Condo Association Management Blog

Developer leaves condo association with expensive, financial mess.

I am a residential unit owner and Board president of a small condominium complex in New Jersey. The complex consists of 8 residential units, and 8 commercial units. The complex was completed in the 2008 time frame, and remained unoccupied, as the prices were set at the height of the real estate boom. In mid-2009, the original developer dropped the prices dramatically, and the 8 residential units all sold by October 2009. None of the commercial units sold, but one was leased to a tenant. The developer was the “Sponsor” of the project, and had the duty to establish the Board of Trustees and hold an Association meeting. After asking the sponsor several times about holding the meeting, we finally found out in January of 2010 that the ownership and Sponsor rights had been transferred to another entity (due to what I believe were financial difficulties of the original owner). Prior to this, the original developer was paying the monthly assessments for the 8 commercial units. Once the transfer in ownership took place, the new owner of the commercial units, and project Sponsor, stopped paying the commercial assessments (even for the leased unit).

All attempts to communicate with them went unanswered. Since the Board had not been established, and the Association was not formed, we residential owners had no other choice but to engage a lawyer and sue the new owner (as individuals) for back assessments (around the August 2010 timeframe). We felt we had a pretty good case, but of course, the legal system has a way of complicating things. The judge (Chancellery court), allowed the defendants’ attorney to claim they weren’t paying the assessments because the commercial units were not complete, yet they were, as they are on the 1st floor of a 3 story building. They weren’t fit-out as there weren’t tenants, but all structural components were completed; in fact we had copies of the Certificates of Occupancy for them. The judge instead appointed another attorney to act as Receiver, whose job it was to establish the Board. He appointed another attorney to act as a mediator to try and get the 2 sides to come to an agreement. Since then, as individuals, we’ve incurred over $50k in attorney fees, the Association has paid the Receiver and mediator in excess of $25k. After numerous court hearings and pleadings, the new owner has slowly agreed to pay his back dues and future dues. We are awaiting the last ~$9k payment (not including any late fees or penalties). Now the big issue is attorneys’ fees, and the purpose of my question. The judge, for some reason, believes this needs to go to trial to determine. We are hesitant to expend more money and potentially come away with nothing. To those of you who might have gone through similar circumstances, do you think we have a case for awarding of attorney’s fees?