February 17, 2005 | By Margaret Bar-Akiva; Op-ed published in The Asbury Park Press
Bill seeks to bring democracy to homeowner associations

Article Courtesy of The Asbury Park Press

Published February 17, 2005

In November, Sen. Shirley K. Turner, D-Mercer, introduced S-2016 on behalf of our organization, the Common-Interest Homeowners Coalition. The bill is a clear and comprehensive response to the serious governance problems plaguing homeowner associations today.

More than 1 million residents, many of them senior citizens, live in condominiums, planned unit developments, town homes and cooperatives across New Jersey. But unlike other New Jersey homeowners, they often discover that living in such communities means relinquishing some of their basic constitutional and property rights.

On a daily basis, homeowner association residents are subjected to boards that hold closed-door meetings, conduct improper elections, deny access to financial records, impose unreasonable fines, refuse to answer questions and initiate frivolous and self-serving lawsuits, all at the homeowners' expense. Some associations have been forced into bankruptcy as a result of mismanagement or corrupt business practices. Homeowners have been forced to pay thousands of dollars in special assessments in order to salvage their homes.

When homeowners exercise their fundamental right to ask probing questions, they are often stonewalled, vilified or harassed by their boards. All of these undemocratic practices have been documented on numerous occasions by the Department of Community Affairs, and described in the report submitted by the Assembly Task Force to Study Homeowner Associations a few years ago.

Many people are at a loss to explain how homeowner boards, which have been granted government-like powers to impose fines, levy assessments and place liens on homes, have been allowed to do so without any of the governmental oversight requirements that such powers demand. And people are equally bewildered that a country bold enough to export democracy abroad can tolerate this form of anarchy at home.

There is no doubt that today's widespread dissatisfaction with homeowner associations stems from laws of the 1960s that failed to establish them as quasi-governmental entities but classified them as private business corporations instead. While the dire outcome of this form of housing might not have been anticipated 40 years ago, we have now acquired sufficient experience by which to make at least the following observations:

Applying the corporate business model and the business judgment rule to homeowner associations has proven to be deeply flawed because it has unwisely exempted them from state scrutiny.

The lack of governmental oversight has allowed homeowner associations to turn into breeding grounds for special-interest groups and has permitted unscrupulous board members to act with impunity.

The wide latitude given to homeowner boards mandates that they no longer be allowed to masquerade as private corporations but be treated just like any other government-regulated business.

Turner's bill seeks to remedy these deficiencies by recognizing the quasi-governmental nature of homeowner associations, providing them with clear and uniform guidelines to follow, and requiring their boards to operate in an open and democratic manner.

These problems are not unique to New Jersey. The history of homeowner associations across this nation paints a disturbing picture of government officials who have essentially abdicated their responsibility in protecting association residents from a housing experiment gone awry. The difference is that New Jersey now has an opportunity to transform and improve this landscape by passing S-2016.