition alleging facts that, if proven, would support entry of a temporary injunction, and if an appropriate motion and supporting papers are filed, the alternative dispute resolution proceedings shall be stayed pending a court hearing and disposition of a motion for temporary injunction.

g. An owner may file a claim with a court of competent jurisdiction with regard to any matter that would constitute a qualified dispute; provided, however, that (1) any such court filing shall be deemed an election of remedies and shall bar the owner from any further alternative dispute resolution proceedings; (2) when an owner has initiated a claim with a court of competent jurisdiction after having been advised by the association of the right to participate in alternative dispute resolution proceedings, nothing herein shall prohibit the association from immediately filing a notice of fine or revoking or suspending the owner's privileges, if otherwise permitted by law and by the governing documents and subject to the authority of the court to stay any such action; and (3) where an owner has, in accordance with paragraph (5) of subsection d. of this section, elected to participate in binding arbitration, the owner shall not be permitted to file a claim with a court of competent jurisdiction except as provided in paragraph (5) of subsection d of this section. No claim may be filed by an owner while alternative dispute resolution proceedings are ongoing pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill), unless such proceedings have been abated pursuant to subsection f. of this section. No application for alternative dispute resolution shall be filed with regard to any matter pending before a court of competent jurisdiction, except upon the order of the court.

h. The department, upon a finding that an association has failed to offer or provide alternative dispute resolution in accordance with P.L. , c. (C. ) (pending before the Legislature as this bill) and the procedural rules promulgated pursuant thereto, shall provide such dispute resolution, in which case any filing fees charged in accordance with paragraph (3) of subsection b. of this section shall be payable to the department. The department may, in its sole discretion, notify the association of such failure and shall provide it with not less than seven, or more than 14 days in which to comply with the requirements of P.L. , c. (C. ) (pending before the Legislature as this bill). If, thereafter, the association fails to proceed with alternative dispute resolution proceedings in accordance with P.L. , c. (C. ) (pending before the Legislature as this bill) and the procedural rules promulgated thereunder, the department shall provide the alternative dispute resolution proceedings. Any alternative dispute resolution provided by the association that is not consistent with this section shall be of no force or effect. In carrying out its responsibilities under this section, the department shall refer the dispute to the Office of the Ombudsman, which shall utilize the Office of Dispute Settlement in the Office of the Public Defender to provide alternative dispute resolution services in accordance with this section and the procedural rules adopted by the commissioner. The department shall reimburse the Office of Dispute Settlement for the cost of providing such services. When the department provides alternative dispute resolution pursuant to this section, the costs shall be paid by the department with funds from the Homeowners' Association Trust Fund established pursuant to section 5 of P.L. , c. (C. ) (pending before the Legislature as Assembly bill number 481) and revenue received from filing fees paid pursuant to subsection c. of this section.

87. (New section) Except for applications for emergent relief, prior to the commencement of any form of construction defects litigation on behalf of an association against a declarant or any members of the executive board appointed by the declarant, the following alternative dispute procedure shall be followed:

a. The association shall give written notice to the declarant, by certified mail, return receipt requested, which shall be referred to as the "notice." The notice shall be accompanied by the association's statement of all known causes of action, and its version of the facts involved and copies of any reports or documents supporting the association's claim.

b. Within 30 days of the receipt of the notice from the association, the declarant or its agent may send a written request to investigate the association's claim, which shall be referred to as the "declarant's reply." The declarant's reply shall include a stipulation by the declarant that all statutes of limitation applicable to any claim by the association against the declarant shall be tolled for 180 days or such shorter period of time as set forth in the cancellation notice delivered pursuant to subsection c. of this section. The tolling of the statutes of limitation shall be effective as of the date of the declarant's reply. If the declarant fails to send the declarant's reply within 30 days or fails to stipulate to the required tolling of all applicable statutes of limitation, then the association may institute an action without satisfying any other condition of this section.

c. Upon receipt of the declarant's reply, the association shall, to the extent practicable, make available for inspection and testing by declarant or its agents, all common areas, interiors of applicable individual units and the documents identified in the notice. All inspections and testing, including testing that may cause physical damage to the subject property, shall be at declarant's sole cost and expense, shall be performed during the business week unless the association and declarant agree otherwise, and shall be completed within 60 days from the date of the declarant's reply. The declarant may conduct destructive testing if the association has conducted prior destructive testing related to the defects specified in the association's notice or the parties mutually agree to destructive testing. "Destructive testing" shall mean any act causing substantial physical change in the condition of the premises which would necessitate a repair to restore the premises to the condition that existed prior to the testing. The testing shall be performed to determine the existence, type, extent, or cause of a defect in the design or construction of the development. Acts of repair or maintenance by the association shall not constitute destructive testing. Upon completion of any testing, declarant shall restore the property to the condition that existed immediately prior to the testing.

d. Within 60 days after completion of its inspections and testing, the declarant shall submit a written statement to the association setting forth declarant's proposed settlement of the claim, which shall be referred to as the "settlement offer." If the declarant does not deliver the settlement offer within the 60-day period, the association may institute an action without satisfying any other condition of this section.

e. Within 30 days of receipt of the settlement offer, the association shall notify the declarant of two business dates during the 45-day period following the date of the association's notice, the first of which will not be earlier than 10 days following the date of the association's notice, on which a majority of the executive board will be prepared to meet with the declarant to discuss the association's claims and the settlement offer. The association and the declarant may be represented at the meeting by attorneys and independent consultants.

