Highpoint at Lakewood Condominium Association, Inc. v. The ( 2015 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2118-13T2
HIGHPOINT AT LAKEWOOD
CONDOMINIUM ASSOCIATION, INC.,
APPROVED FOR PUBLICATION
Plaintiff-Appellant,
August 14, 2015
v.
APPELLATE DIVISION
THE TOWNSHIP OF LAKEWOOD, a
Municipal Corporation and Body
Politic of New Jersey,
Defendant-Respondent.
___________________________________
Argued November 18, 2014 – Decided August 14, 2015
Before Judges Ostrer, Hayden and Sumners.
On appeal from the Superior Court of New
Jersey, Chancery Division, Ocean County,
Docket No. C-214-12.
Scott K. Penick argued the cause for
appellant (McGovern Legal Services, LLC,
attorneys; Mr. Penick, on the briefs).
Christopher B. Healy argued the cause for
respondent (Bathgate, Wegener & Wolf, PC,
attorneys; Mr. Healy, on the brief).
The opinion of the court was delivered by
OSTRER, J.A.D.
This appeal arises out of a condominium developer's failure
to complete construction of certain planned units. Plaintiff
High Point at Lakewood Condominium Association, Inc. (High
Point) appeals from the General Equity Part's November 22, 2013,
summary judgment order dismissing its quiet title complaint.
High Point currently consists of 260 completed condominium
units in thirty-three low rise buildings, located within the
bounds of a 25.03 acre property. The 1971 master deed
contemplated the construction of 136 additional units in
seventeen buildings in the southern portion of the total parcel.
Pursuant to the master deed, the developer also obtained the
power of attorney from all original owners to remove from the
condominium unbuilt units and the land on which they were to be
built. Neither the original developer, nor a successor in
interest, completed the 136 unbuilt units, or formally removed
them from the condominium. Eventually, the successor in
interest failed to pay real estate taxes on the unbuilt units.
Lakewood Township ultimately foreclosed on tax sale certificates
and took title to the unbuilt units in 1980. There is no
evidence that Lakewood attempted to exercise the power of
attorney to remove the unbuilt units and the roughly 9.8 acres
on which they were to be constructed.
In September 2012, High Point challenged Lakewood's
foreclosure of the unbuilt units, and sought a declaration that
the township did not hold title to the undeveloped portion of
the parcel removed from the condominium's common property. In
2 A-2118-13T2
the alternative, High Point asserted that Lakewood was liable
for common area assessments payable by all unit owners. The
trial court determined that Lakewood holds clear title to the
undeveloped parcel removed from the condominium; and dismissed
High Point's remaining claims.
High Point's appeal requires us to determine the status of
the undeveloped parcel and the unbuilt or so-called "phantom"
units. In so doing, we must address several novel questions
regarding the rights and duties pertaining to such units. We
hold that phantom units are subject to real estate tax, and to
foreclosure if taxes are not paid. As the foreclosure pertains
to specific units, the association is not entitled to personal
notice. We also hold that the title owner of phantom units may
be liable for common area assessments, absent legal or equitable
defenses. Assuming the powers of attorney as were granted in
this case comply with the New Jersey Condominium Act (Act),
N.J.S.A. 46:8B-1 to -38, and run with land — about which we
express substantial doubts — we hold that they are not self-
executing. Consequently, absent the formal filing of a deed of
removal, the phantom units and undeveloped parcel remain
integrated with the balance of the development, as set forth in
the master deed.
3 A-2118-13T2
We therefore disagree with the trial court's determination
that Lakewood currently holds separate title to the undeveloped
parcel. Based on the record before us, Lakewood owns the
phantom units and the undivided proportionate share of common
elements accompanying those units. We therefore affirm in part
and reverse in part the trial court's order, and remand for
further proceedings.
I.
The essential facts are undisputed. High Point was
established under the Act pursuant to a master deed from High
Point Development Corp. (HPDC) as grantor recorded in February
1971.1 The master deed contemplated the construction of up to
396 condominium units in fifty separate buildings. Each
building would contain eight units, except for building number
four, which would contain four units. Each building adjoined at
least one other building; thus, as depicted in drawings, the
total proposed development appears to consist of a total of
twenty-four separate structures.
