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Court Rules That Unit Owners May Ratify Actions Taken By Association Developer Has No Standing To Enforce Owners’ Rights Under Governing Documents

In Port Liberte II Condominium Association v. New Liberty Residential Urban Renewal Company, LLC, the Condominium Association filed suit against the developer, the general contractor, and others, alleging construction defects. At the time suit was filed, the Statute of Limitations was about to expire. Due to these time constraints, the Association filed suit against the developer without obtaining the approval of the unit owners as required by the Association's Bylaws. Thereafter, the unit owners voted to pursue the litigation. No unit owner sought to intervene in the lawsuit, or otherwise questioned the Association's authority to conduct the litigation.

The developer then filed a Motion for Summary Judgment, seeking to dismiss the Complaint on the grounds that the Association had not properly obtained the unit owners' authorizations before filing suit. As such, the developer argued that the Association lacked standing to file the suit.

The Court rejected the developer's arguments. It concluded that the Association had standing to file the lawsuit pursuant to pertinent provisions of the New Jersey Condominium Act, since it was legally responsible for the upkeep of the common areas and was authorized by statute to sue for damages. While the Court determined that the Association did not have legal authorization to file the lawsuit on the date the Complaint was filed, it determined that the action was legally ratified by the unit owners, who thereafter voted to approve the litigation, even though the litigation had been filed without the authority of the owners. The Court had determined that it would be contrary to the purpose of the Condominium Act, and the spirit and purpose of the governing documents, for the Court to deny the unit owners a chance to ratify the litigation before dismissing it. The Court reasoned that it would not enforce a statute or regulation in a manner that would have produced an absurd result. The Court believed that it would be absurd to strip the unit owners of a cause of action designed to recoup payment for construction defects, since theywere willing to authorize (ratify) the litigation after it was filed.

Finally, the Court determined that the developer did not have standing to assert the unit owners' rights to challenge the lawsuit that had been filed without the unit owners' authority.