UCIOA – A Wolf in Sheeps’s Clothing – Part 9

This is part 9 of Randy Sawyer’s 16 Part series on UCIOA. You can read previous posts here.

Section 87, subsection (i)

’87(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.

This section could not have been made more burdensome if the drafters tried.

First, the cost to the Association to comply with this provision could be staggering. For a larger condominium, this provision could require thousands of pages of copies that could cost the Association tens of thousands of dollars. Second, the requirements in subsections (i)(4) and (i)(5) are clearly intended to frighten unit owners and influence them not to agree to the litigation. The question arises, why are subsections (i)(4) and (i)(5) in the negative? Why can=t the statements say that the litigation Amay recover sufficient funds to repair all the damages,@ or Athe costs of the litigation may be recovered.@ The only entity that benefits from a negative spin on these statements is the developer.

Subsection (i)(7) is also problematic. This provision allows the developer to disseminate whatever propaganda it wants to the unit owners. In addition, the developer can force the Association to disseminate what information the developer desires. In other words, if the developer gives the Association something it wants disseminated to the unit owners, and the Association refuses to send it out, this provision would allow the developer to move to dismiss a lawsuit later-filed by the Association for the Association=s failure to comply with UCIOA.

The last and most obvious problem with this section is that it takes all control over the litigation decision away from the Board and gives it to the unit owners. It has been a long-standing, well-settled principle in New Jersey that under PREDFDA and the New Jersey Condominium Act, a Board of an Association has a fiduciary duty to act in the best interests of the unit owners. That duty includes the decision of whether or not the Association should pursue litigation. Here, that authority is completely nullified.