Legal Concerns with Boards Imposing Fees on Unit Owners by Resolution

March 16th, 2019 | Community Association Law Blog

March 16, 2019
By Eric F. Frizzell, Esq.

Sometimes community association boards want to impose various kinds of fees on unit owners.

However, under New Jersey law, a board cannot charge a late fee, fine, working capital contribution, membership fee, sublet privilege fee, or flip tax (in cooperatives) unless expressly authorized by the master deed, declaration, proprietary lease, or by-laws.

A board also cannot increase the amount of a fee that is specified in those governing documents – such as a $25 late fee or $50 fine – unless they expressly authorize the board to do so.

Instead, in both of these situations, the governing documents would need to be amended to empower the board to impose such fees.

Moreover, any fees must be reasonable. For example:

• The maximum working capital contribution/ membership fee/other fee on a purchase of a unit cannot exceed nine times the base monthly common expenses of the unit in question.

• A rental review fee must be reasonably calculated to recoup actual expenses of the association and cannot be a revenue raising device.

Why should you care?

An association can get sued years later by a large group of unit owners, or in a class action, seeking reimbursement of all fees charged by the board without proper authority in the governing documents – and a court can order the association to reimburse those fees, which could have a significant adverse impact on the association and its existing unit owners. In one such case, shareholders in six cooperatives in the Fort Lee area joined together and successfully sued their cooperatives for disgorgement of millions of dollars in flip taxes that were not authorized by the proprietary lease or by-laws.

So if your community association board is considering imposing a new kind of fee on your owners, or if you are concerned that existing fees may not have been properly authorized, please feel free to contact any of our partners to learn more about this important issue.