Under New Jersey’s Condominium Act, housing-related disputes are required to be settled via arbitration or a similar method of alternative dispute resolution (“ADR”). In a recent decision, the Appellate Division of the Superior Court of New Jersey clarified the types of disputes to which this applies and, hence, when ADR is and is not required. Bell Tower Condominium Association v. Haffert, Docket No. A-3218-10T2.

In that case, the plaintiff, Bell Tower Condominium Association (“Association”) owned a five-unit condominium in Sea Isle. The defendants, Pat Haffert and Terry Downey, owned one of the units. In May 2010, the Association’s Board approved an $80,000 special assessment for repairs. The Defendant Haffert was the fifth of the five Board members. Unfortunately, he was not present at the 2010 meeting during which the Board approved the assessment. Four of the unit owners were each assessed $14,400, but the defendants were assessed $22,400 because their unit was substantially larger than the other four. The defendants subsequently refused to pay the amount assessed to them.

The Association filed a complaint, demanding judgment in favor of the Association in the amount of $22,400 for the unpaid special assessment, as well as attorney’s fees and costs. The defendants filed a counterclaim asserting that the Association had failed to adhere to the Association’s Master Deed, bylaws and applicable statutes, and sought an order requiring arbitration or mediation of the dispute. The defendants relied heavily on a section of the Planned Real Estate Development Full Disclosure Act (“PREDFDA”), which requires condominium associations to establish an arbitration mechanism to resolve disputes between a condominium board and its unit owners. See N.J.S.A. 45:22A-44. However, a lower court determined that the PREDFDA requirements were inapplicable to condominiums containing fewer than ten units, and Bell Tower had only five. The lower court also concluded there was no genuine dispute about the validity of the assessment or the defendant’s obligation to pay their share. The court granted summary judgment in favor of the Association. The defendants appealed.

Upon review, the Appellate Division of the Superior Court of New Jersey considered whether the lower court erred when refusing to send the Association’s claim for judgment to arbitration. First, the Appellate Court noted that there is a strong public policy favoring arbitration, citing prior case law that held that “[l]itigation ought to be a last resort, not a first one.” Billig v. Buckingham Towers Condominium Association I, Inc., 287 N.J. Super. 551, 564 (App. Div. 1996). Additionally, the Appellate Division had previously construed the PREDFDA statute to require condominium associations to provide a means of resolving “housing-related disputes” as an alternative to litigation. See Finderne Heights Condominium Association, Inc. v. Rabinowitz, 390 N.J. Super. 154, 163 (App. Div. 2007).

The Bell Atlantic Court determined that the resolution of the appeal turned on whether the dispute between the Association and the defendants was a “housing-related dispute” within the meaning of N.J.S.A. 46:8B-14(k) (the statute did not define the term).  If the dispute was housing-related, the Association conceded that arbitration or some other method of ADR would be required.

Though the Court noted that the term “housing-related disputes” is broad, it is not ambiguous:

“In light of the autonomy that unit owners surrender by choosing to live in a condominium, we cannot agree with the Association that its management of the condominium’s common elements, and its imposition of special assessments, should be carved out as an exception to the broad right of unit owners to demand arbitration to resolve ‘housing related disputes.’…The term ‘housing-related disputes’ signifies that only disputes that arise from the parties’ condominium relationship are subject to the arbitration provisions of N.J.S.A. 46:8B-14(k). Any other dispute would be resolved either in the Law Division or in the municipal courts.”

Bell Tower at x.

The Court differentiated other disputes – such as an auto accident in a condominium parking lot – as examples of matters that would not be treated as “housing-related disputes.” The Court concluded that the dispute between the Association and the defendants did qualify as such a dispute under the language of the statute, and consequently, arbitration or other ADR was required to resolve the dispute.

“In sum, the strong public policy of this State favoring arbitration, the broad and unconditional language chosen by the Legislature when it used the term ‘housing-related disputes,’ and the present dispute’s origins in the disagreement over the scope of the special assessment, all compel the conclusion that under the statute, arbitration or other form of alternative dispute resolution is required.” Id. at x

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