Empress House Condominium Association v. Turn Bright at Paterson, LLC

The Parties
 

The Empress House Condominium Association (the “Association”) consists of 150 residential units and two commercial units. Turn Bright at Paterson, LLC purchased the two commercial units within the Association and rented out the units to a daycare center. The units Turn Bright purchased historically experienced water issues, including pipe condensation and broken or leaky pipes. Despite renovations in March of 2013, the water damage persisted in the form of leaks and floods. Because Turn Bright’s owner felt that the Association was not fulfilling its responsibility to maintain and repair the premises, Turn Bright stopped paying its monthly Association assessments. In 2014, Turn Bright sued the Association, alleging that the Association breached its duty to maintain and repair the premises.
  

The litigation was eventually settled via a settlement agreement (the “Agreement”). The Agreement required Turn Bright to pay the Association five years’ worth of assessment, which resulted in $97,000 in unpaid dues being forgiven by the Association. The Agreement also required Turn Bright to pay all ongoing monthly assessments starting April 1, 2016. Lastly, the Agreement mandated the Association to earmark $1,000 per month from the paid assessments to make repairs to Turn Bright’s unit.

Despite the Agreement, the leaks in the unit continued and Turn Bright ceased making payments. In January 2017, the Association made a few interim repairs but notified Turn Bright it was awaiting payment of its 2017 dues to make further repairs. However, Turn Bright did not pay the Association these dues, and contended the proposed work was not subject of the agreement.
 

On November 2, 2018, the Association sued Turn Bright, seeking payments of the unpaid Association dues. At trial, an Association representative testified that because of the water damage, it had no other choice but to stop payment. After the trial, the court issued a decision that mentioned that water infiltration was an ongoing problem in Turn Bright’s units and the Association’s efforts to respond to and repair the water issues were “woefully deficient.” Although the court criticized the Association in how it responded to the water issues that plagued the units, it stated Turn Bright took advantage of the Association in attempting to avoid its mandate to pay assessments.

The court rested its decision on the Appellate Division decision of Glen v. June, in which the court announced that, “[a] unit owner’s obligations to pay common expenses is unconditional.” The court ruled that there was no legal basis for Turn Bright to not pay assessments to the Association and entered judgment in the amount of $159,151.27 in favor of the Association.
 

On appeal, Turn Bright argued that the trial court erred by awarding the Association damages despite finding the Association breached its duty to maintain and repair the unit and by failing to apply the Agreement in its award of damages. The Appellate Division explained in its decision that under contract law, if a party commits a material breach, the non-breaching party is relieved of its duties under the contract. However, the court clarified that even if the Association materially breached the Agreement by not maintaining Turn Bright’s units, Turn Bright had no right under the Agreement to cease paying the Association. This is because the Agreement did not specifically provide that remedy to Turn Bright.

Like the trial court, the Appellate Division quoted Glen v. June’s pronouncement that a unit owner’s duty to pay assessments is unconditional. Turn Bright asserted that Glen v. June was inapplicable because that case involved the New Jersey Condominium Act, which obligates unit owners to pay assessments, while Turn Bright’s duty to pay assessments arose from the Agreement. The court disagreed and stated that the Agreement did not address the payment of future assessments except to recognize that Turn Bright would recommence its payment of assessments upon the execution of the Agreement. Turn Bright’s duty to pay assessments arose from the Association’s master deed and bylaws, not the Agreement. Thus, the court held the Association’s breach of its duty to maintain and repair the premises did not give Turn Bright the right to cease making payments to the Association.

It should be noted that Turn Bright also argued on appeal that the court should have offset a substantial amount of the damages award as a result of lost rental income because of the Association’s breach of its duty to repair the unit. However, the Appellate Division agreed with the trial court’s conclusion that Turn Bright was not entitled to this offset because it never made an effort to fix the leaks itself or attempt to collect rent from or evict its non-paying tenants.

Though this decision is an unpublished decision, which means that the decision does not constitute precedent and is only binding on the parties in the case, it reinforces how stringent the duty to pay assessments is. This decision also shows how much deference a court may give an association’s governing documents. Though the court held that the unit owner was not absolved of its responsibility to pay assessments despite the association’s breach of its duty to maintain the unit, an association should never abandon this duty as it may lead to litigation from and unrest among unit owners.

The Hill Wallack Community Association team is here to help our clients navigate through the process of collecting assessments from unit owners. For further information, please contact one of our team members: Ronald L. Perl, Kenneth R. Sauter, Caroline Record, Michael S. Karpoff, George Greatrex, Gregg Shivers, Terry A. Kessler, Jennifer Webb, Catherine M. Brennan, Daria B. Janka, Lucas B. Klirsfeld, Mel Edgar.