January 1, 1900

by Fred Pugliese

Collection of maintenance fees is a major concern for community associations. Maintenance fees are the lifeblood of associations, so if a unit owner doesn't pay, all owners suffer. Therefore, association boards are always looking for ways to encourage their members to keep current. Associations which provide utility services to unit owners may have additional means to encourage payment by threatening to cut off such services if assessments are not paid. However, as the law in New Jersey is not clear whether associations have such a right, an association's attempt to terminate utility services must proceed cautiously.

No reported judicial decision in New Jersey has yet dealt with the issue of termination of utility services for non-payment of common expense assessments. A recent nationwide search, in fact, disclosed only three reported cases which dealt with the issue. In each case, the reviewing court upheld the suspension of utilities by a condominium association where the owner failed to pay assessments and other amounts due. However, none of these cases is binding in New Jersey.

Other Jurisdictions

In In Re Rafael Rivera Cruz, the United States Bankruptcy Court for the District of Puerto Rico ruled in 1988 that a unit owner, who refused to pay his pro rata share of the association's maintenance fees, was not deprived of his property rights by the suspension of his water and electricity service by the association. In so concluding, the court relied upon language of the Puerto Rico Supreme Court in an earlier case, Maldonado v. Council of Co-owners, that the power to suspend services was not in contravention of law, morals or public order and tended to implement the public policy of the Commonwealth's Horizontal Property Act.

A Texas appellate court also considered the issue in 1988, in San Antonio Villa Del Sol Homeowners Association v. Miller. The court ruled that "a condominium dweller who does not pay his share of the maintenance fee, admits that the other owners are in essence paying his way, and fails to respond to notice of disconnection is in violation of the meaning and intent of the Bylaws." The court held that suspension of gas and water services was an appropriate and reasonable action where the unit owner had been warned that failure to pay assessments would result in suspension.

In Fontaine Condominium Association v. Schnacke, a 1998 case, the Georgia Court of Appeals relied upon statutory authority and ruled that a condominium association could suspend utility service to a delinquent unit owner, provided the association satisfied all three essential elements of the statute which allows such action. Those three elements are: (1) the condominium instruments permit suspension of utility service; (2) the association complies with proper suspension standards and notice requirements; and (3) the association obtains final judgment in excess of $750 against the delinquent unit owner.

Since this issue is one of first impression in New Jersey, there is no clear answer. The three cases discussed weigh in favor of allowing suspension of utility services, in the same way that associations suspend recreational privileges for delinquent owners. However, termination of utility services will have a much greater impact upon residents than prevention of the use of recreational facilities.