f. If no settlement of the association's claim, or any part thereof, has been agreed upon, then either the association or the declarant may deliver a written demand within 15 days from the date of the meeting held pursuant to subsection e. of this section for arbitration of the association's claims. The party filing the demand for arbitration shall be responsible for paying any filing fees or escrow deposits related thereto. The arbitration shall be undertaken by and in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, unless the declarant and the association agree to another form of alternative dispute resolution in lieu of the provisions of this subsection. The arbitration shall be non-binding. Arbitration hearings shall be conducted in the county in which the property is located unless the parties agree otherwise. The declarant and the association shall be responsible for their own costs in connection with presenting their respective cases. The cost of the arbitrator shall be equally shared by the parties unless the arbitrator determines otherwise. If neither the declarant nor the association delivers a written demand for arbitration as provided herein, compliance with the terms of this subsection shall not be a precondition to the association's institution of litigation.

g. At any time subsequent to the tolling of the statute of limitations, as set forth in the declarant's reply, the declarant may give written notice terminating the tolling of the statute of limitations. Upon delivery of the termination notice, the association shall be relieved of its obligation to arbitrate under subsection f. of this section, but, provided declarant has satisfied its obligations under subsections b. and d. of this subsection, the association shall be required to satisfy its obligations under subsections h. and i. of this section. The tolling of any applicable statutes of limitation shall terminate 180 days following the commencement of the tolling, unless extended by mutual written agreement.

h. If the association does not accept the declarant's settlement offer, or if either the association or the declarant does not accept the arbitrator's determination, then the association may commence any legal action the association deems appropriate, provided that prior to the filing of any complaint commencing a legal action against the declarant, a majority of the association's non-declarant members present, in person or by proxy at a meeting of the association where a quorum is present, shall approve the commencement of a lawsuit. The quorum for a meeting of the members of the association for the purposes set forth in this subsection shall be 33 percent of all members of the association qualified to vote, unless the declaration or bylaws shall provide for a lesser quorum requirement. For purposes of determining a quorum, membership interests allocated to declarant units will not be considered in determining a quorum.

i. The executive board shall, at least 10 days prior to the meeting referenced in subsection h. of this section, distribute to each member of the association the following written materials:

(1) a statement of the association's claim against the declarant, specifying all construction defects and other claims which comprise the cause of action;

(2) a copy of the settlement offer and any other written responses to the claim provided by the declarant;

(3) if the declarant and association participated in an arbitration procedure pursuant to subsection f. of this section, a copy of the arbitrator's findings along with the association's and declarant's response to such findings, if any;

(4) a statement that the recovery of damages through litigation may not result in the receipt of sufficient funds to pay all damages or repair costs as estimated by the association's experts;

(5) an estimate of the minimum and maximum costs to the association to prosecute the litigation and a statement that such costs may not be recovered in the litigation;

(6) a description of the agreement with the attorney whom the association contemplates retaining to prosecute the litigation; and

(7) such other information as the association deems appropriate or as the declarant may have provided to the association in connection with its distribution to its members.

j. All written materials provided to the association's members will be privileged communications, unless the association agrees otherwise, and shall not be admissible in evidence in any action unless such materials would, notwithstanding their distribution to the association's members, otherwise be admissible but for their distribution to the association's members.

k. If the association fails to comply with any of the provisions of this section, such failure may be asserted by declarant as a procedural deficiency. Upon a judicial determination that the association failed to comply with the provisions set forth in this section, the association's complaint shall be stayed for an appropriate period of time to permit the association to cure any non-compliance.

l. Neither the failure to state a particular cause of action in the notice provided for in subsection a. of this section nor the failure to state a particular claim under paragraph (1) of subsection i. of this section shall be deemed a procedural deficiency, nor prevent the association from stating such other causes of action as it deems necessary or appropriate in connection with any litigation against the declarant.

88. (New section) a. During the period of declarant control after the initial election of unit owner board members other than the declarant, the executive board of the association may, upon the request of any board member, authorize an independent committee of at least five unit owners other than the declarant to evaluate, compromise and enforce by any lawful means as provided in this section any claims involving the common elements or any other improvements in the common interest community which the association is obligated to maintain. Only members of the executive board elected by the unit owners other than the declarant and other unit owners appointed by those independent members shall serve on the committee, and the committee's decisions shall be free of any control by the declarant or any member of the executive board or officer appointed by the declarant. Any vacancies on the committee shall be filled by the independent board members within 30 days, and in the case of any tie votes by such board members, by the vote of the unit owners other than the declarant within 60 days after the vacancy occurs.

b. If the committee authorized in subsection a. of this section is established and there has been substantial completion of the common elements and public improvements in any phase of the common interest community which are not covered by the performance or maintenance guarantees posted with any governmental agencies having jurisdiction, the committee shall, at the declarant's request, cause such common elements and improvements to be inspected and evaluated for compliance with the declarant's warranty and construction obligations, with the assistance of qualified independent engineering and legal consultants selected by the committee. The fees for such consultants shall be paid from funds contributed at closing for such purposes by unit owners other than the declarant or by regular or special common expense assessments, or by both; provided, however, that the declarant shall have the option to supplement such funds to the extent that it deems appropriate.