1
The original master deed was dated January 8, 1971, and
recorded on February 8, 1971. An amendment was dated February
8, 1971, and recorded three days later to correct a
typographical error resulting in the omission of the first eight
words of section 13. We refer to the master deed as amended as
the "master deed."
4 A-2118-13T2
Under section 13 of the master deed, entitled "Removal,"
HPDC reserved the authority to remove "lands" described in the
master deed by exercising powers of attorney granted by unit
owners pursuant to the master deed. The first unnumbered
paragraph states that any and all lands were subject to
withdrawal from condominium ownership pursuant to a deed of
revocation executed by all unit owners, or their attorneys-in-
fact or mortgagees:
Anything to the contrary herein or in
any other document notwithstanding, the
submission of the lands described in Exhibit
"A" aforesaid[2] to condominium ownership shall
be subject to removal from the provisions of
the Condominium Act by a Deed(s) of
Revocation executed by all unit owners or
the sole owner of the property, the holders
of all mortgages or other liens affecting
all units, or be [sic] the attorney-in-fact
for any of the foregoing, and recorded in
the same office as this Master Deed.
HPDC also purported to reserve to itself the power to
remove unsold units together with the common elements and land
associated with them, to within twenty-five feet of structures
not removed, pursuant to the following paragraph:
Grantor hereby reserves for itself, its
successors and assigns, the irrevocable
right to remove, at its election, from the
Condominium and from the application of the
Condominium Act, any or all unsold units
2
Exhibit A is the metes and bounds description of the "Entire
Tract" as defined.
5 A-2118-13T2
. . . comprising the Condominium, except for
all units contained in Building Nos. 11
through 21 ("Charter Units"), together with
that portion of the common elements of the
Condominium comprising the land upon which
the units removed are located and all lands
contiguous thereto which are at least
twenty-five (25) feet distant from any
existing building or structure which remains
a part of the Condominium. Said right of
election to remove the Removed Units from
the Condominium may be exercised in
accordance with applicable law from time to
time and any [sic] any time.
However, the master deed appears to acknowledge that
consent of all unit owners was required for removal of any
units, as set forth in the first and second unnumbered
paragraphs. Consequently, in the third unnumbered paragraph
within section 13, the deed purports to automatically grant
powers of attorney to the grantor to exercise that consent:
By acceptance of a deed to any unit or
by the acceptance of any other legal or
equitable interest in the Condominium, each
and every contract purchaser, unit owner or
occupant or holder of any mortgage or other
liens, does automatically and irrevocably
name, constitute, appoint and confirm
Grantor its successors and assigns, as
attorney-in-fact for the purpose of
executing such Deed(s) of Revocation or
other instrument necessary to effect the
foregoing.
[(Emphasis added).]
6 A-2118-13T2
The master deed also states, "The Power of Attorney aforesaid is
expressly declared and acknowledged to be coupled with an
interest in the subject matter."
The master deed provides, "[u]pon the removal(s) of any
unit(s)," for the recalculation of the remaining unit owners'
proportionate interest in common elements.3 In the event of
removal, remaining unit owners retained an easement to parking,
driveways for ingress and egress, and various utilities that may
be located on or contiguous to removed units.
The recitals of the master deed recognize that in order to
remove units or portions of common elements, the Act "requires
that a Deed of Revocation be executed by all unit owners or the
sole owner of the property and the holders of all mortgages or
other liens affecting all units." The recitals state that the
powers of attorney were granted to enable HPDC to reserve unto
itself the power of removal:
WHEREAS, Grantor may at some future
date determine that it is not feasible to
continue the development and sale of the
Entire Tract as a condominium in the manner
herein provided, and may desire to remove
from the aforesaid Condominium, according to
the provisions of the Condominium Act, any
or all condominium units not theretofore
3
The master deed also preserves the right of owners or occupants
of removed units to use the recreational clubhouse or pool
facilities which remain common elements of the condominium, but
puts a limit on the total number of families that can use them.
