Condominium-Related Standing Law: The Effect of a “Hiccup”

Rialto-Capitol Condominium Ass’n, Inc. v. Baldwin Assets Assocs. Urban Renewal Co., LLC, 465 N.J. Super. 31 (App. Div. 2020). As Judge Fisher noted in his opinion in this case, “[t]he law is well settled that [condominium] unit owners have standing to bring claims for damages to their units, including the units’ contents or those fixed items that form part of the units, while the condominium] association has standing to pursue a claim for damages caused to the common elements. See Siller v. Hartz Mountain Assocs., 93 N.J. 370, 378 (1983); Belmont Condo. Ass’n, Inc. v. Geibel, 432 N.J. Super. 52, 85 (App. Div. 2013). Difficulties in applying this distinction usually arise from uncertainty about what is part of the unit and what is part of the common elements. There is no such problem here.”

In this case, the claims arose out of allegedly defective exterior windows in the subject condominium units. The master deed unambiguously made interior and exterior windows a part of the “units,” such that only individual unit owners could sue for damage regarding the windows. Here, the association was the plaintiff (though Judge Fisher later noted that the association had, during the course of the case, obtained assignments of unit owners’ rights and brought another case about the windows using those assignments, a fact that might have mooted the key part of the appeal, discussed below, regarding the effect of a historic preservation easement).

The association thus lacked standing to sue about damage to the units from the allegedly defective windows. The Law Division so ruled, and the Appellate Division upheld that decision.

But that did not end the case. Judge Fisher noted the presence of one “hiccup”: a historic preservation easement. The master deed declared that the subject buildings, formerly the site of Jersey City Medical Center, “have been included on the National Register of Historic Places.” The master deed also, Judge Fisher said, “binds the association to the historic preservation easement, which protects ‘all surfaces that are of historic significance.’ The association argues that the exterior windows are part of the ‘surface’ of the buildings and that the obligation imposed by the easement gave the association a ‘sufficient stake’ to allow it standing to sue to protect and vindicate its promise to maintain the outward appearance of the buildings.”

The Appellate Division agreed, holding that “while the windows are undeniably part of the unit, one aspect of the windows – their exterior appearance – was subject to an easement to which the association was bound, and, in being so bound, would have standing to sue a wrongdoer in order to stay in compliance.” But since it was not clear that the association had alleged a claim that defendants had provided or installed windows that caused a violation of the historic preservation easement, the Appellate Division remanded the case to allow the association to amend to bring such a claim, if warranted.

The association had also sued for damages to the common elements, as to which the association indisputably had standing. The Law Division dismissed that claim, ruling that the association could sue only the unit owners, the owners of the windows. Judge Fisher rejected that result. The only authority that defendants offered for that argument was Ellenheath Condo. Ass’n, Inc. v. Pearlman, 294 N.J. Super. 381 (App. Div. 1996), which the panel found “entirely inapposite,” since it involved an association suing a unit owner for damages to common elements from a leaky oil tank that served that owner’s unit.

Judge Fisher said that Ellenheath did not “hold either expressly or by implication that when common elements are damaged by the manufacture, design or installation of a component of the unit, the association may sue only the unit owner for the damage to the common areas.” Neither the law nor the governing condominium documents called for such a result. In any event, Judge Fisher stated, if that were the law, the unit owners would simply bring third-party complaints against the allegedly responsible third parties, using the association’s evidence, an outcome that would require roundabout tactics to accomplish what could be done directly.

Finally, the Appellate Division noted, condominium associations owe their members a fiduciary duty. The notion that an association should sue unit owners for damages to common elements allegedly caused by third parties rather than the unit owners themselves, would turn that fiduciary duty upside down. “The association’s fiduciary obligation to the unit owners required their pursuit of relief for the unit owners not from them” (emphases by Judge Fisher).