c. Public improvements to be dedicated to any governmental entity shall be exempt from any direct warranty or construction defect claims by the association or the unit owners other than the declarant. Acceptance of any such public improvements by the governmental entity to which they are to be dedicated shall be deemed conclusive evidence that such improvements have been satisfactorily completed and the declarant shall have no further obligation with respect to same to the association, to any unit owners other than the declarant, or to any governmental agency having jurisdiction.

d. Within 120 days after the association's receipt of any request for inspection of any phase of the completed common elements or other improvements, the committee shall cause its engineering consultant to inspect the particular completed improvements and render a written evaluation of same to the committee. A copy of the final report, following the committee's review of the initial evaluation, shall be furnished to the declarant within 30 days after the committee's receipt of the report. Thereafter, the committee, or its designated representatives, and the declarant shall conduct one or more joint inspections of the common elements and other improvements covered by the declarant's request and pursue good faith negotiations to resolve any warranty or construction defect claims against the declarant. All fees and related expenses incurred by the committee for engineering and legal consultants shall be paid promptly by the association from available designated funds upon receipt of the committee's written authorization to make such payments.

e. If a settlement agreement is finalized between the committee and the declarant, the declarant controlled executive board shall have the authority to execute such an agreement and to release the declarant from all liability with respect to the completed common elements and improvements, subject to such terms and conditions as may be acceptable to the committee. Any such settlement agreement and release shall be legally binding upon the association and the unit owners, provided that its form is approved by the independent legal counsel retained by the committee on behalf of the association.

f. If no settlement agreement is approved by the committee within 180 days after the committee's receipt of the declarant's request for inspection, the parties shall be obligated to proceed to mediation within 30 days thereafter in accordance with the rules of the American Arbitration Association. If no settlement is reached through mediation within 15 days after commencement of same, then the parties shall promptly proceed to non-binding arbitration of any remaining issues in accordance with the rules of the American Arbitration Association, and such mediation and non-binding arbitration shall be conditions precedent to any litigation of the warranty and construction defect claims against the declarant, which shall also require the approval of a majority of the unit owners other than the declarant. All professional fees and expenses reasonably incurred by the association with regard to the mediation or arbitration, or both, shall be borne by the non-declarant unit owners and paid by the association promptly upon the receipt of written authorization of the committee.

g. In the event that no settlement agreement and releases are executed with respect to any phase of completed common elements or improvements during the period of declarant control of the executive board of the association, any statutes of limitation or repose applicable to such phase shall be extended for a period of one year after the assumption of control of the executive board by unit owners other than the declarant. In addition, the declarant controlled board shall not be obligated to commence suit for any such claims during its period of control.

h. The procedures set forth in this section shall also apply to and be binding upon the declarant and the association after the unit owners, other than the declarant, assume control of the executive board of the association; provided, however, that the independent unit owner controlled executive board of the association shall not be bound by the recommendations of the committee.

ARTICLE 5

STATE OVERSIGHT OF ASSOCIATIONS

89. (New section) The Commissioner of Community Affairs shall have the following powers with regard to associations:

a. To initiate, receive, hear and review complaints, hold hearings and take such other enforcement actions as may be necessary with regard to any of the following matters:

(1) furnishing of information concerning records required to be maintained by the association and to be made available to unit owners;

(2) conduct of fair elections for association executive board members and officers and fair voting on other matters;

(3) establishment and implementation of a fair and efficient procedure for the resolution of disputes between associations and unit owners and among unit owners;

(4) holding of meetings that are open to unit owners and the conducting of association business in such open meetings, except as otherwise expressly permitted by statute;

(5) enforcement of conflict of interest provisions of section 72 of P.L. , c. (C. ) (pending before the Legislature as this bill) on the part of association trustees, officers and employees; and

(6) enforcement of standards of due process and open governance.

b. To issue subpoenas for the production of documents and the attendance of witnesses with respect to the investigation of any complaint.

c. To forward to the appropriate law enforcement officials any information that may indicate violation of any criminal statute.

d. To render advisory opinions as to whether a given state of facts or circumstances or action would constitute a violation of any statute or rule applicable to associations.

e. To enforce all statutes and rules imposing any duty upon associations.

f. (1) If the department determines, after notice, that an association, or a past or current officer or executive board member of an association, has: (a) violated any provision of P.L. , c. (C. ) (pending before the Legislature as this bill), the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.), "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), or any other statute regulating associations; (b) directly or through an agent or employee knowingly engaged in any violation of the governing documents of the association; or (c) violated any lawful order or rule of the department; the department may issue and enforce an order requiring the association or past or present executive board member or officer to cease and desist from the unlawful practice or to take such other affirmative action as in the judgment of the department will carry out the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill).

In the event the department has reason to believe that any person subject to licensing by any agency of State government has knowingly engaged in any unlawful practice in connection with the operation of an association, the department shall refer the matter to the agency having licensing jurisdiction over such person.

If the department makes a finding of fact in writing that the public interest will be irreparably harmed by delay in issuing an order, it may issue a temporary cease and desist order. Every temporary cease and desist order shall include in its terms a provision that upon request a hearing shall be held within 10 days of such request to determine whether or not it becomes permanent. Such temporary cease and desist order shall be forwarded by certified mail.