7 A-2118-13T2
sold, shown on the map hereinafter described
as Exhibit "B", including those portions of
the common elements constituting certain
lands contiguous to and upon which such
units are located (hereinafter referred to
as the "Removed Units"); and
WHEREAS, in order to so remove the
Removed Units, the Condominium Act requires
that a Deed of Revocation be executed by all
unit owners or the sole owner of the
property and the holders of all mortgages or
other liens affecting all units; and
WHEREAS, in order to facilitate the
execution of any such Deed(s) of Revocation
by all such required parties, the Grantor
desires to reserve herein the irrevocable
right to remove the Removed Units from the
Condominium and from the application of the
Condominium Act and for the Grantor to
execute any such Deed(s) of Revocation as
attorney-in-fact for all such required
parties without any further consent or the
necessity for execution of any further
instrument or document by any such party.
Ultimately, only 260 condominium units were completed,
although the date of their completion is not indicated in the
record. The unbuilt 136 units were to be located on roughly 9.8
acres of land denominated as Block 423, Parcel 1A (Undeveloped
Parcel).4
By a deed recorded on June 30, 1971, HPDC purported to
transfer various rights and property to Unisave Service Corp.
4
Although the land is denominated as Parcel 1A in the
foreclosure judgment discussed below, the record includes no
other evidence — such as the tax map — reflecting the
subdivision of the entire tract.
8 A-2118-13T2
(Unisave) in exchange for $640,000. We infer that as of that
date, HPDC had not completed construction of, or sold the 260
units that were ultimately finished and transferred. We do so
because the deed purported to transfer buildings 1 through 10,
and 22 through 50, including the apartments contained therein,
plus "such land . . . which encompasses Building #13, Apartments
D-1, D-2, D-3, D-4, and Building #14, Apartments R-1, R-2, E-3
and E-4." In other words, the only buildings apparently not
transferred — perhaps because they were completed and units
therein were sold or retained by HPDC — were nine buildings: 11
through 12, and 15 through 21.5 The deed stated that the
transferred property "is a portion of the property conveyed in
the aforesaid Master Deed." Thus, according to the deed, the
property transferred to Unisave included, but was not limited
to, the 9.8 acres that were to contain the 136 never-built
units.
The deed also transferred to Unisave the powers of attorney
received by HPDC. "The foregoing conveyance is made together
with all rights reserved to Grantor in the aforesaid Master Deed
which include, but are not limited to: . . . (e) The right of
5
So-called "Charter Units" — units in buildings 11 through 21 —
were not subject to claimed removal rights, according to the
master deed quoted above. Nonetheless, the land that
encompassed the identified units in buildings 13 and 14 was
transferred in the HPDC-to-Unisave deed.
9 A-2118-13T2
removal reserved by Paragraph #13 of said Master Deed as the
same may have been amended."
It is undisputed that Unisave ultimately defaulted on the
payment of property tax on the 136 phantom units. In August
1979, Lakewood filed a complaint against each of the units
seeking foreclosure in rem on the tax sale certificates of those
units. The record does not include the complaint, but it is
undisputed that Lakewood did not name High Point as a party, nor
did it serve High Point with the complaint. However, Lakewood
did publish notice of its complaint.
Ultimately, Lakewood secured a final judgment in
foreclosure on the tax sale certificates on December 5, 1980,
transferring to Lakewood "an absolute and indefeasible estate of
inheritances in fee simple in said lands."6 The judgment
described the "lands" transferred, setting forth each unit,
noting its building and apartment number, that it was part of
6
The reference to a "fee simple" interest does not connote
ownership of property removed from the condominium. "The New
Jersey Supreme Court has characterized a condominium unit owner
as having 'fee simple title to and enjoy[ing] exclusive
ownership of his or her individual unit while retaining an
undivided interest as a tenant in common in the facilities used
by all of the other unit owners.'" Jennings v. Borough of
Highlands, 418 N.J. Super. 405, 419 (App. Div. 2011) (emphasis
added) (quoting Fox v. Kings Grant Maint. Ass'n, 167 N.J. 208,
219 (2001)).
