Capital Contribution Legislation Awaiting Governor’s Approval

It has been almost a year since we first reported on a proposal working its way through the Legislature that would protect by statute an additional source of revenue, capital contributions, for many common interest community associations in New Jersey.  You can find our original blog on this subject here. Now, this proposed legislation is on the Governor’s desk and, if approved, will become effective immediately.

On June 21, 2007, this bill – which had previously passed in the Assembly – easily passed in the Senate by a vote of 36-0.  The legislation would permit a common interest community association – if authorized by its master deed or by-laws – to levy and collect a capital contribution, membership fee, NJ realty transfer fee, or other charge upon the sale or transfer of a unit for the purpose of defraying the association’s common expenses.  As amended by the Senate, the legislation now allows for the collection of such a fee by an association not to exceed nine (9) times the amount of the most recent monthly maintenance fee and special assessment for that unit – reduced from the original proposal of 18 times.   You can view the most recent version of this legislation here.

The legislation would also settle the dispute caused by the Appellate Division’s decision in Micheve, L.L.C. v. Wyndham Place at Freehold Condo. Ass’n, 381 N.J. Super. 148 (App. Div. 2005), which invalidated a condominium working capital contribution authorized solely by the condominium’s board-enacted resolution.  More importantly, however, the legislation would authorize common interest community associations who do not have provisions for working capital or membership fees in their master deed and by-laws to validly enact such amendments requiring new buyers to pay such a fee upon the purchase of their units.