(2) The department shall provide an opportunity for a hearing for any association, or for any current or former executive board member or officer, prior to the imposition of any sanction, including monetary fines. Associations shall be subject to fines only after they have failed or refused to comply with an order of the department. The maximum fine that may be levied against an association or former executive board member or officer for failure to comply with an order to cease and desist from continuing to violate an order of the department shall be $1,000 per order. Former executive board members or officers shall be not be subject to fines for violations that occurred while they held board membership or office. All fines or penalties levied by the department shall be collected in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

g. To remove from office, after notice and the opportunity for a hearing, any executive board member or officer who shall fail to comply with any order issued by the commissioner to cease and desist from violating any statute or rule. Following any such removal, the commissioner shall provide such assistance as may be required by an association in scheduling and holding elections or in managing the association until such time as the executive board is able to function properly. Notice of any fine imposed upon the association or a former board member orof the removal of an executive board member or officer by the commissioner shall be given to all unit owners by the executive board within 30 days of the action and shall be entered upon the minutes of the next meeting of the executive board or of the association. Current executive board members and officers shall not be subject to the imposition of a personal monetary fine or penalty under this subsection, other than for failure or refusal to comply with an order of removal from office.

h. To select, assign and provide trained and impartial volunteer dispute resolvers for the purpose of resolving disputes in conjunction with the Office of Dispute Settlement in accordance with section 28 of P.L.1994, c.58 (C.52:27E-73).

i. To employ or contract, in conjunction with the Office of Dispute Settlement, with persons who are professionally trained in dispute resolution, as mediators and as arbitrators, and to establish ethical and professional standards for such persons.

90. (New section) a. On or before the first day of the fourth month next following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), and annually on the same date thereafter, all homeowners associations having three or more units shall register with the Commissioner of Community Affairs, on such form as the commissioner shall prescribe, which form shall include, but not be limited to, information concerning the names and addresses of the officers and members of the executive board. Associations formed subsequent to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) shall register within 30 days of the formation of the association; provided, however, that any association formed for a planned real estate development required to be registered with the department shall be registered not later than the date of registration of the planned real estate development.

b. All penalty monies received by the Department of Community Affairs pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) shall be deposited in an interest-bearing, non-lapsing revolving fund, entitled the "Homeowners' Association Trust Fund," to be held by the State Treasurer. Moneys held in this non-lapsing revolving fund shall be continuously appropriated to the Department of Community Affairs and to the Department of Treasury, Office of the Public Defender, Office of Dispute Settlement for the purposes expressed in P.L. , c. (C. ) (pending before the Legislature as this bill) and shall be dedicated solely for those purposes. Any claims of transfers made outside of the purposes of this section may be submitted to the Joint Budget Oversight Committee, or its successor committee.

91. (New section) The Department of Community Affairs shall prepare and publish a booklet, which shall be made available at cost to the general public, to associations and to unit owners in common interest communities to serve as a general guide to community associations. The booklet shall be distributed by the association to each unit owner free of charge initially, and at cost as required for distribution to purchasers; it shall be the duty of each selling unit owner to provide a copy of the booklet to a purchaser of the unit at or before the time of signing of the sales contract. The booklet shall include at least the following:

a. An explanation of the nature of home ownership in a planned real estate development and a glossary of relevant terms, including, but not limited to, "master declaration," "bylaws," "master deed," "covenants and restrictions," and "common elements";

b. A description of the rights and responsibilities of unit owners, including reference to applicable statutes and rules;

c. A description of the duties and powers of, and restrictions on, executive boards, including reference to applicable statutes and rules. The booklet shall include information concerning conflict of interest requirements applicable to executive board members and officers and to professionals hired by associations and shall also include reference to any other sources of information that may be recommended by the commissioner as being of assistance to executive board members and officers in the discharge of their duties and to the public and professional bodies having authority to investigate allegations of statutory or rule violations by board members and officers or by managers, attorneys, accountants, or other professionals;

d. A description of the statutory and regulatory requirements for association bylaws or rules and such other material as the commissioner shall deem useful; and

e. A listing of documents and other information that a potential purchaser of a unit in a planned real estate development should obtain before entering into a contract to purchase a unit, including, but not limited to: copies of the association's governing documents; a copy of the latest capital reserve study, if any, showing the condition, life expectancy and replacement costs of major mechanical systems and other common elements; any litigation pending against the association; any pending notices or orders issued by the Department of Community Affairs or any other governmental entity; the association's procedures for alternate dispute resolution, adopting rules and regulations, providing access to records, approval of budgets, and review of unit owners' applications to do work on their units; delinquency and foreclosure rates; the association's insurance coverages; and governmental and non-governmental remedies available in the event of violation of the rights of unit owners. These documents and this information shall be made available to prospective purchasers upon written request and copies shall be provided, for a charge not exceeding the reasonable cost of copying or printing, to any person who has contracted to purchase a unit within the jurisdiction of the association.