10 A-2118-13T2
Block 423, Parcel 1A, and that it consisted of "Vacant Land."7
According to High Point, for over thirty years thereafter,
Lakewood did not take any steps to exercise physical possession
of the foreclosed property.
Apparently concerned that the "status quo" would change, on
September 24, 2012, High Point filed its complaint to quiet
title to the undeveloped parcel. It sought a judgment declaring
it the sole owner of the undeveloped parcel. In the
alternative, if the court found that High Point did not own the
parcel, then High Point — based on theories of contract and
quasi-contract — sought back payments of unpaid assessments on
the phantom units, plus interest, from January 1, 2006, through
September 18, 2012.
High Point sought summary judgment, and Lakewood filed a
cross-motion. High Point argued that the undeveloped parcel
remained part of the common elements of the condominium; it was
7
For example, the "Description on tax duplicate and in
certificate of sale" for the first of the 136 units was
presented as follows:
Block 423 Parcel 1A3401
Massachusetts Avenue
Part of Block 423,
Parcel 1A
Building 34, Apt. 01
High Point at Lakewood
Vacant Land
11 A-2118-13T2
not subject to separate taxation; High Point was entitled to
notice; and the foreclosure judgment was void.
Lakewood argued that taxation and foreclosure were
permitted on the unbuilt units; High Point was not entitled to
notice; and High Point was time-barred from challenging the
foreclosure. In its response to High Point's statement of
material facts, Lakewood asserted that its judgment of
foreclosure "effectuated Lakewood's exercise of its rights as
successor in interest to the developer under Paragraph 13 of the
Master Deed [governing removal] and resulted in Lakewood taking
possession of the Property." Lakewood also submitted the
opinion of a title officer with a title insurance agency, who
stated that the HPDC-to-Unisave deed conveyed to Unisave the
removal rights in section 13 of the master deed; and Lakewood
became a successor in interest to those rights; and by operation
of the foreclosure, it removed the units from the condominium,
and obtained a fee simple estate to the undeveloped parcel. In
other words, the title officer took the position that until the
foreclosure, the phantom units were still part of the
condominium.
The trial court granted Lakewood's motion, denied High
Point's motion, dismissed the complaint, and declared that
Lakewood is the fee simple owner of all lands foreclosed upon by
12 A-2118-13T2
way of the 1980 final judgment, free from any requirements of
the High Point master deed, by-laws, or the Act. In its oral
decision, the trial court held that each unit, including unbuilt
units, were subject to taxation, citing Glenpointe Associates v.
Township of Teaneck, 10 N.J. Tax 288 (Tax 1988). The court
found that High Point was not entitled to specific notice of the
foreclosure complaint, and it was, in any event, time-barred
from challenging the foreclosure. Finally, the court held that
the developer possessed the right to remove unsold units from
the condominium pursuant to section 13 of the master deed;
Lakewood succeeded to those rights; and the in rem foreclosure
"effectively removed this land from the condominium" pursuant to
those removal rights.
II.
We review the trial court's grant of summary judgment de
novo, applying the same standard as the trial court. Henry v.
N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). We
determine whether the moving party has demonstrated the absence
of genuine issues of material fact, and whether the trial court
has correctly determined that movant is entitled to judgment as
a matter of law, owing no deference to the trial court's legal
conclusions. N.J. Dep't of Envtl. Prot. v. Alloway Twp., 438
13 A-2118-13T2
N.J. Super. 501, 507 (App. Div.), certif. denied, ___ N.J. ___
(2015).
Interpretation of a master deed is also a question of law.
Belmont Condo. Ass'n v. Geibel, 432 N.J. Super. 52, 86 (App.
Div.), certif. denied, 216 N.J. 366 (2013). We exercise de novo
review of such legal questions. See Manalapan Realty, L.P. v.
Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
A.
