New Jersey Ct. Dismisses HOA Action to Allow “Alternative Dispute Resolution” Requested by Homeowner

New Jersey Appellate Court decision (May 7, 2015)

A condominium association (“Association”) sued homeowners for unpaid maintenance fees and related costs. The homeowners non-payment of monthly fees was precipitated by a dispute between the Association and the homeowners over the alleged failure of the Association to properly maintain portions of the condominium’s exterior (common area property) that was adjacent to the owners’ unit. Due to the unresolved dispute over the maintenance issues, the homeowners paid their monthly maintenance fees to their attorney to be held in escrow pending a resolution of their dispute with the Association. When the matter did not get resolved, the Association filed suit against the homeowners for the unpaid fees, together with late fees and attorney’s fees. The homeowners did not dispute that they owed the maintenance fees, but did dispute their liability for the late fees and the attorney fees.

The trial court granted the homeowners a summary judgment dismissing the Association’s complaint in favor of Alternative Dispute Resolution (“ADR”) under a New Jersey statute(Section 14(k) of the Condominium Act) which requires an association to provide a “fair and efficient procedure for the resolution of housing-related disputes between individual unit owners and the association, and between unit owners, which shall be readily available as an alternative to litigation.” The Association appealed contending that the homeowners were not entitled to “compel” ADR of the dispute over non-payment of the fees due to the Association.

The appellate court affirmed the trial court’s judgment in ruling that the statute in question compelled the trial court to dismiss the Association’s complaint without prejudice in favor of ADR because, subsequent to the filing of the action, the homeowner defendants chose to avail themselves of the alternative dispute remedy that the subject Act required be made available to them in order to resolve “housing-related” disputes. Thus, having determined that the issues were in fact “housing-related,” and in light of New Jersey’s strong public policy favoring ADR, upon the homeowners’ request that the matter be resolved through ADR, the court was compelled to dismiss the Association’s action without prejudice to refiling the action if the issues were not resolved through the ADR process.

See case decision: Glens_At_Pompton_Plains_Cond