92. (New section) There is hereby established the Office of the Ombudsman for Homeowners and Associations, which, for purposes of separation from activities related to the enforcement powers granted to the commissioner, shall be separate and apart from any other unit charged with carrying out such enforcement activities. The office shall be headed by the ombudsman, who shall be a person qualified by experience in the areas of planned real estate developments and dispute resolution. No person who shall have been a unit owner or an employee of, or provider of professional or business services to, any association or organization representing associations within the preceding 36-month period shall be eligible for appointment as ombudsman. The ombudsman shall have the following duties and functions:

a. To develop and maintain, in consultation with the Office of Dispute Settlement and section 28 of P.L.1994, c.58 (C.52:27E-73), a pool and list of volunteers throughout the State who have been trained in dispute resolution and to establish procedures and a system of training for such volunteers;

b. To obtain and compile information concerning alternative dispute resolution proceedings throughout the State that may serve as a resource on the methods used to resolve disputes, for the benefit of associations, unit owners and volunteer dispute resolvers;

c. To assist unit owners in understanding their rights and responsibilities and the remedies available to them;

d. To assist executive board members and officers of associations in receiving appropriate training to allow them to properly discharge their functions and duties. This assistance shall include listings of appropriate reference and educational materials and general budgetary and financial guidance;

e. To conduct dispute resolution workshops for executive board members and unit owners; and

f. To assist associations in their dealings with municipalities and with other State and local regulatory agencies.

93. (New section) The commissioner shall review any complaints received from unit owners' associations concerning noncompliance with the provisions of P.L.1989, c.299 (C.40:67-23.2 et seq.). Upon a finding that a municipality is not in compliance with that act, the commissioner, through the Director of the Division of Local Government Services, shall provide appropriate direction to the municipality and, in the event of continued noncompliance, shall take such corrective action as may be appropriate, including denial of budget certification or withholding of State aid. A municipality aggrieved by an order of the commissioner or of the director pursuant to this section shall be entitled to a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).

94. (New section) The commissioner shall have authority to adopt such rules as may be necessary to enforce the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), provided the commissioner shall not adopt rules creating substantive rights or obligations other than as set forth in P.L. , c (C. ) (pending before the Legislature as this bill).

95. (New section) It is the intent of the Legislature that the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall supplement the provisions of the "Horizontal Property Act," P.L.1963, c.168, (C.46:8A-1 et seq.), the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.), and all supplements to that act, as well as the provisions of P.L.1993, c.30 (C.45:22A-43 et seq.) concerning associations; provided, however, that whenever any conflict or apparent conflict may be read between the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) and the provisions of those acts, the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall supersede those acts and be deemed to be the controlling law.

96. Section 1 of P.L.1989, c.299 (C.40:67-23.2) is amended to read as follows:

1. For the purposes of [this act] P.L.1989, c.299 (C.40:67-23.2 et seq.):

a. "Condominium" means the form of real property ownership provided for under the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.) or any law subsequently enacted providing for such a form of ownership;

b. "Cooperative" means a housing corporation or association wherein the holder of a share or membership interest in the corporation or association is entitled to possess and occupy, for dwelling purposes, a house, apartment, or other unit of housing owned by the corporation or association, or to purchase a unit of housing constructed or erected by the corporation or association;

c. "Fee simple community" means a private community which consists of individually owned lots or units and provides for common or shared elements or interests in real property;

d. "Horizontal property regime" means the form of real property ownership provided for under the "Horizontal Property Act," P.L.1963, c.168 (C.46:8A-1 et seq.) or any law subsequently enacted which provides for such a form of ownership;

e. "Qualified private community" means a residential condominium, cooperative, fee simple community, [or] horizontal property regime, or a common interest community as defined pursuant to section 3 of P.L. , c. (C. ) (now pending before the Legislature as this bill), the residents of which do not receive any tax abatement or tax exemption related to its construction, comprised of a community trust or other trust device, condominium association, homeowners' association, or council of co-owners, wherein the cost of maintaining roads and streets and providing essential services is paid for by [a not-for-profit entity consisting exclusively of unit owners within the community] a unit owners' association as defined pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill). No apartment building or garden apartment complex owned by an individual or entity that receives monthly rental payments from tenants who occupy the premises shall be considered a qualified private community. No "proprietary campground facility," as defined in section 1 of P.L.1993, c.258 (C.45:22A-49), shall be considered to be a qualified private community.

(cf: P.L.1993, c.258, s.10)

97. Section 3 of P.L.1977, c.419 (C.45:22A-23) is amended to read as follows:

3. As used in [this act] P.L.1977, c.419 (C.45:22A-1 et seq.) unless the context clearly indicates otherwise:

a. "Disposition" means any sales, contract, lease, assignment, or other transaction concerning a planned real estate development.

b. "Developer" or "subdivider" means any person who disposes or offers to dispose of any lot, parcel, unit, or interest in a planned real estate development.

c. "Offer" means any inducement, solicitation, advertisement, or attempt to encourage a person to acquire a unit, parcel, lot, or interest in a planned real estate development.

d. "Purchaser" or "owner" means any person or persons who acquires a legal or equitable interest in a unit, lot, or parcel in a planned real estate development, and shall be deemed to include a prospective purchaser or owner.

e. "State" means the State of New Jersey.

f. "Commissioner" means the Commissioner of Community Affairs.

g. "Person" shall be defined as in R.S.1:1-2.

h. "Planned real estate development" or "development" means any real property situated within the State, whether contiguous or not, which consists of or will consist of, separately owned areas, irrespective of form, be it lots, parcels, units, or interest, and which are offered or disposed of pursuant to a common promotional plan, and providing for common or shared elements or interests in real property. This definition shall specifically include, but shall not be limited to, property subject at any time to the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.), any form of homeowners' association, any housing cooperative [or to] , any community trust or other trust device, or any property subject to the "New Jersey Uniform Common Interest Ownership Act," P.L. ,c. (C. ) (pending before the Legislature as this bill).

This definition shall be construed liberally to effectuate the purposes of [this act] P.L.1977, c.419 (C.45:22A-1 et seq.).

i. "Common promotional plan" means any offer for the disposition of lots, parcels, units or interests of real property by a single person or group of persons acting in concert, where such lots, parcels, units or interests are contiguous, or are known, designated or advertised as a common entity or by a common name.

j. "Advertising" means and includes the publication or causing to be published of any information offering for disposition or for the purpose of causing or inducing any other person to purchase an interest in a planned real estate development, including the land sales contract to be used and any photographs or drawings or artist's representations of physical conditions or facilities on the property existing or to exist by means of any:

(1) Newspaper or periodical;

(2) Radio or television broadcast;

(3) Written or printed or photographic matter;

(4) Billboards or signs;

(5) Display of model houses or units;

(6) Material used in connection with the disposition or offer of the development by radio, television, telephone or any other electronic means; or

(7) Material used by developers or their agents to induce prospective purchasers to visit the development, particularly vacation certificates which require the holders of such certificates to attend or submit to a sales presentation by a developer or his agents.

"Advertising" does not mean and shall not be deemed to include: Stockholder communications such as annual reports and interim financial reports, proxy materials, registration statements, securities prospectuses, applications for listing securities on stock exchanges, and the like; all communications addressed to and relating to the account of any person who has previously executed a contract for the purchase of the subdivider's lands except when directed to the sale of additional lands.

k. "Nonbinding reservation agreement" means an agreement between the developer and a purchaser and which may be [cancelled] canceled without penalty by either party upon written notice at any time prior to the formation of a contract for the disposition of any lot, parcel, unit or interest in a planned real estate development.

l. "Blanket encumbrance" means a trust deed, mortgage, judgment, or any other lien or encumbrance, including an option or contract to sell or a trust agreement, affecting a development or affecting more than one lot, unit, parcel, or interest therein, but does not include any lien or other encumbrance arising as the result of the imposition of any tax assessment by any public authority.

m. "Conversion" means any change with respect to a real estate development or subdivision, apartment complex or other entity concerned with the ownership, use or management of real property which would make such entity a planned real estate development.

n. "Association" means an association organized for the management of common elements and facilities [, organized pursuant to section 1 of P.L.1993, c.30 (C.45:22A-43)].

o. "Executive board" means the [executive board of an association, as provided for in section 3 of P.L.1993, c.30
(C.45:22A-45)] body, regardless of name, designated in the declaration to act on behalf of the association.

p. "Unit" means any lot, parcel, unit or interest in a planned real estate development that is, or is intended to be, a separately owned area thereof.

q. "Declarant" means any person or group of persons acting in concert who (1) as a part of a common promotional plan, offers to dispose of any interest in a unit not previously disposed of, or (2) reserves or succeeds to any special declarant right.

(cf: P.L.1993, c.30, s.7)

98. Section 8 of P.L.1977, c.419 (C.45:22A-28) is amended to read as follows:

8. a. A public offering statement shall disclose fully and accurately the characteristics of the development and the lots, parcels, units, or interests therein offered, and shall make known to prospective purchasers all unusual or material circumstances or features affecting the development. The proposed public offering statement submitted to the agency shall be in a form prescribed by its rules and regulations and shall include the following:

(1) The name and principal address of the developer;

(2) A general narrative description of the development stating the total number of lots, units, parcels, or interests in the offering, and the total number of such interests planned to be sold, leased or otherwise transferred;

(3) Copies of any management contract, lease of recreational areas, or similar contract or agreement affecting the use, maintenance, or access of all or any part of the development, with a brief and simple narrative statement of the effect of each such agreement upon a purchaser, and a statement of the relationship, if any, between the developer and the managing agent or firm;

(4) (a) The significant terms of any encumbrances, easements, liens, and restrictions, including zoning and other regulations, affecting such lands and each unit, lot, parcel, or interest, and a statement of all existing taxes and existing or proposed special taxes or assessments which affect such lands; and

(b) In the case of a conversion subject to the provisions of the "Tenant Protection Act of 1992," P.L.1991, c.509 (C.2A:18-61.40 et al.), the information required pursuant to section 14 of P.L.1991, c.509 (C.2A:18-61.53);

(5) (a) Relevant community information, including hospitals, health and recreational facilities of any kind, streets, water supply, levees, drainage control systems, irrigation systems, sewage disposal facilities and customary utilities; and

(b) The estimated cost, size, date of completion, and responsibility for construction and maintenance of existing and proposed amenities which are referred to in connection with the
offering or disposition of any interest in the subdivision or subdivided lands;

(6) A copy of the proposed budget for the operation and maintenance of the common or shared elements or interests;

(7) Additional information required by the agency to assure full and fair disclosure to prospective purchasers.

(8) If any declaration filed pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) provides that a common interest community is subject to any development rights, the public offering statement shall disclose, subject to the limitations set forth in section 47 of P.L. , c. (C. ) (pending before the Legislature as this bill) and, in addition to the information required under paragraphs (1) through (7) of this subsection, the following:

(a) the maximum number of units, and the maximum number of units per acre, that may be created;

(b) a statement of how many or what percentage of the units that may be created will be restricted exclusively to residential use, or a statement that no representations are made regarding use restrictions;

(c) if any of the units that may be built within real estate subject to development rights are not to be restricted exclusively to residential use, a statement, with respect to each portion of that real estate, of the maximum percentage of the real estate areas, and the maximum percentage of the floor areas of all units that may be created therein, that are not restricted exclusively to residential use;

(d) a brief narrative description of any development rights reserved by a declarant and of any conditions relating to or limitations upon the exercise of development rights;

(e) a statement of the maximum extent to which each unit's allocated interests may be changed by the exercise of any development right described in subsection c. of this section;

(f) a statement of the extent to which any buildings or other improvements that may be erected pursuant to any development right in any part of the common interest community will be compatible with existing buildings and improvements in the common interest community in terms of architectural style, quality of construction, and size, or a statement that no assurances are made in those regards;

(g) general descriptions of all other improvements that may be made and limited common elements that may be created within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;

(h) a statement of any limitations as to the locations of any building or other improvement that may be made within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;

(i) a statement that any limited common elements created pursuant to any development right reserved by the declarant will be of the same general types and sizes as the limited common elements within other parts of the common interest community, or a statement of the types and sizes planned, or a statement that no assurances are made in that regard;

(j) a statement that the proportion of limited common elements to units created pursuant to any development right reserved by the declarant will be approximately equal to the proportion existing within other parts of the common interest community, or a statement of any other assurances in that regard, or a statement that no assurances are made in that regard;

(k) a statement that all restrictions in the declaration affecting use, occupancy and alienation of units will apply to units created pursuant to any development right reserved by the declarant, or a statement of any differentiations that may be made as to those units, or a statement that no assurances are made in that regard; and

(l) a statement of the extent to which any assurances made pursuant to this section apply or do not apply in the event that any development right is not exercised by the declarant.

b. The public offering statement shall not be used for any promotional purposes before registration of the development and afterwards only if it is used in its entirety. No person may advertise or represent that the agency approves or recommends the development or dispositions therein. No portion of the public offering statement may be underscored, italicized, or printed in larger or heavier or different color type than the remainder of the statement, unless the agency requires or permits it.

c. The agency may require the developer to alter or amend the proposed public offering statement in order to assure full and fair disclosure to prospective purchasers, and no change in the substance of the promotional plan or plan of disposition or development of a planned real estate development may be made after registration without the approval of the agency. A public offering statement shall not be current unless all amendments have been incorporated.

d. The public offering statement shall, to the extent possible, combine simplicity and accuracy of information, in order to facilitate purchaser understanding of the totality of rights, privileges, obligations and restrictions, comprehended under the proposed plan of development. In reviewing such public offering statement, the agency shall pay close attention to the requirements of this subsection, and shall use its discretion to require revision of a public offering statement which is unnecessarily complex, confusing, or is illegible by reason of type size or otherwise.

(cf: P.L.1991, c.509, s.22)

99. Section 28 of P.L 1994, c.58 (C.52:27E-73) is amended to read as follows:

28. a. The Office of Dispute Settlement may provide, in the discretion of the Public Defender, mediation, and other third party neutral services in the resolution of disputes which involve the public interest and may enter into agreements or contracts to carry out any of the purposes or functions of this section. The Office of Dispute Settlement may assist public or private parties in resolving disputes. The Office of Dispute Settlement is authorized to:

(1) Facilitate the resolution of disputes through the provision of mediation and other neutral dispute resolution services;

(2) Establish standards for the selection, assignment, and conduct of persons acting on behalf of said office in the resolution of disputes;

(3) Conduct educational programs and provide other services designed to reduce the occurrence, magnitude, or cost of disputes;

(4) Design, develop, or operate dispute resolution programs, or assist in improving or extending existing dispute resolution programs;

(5) Work with the business ombudsman, established by Executive Order No. 15, and take such other action as will promote and facilitate dispute resolution in the State; [and]

(6) Coordinate and cooperate with the Office of Administrative Law so as to avoid duplication of effort and to facilitate alternate resolution of disputes that would otherwise require administrative hearings; and

(7) Work with the Office of the Ombudsman for Homeowners and Associations, established pursuant to section 92 of P.L. , c. (C. ) (pending before the Legislature as this bill), to promote and facilitate dispute resolution for associations in the State and provide training programs pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) free of charge to a volunteer, in exchange for the agreement of the volunteer to offer dispute resolution services free of charge to associations. Costs of training incurred under this paragraph shall be reimbursed from the Homeowners' Association Trust Fund established pursuant to section 90 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. The Public Defender may establish reasonable fees to be charged to public or private parties for the provision of the educational, consultation, dispute resolution, or other services authorized herein and may apply for and accept on behalf of the State any federal, local, or private grants, bequests, gifts, or contributions to aid in the financing of any of the programs or activities of the office. The Public Defender in the name of the State shall do all that is necessary and proper to receive or to collect all moneys due to the State, including such fees, grants, bequests, gifts,
or contributions, by or reimbursement for services rendered pursuant to this section.

(cf: P.L.1994, c.58, s.28)

100. N.J.S.12A:9-515 is amended to read as follows:

12A:9-515. Duration and Effectiveness of Financing Statement; Effect of Lapsed Financing Statement.

(a) Five-year effectiveness. Except as otherwise provided in subsections (b), (e), (f) and (g), a filed financing statement is effective for a period of five years after the date of filing.

(b) Public-finance or manufactured-home transaction. Except as otherwise provided in subsections (e), (f) and (g), an initial financing statement filed in connection with a public-finance transaction or manufactured-home transaction is effective for a period of 30 years after the date of filing if it indicates that it is filed in connection with a public-finance transaction or manufactured-home transaction.

(c) Lapse and continuation of financing statement. The effectiveness of a filed financing statement lapses on the expiration of the period of its effectiveness unless before the lapse a continuation statement is filed pursuant to subsection (d). Upon lapse, a financing statement ceases to be effective and any security interest or agricultural lien that was perfected by the financing statement becomes unperfected, unless the security interest is perfected otherwise. If the security interest or agricultural lien becomes unperfected upon lapse, it is deemed never to have been perfected as against a purchaser of the collateral for value.

(d) When continuation statement may be filed. A continuation statement may be filed only within six months before the expiration of the five-year period specified in subsection (a) or the 30-year period specified in subsection (b), whichever is applicable.

(e) Effect of filing continuation statement. Except as otherwise provided in 12A:9-510, upon timely filing of a continuation statement, the effectiveness of the initial financing statement continues for a period of five years commencing on the day on which the financing statement would have become ineffective in the absence of the filing. Upon the expiration of the five-year period, the financing statement lapses in the same manner as provided in subsection (c), unless, before the lapse, another continuation statement is filed pursuant to subsection (d). Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the initial financing statement.

(f) Transmitting utility financing statement. If a debtor is a transmitting utility and a filed financing statement so indicates, the financing statement is effective until a termination statement is filed.

(g) Record of mortgage as financing statement. A record of mortgage that is effective as a financing statement filed as a fixture filing under 12A:9-502 (c) remains effective as a financing statement filed as a fixture filing until the mortgage is released or satisfied of record or its effectiveness otherwise terminates as to the real property.

(h) Bondable transition property. If a filed financing statement relates to a security interest in bondable transition property and the financing statement so states, it is effective until a termination statement is filed.

(i) When a financing statement covers shares or ownership interests evidenced by stock certificates or other instruments, and a leasehold evidenced by a proprietary lease or either of the foregoing issued by an entity formed for the purpose of cooperative ownership of real estate and the financing statement so states, it shall be effective until a termination statement is filed.

(cf: P.L.2001, c.386, s.80)

101. Section 20 of P.L.1987, c.381 is amended to read as follows:

20. [This act] P.L.1987, c.381 applies to all cooperatives created within this State [after the effective date of this act] prior to the effective date of P.L. , c. (C. ) (now before the Legislature as this bill). On or after the effective date of P.L. , c. (C. ) (now before the Legislature as this bill), the provisions of P.L. , c. (C. ) (now before the Legislature as this bill) shall apply to all cooperatives, regardless of the date of creation, and the provisions of P.L.1987, c.381 (C.46:8D-1 et al) shall only apply to the extent they are not expressly overridden or repealed by P.L. , c. (C. ) (now before the Legislature as this bill).

(cf: P.L.1987, c.381, s.20)

102. (New section) It is the intent of the Legislature that any rights, claims, entitlements, priorities, privileges, or benefits that accrued under the laws set forth below prior to the effective date of P.L. , c (C. ) (pending before the Legislature as this bill) shall not be superseded by the adoption of P.L. , c. (C. ) (pending before the Legislature as this bill). P.L. , c. (C. ) (pending before the Legislature as this bill) shall supersede the laws set forth below with respect to all rights, claims, entitlements, priorities, privileges, or benefits that accrue after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) and all matters concerning a common interest community shall be solely governed by P.L. , c. (C. ) (pending before the Legislature as this bill), except with respect to those common interest communities that are fully or partially exempt from the terms of P.L. , c. (C. ) (pending before the Legislature as this bill), in which event the exempted common interest communities and all persons owning an interest therein shall be bound, to the extent applicable, by the provisions of the following:

Sections 1 through 28 of P.L.1963, c.168 (C.46:8A-1 et seq.);

Section 11 of P.L.1978, c.124 (C.46:8A-3.1);

Sections 1 through 30 of P.L.1969, c.257 (C.46:8B-1 et seq.);

Section 3 of P.L.1973, c.216 (C.46:8B-8.1);

Sections 2 and 3 of P.L.1979, c.157 (C.46:8B-12.1 and 46:8B-12.2)

Section 2 of P.L.1991, c.48 (C.46:8B-13.1);

Sections 1 through 8 of P.L.1979, c.297 (C.46:8B-31 et seq.);

Section 3 of P.L.1980, c.103 (C.46:8B-38); and

Sections 1 through 12 and 14 through 20 of P.L.1987, c.381 (C.46:8D-1 through 46:8D-12 and C.46:8D-13 through 46:8D-18).

103. This act shall take effect on the first day of the sixth month after enactment, except that the Commissioner of Community Affairs shall immediately take such administrative action as necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).