We turn first to the issue of taxation and Lakewood's in
rem foreclosure of the tax sale certificates. High Point argues
that Lakewood was not empowered to impose taxes on, or to
foreclose on, phantom units. Further, High Point asserts that
its foreclosure complaint sought foreclosure on common property;
High Point was entitled to notice as owner; and the failure of
notice rendered the judgment void. We are unpersuaded.
Under the condominium form of ownership of real property, a
"master deed provid[es] for ownership by one or more owners of
units of improvements together with an undivided interest in
common elements appurtenant to each such unit." N.J.S.A. 46:8B-
3(h). A "unit" consists of "a part of the condominium property
designed or intended for any type of independent use, having a
direct exit to a public street or way or to a common element
. . . leading to a public street or way." N.J.S.A. 46:8B-3(o).
14 A-2118-13T2
"Each unit shall constitute a separate parcel of real property
which may be dealt with by the owner thereof in the same manner
as is otherwise permitted by law for any other parcel of real
property." N.J.S.A. 46:8B-4. A common element includes land
described as such in the master deed; "yards, gardens, walkways,
parking areas;" and "installations of all central services and
utilities." N.J.S.A. 46:8B-3(d).
For purposes of taxation, each unit is taxed separately.
N.J.S.A. 46:8B-19 (stating that "[a]ll property taxes . . .
shall be separately assessed against and collected on each unit
as a single parcel, and not on the condominium property as a
whole"); see also Perth Amboy Gen. Hosp. v. City of Perth Amboy,
176 N.J. Super. 307, 312 (App. Div. 1980) (stating that "a
condominium unit is for tax purposes an exclusive and separate
unit despite the fact that by definition any condominium owner
shares undivided interests in common with others"), certif.
denied, 87 N.J. 352 (1981); Cigolini Assocs. v. Borough of
Fairview, 208 N.J. Super. 654, 664-65 (App. Div. 1986) (stating
that the borough was authorized to separately assess nineteen
apartments converted to condominium form of ownership,
notwithstanding that the plaintiff who converted the apartments
retained ownership, and continued to rent the units because of
poor market conditions). Likewise, the tax shall serve as a
15 A-2118-13T2
"lien only upon the unit and upon no other portion of the
condominium property." N.J.S.A. 46:8B-19.8
In Glenpointe, the tax court held that under N.J.S.A.
46:8B-19, a unit does not need to include an apartment, and an
assessment may involve only land. Glenpointe, supra, 10 N.J.
Tax at 294. Furthermore, a condominium unit does not need to be
completed before it is considered a unit for purposes of
assessing responsibility for the proportionate share of the
common elements. Ibid.
By statute [the Condominium Act], a
condominium is created and established upon
the filing of a master deed. The statute
also clearly provides that each condominium
unit is separately assessed and that,
appurtenant to and inseparable from each
unit, is a proportionate share of the common
elements. Indeed, the statutory definition
of a condominium unit includes the share of
the common elements assigned to it. The
separate assessment of each unit
contemplated by N.J.S.A. 46:8B-19 may
involve land only, or it may reflect land
plus partial improvements, such as footings
and foundations. Whatever the condition of
the unit assessed, whether finished or
8
We recognize that if a condominium association separately owns
a parcel not recorded as a "common element," the association may
be subject to separate taxation. See Tower W. Apartment Ass'n
v. Town of W. New York, 2 N.J. Tax 565, 569-74 (Tax 1981)
(allowing separate taxation of parking facility not conveyed as
part of the condominium unit and not within the purview of
N.J.S.A. 46:8B-19), aff'd o.b., 5 N.J. Tax 478 (App. Div. 1982);
see also Wendell A. Smith, Dennis A. Estis, & Christine F. Li,
New Jersey Condominium & Community Association Law, § 2:4 at 21
(2015).
16 A-2118-13T2
unfinished, the unit's assigned share of the
value of the common elements is included in
the assessment.
[Ibid.]
See also Tall Timbers, Inc. v. Vernon Twp., 5 N.J. Tax 299, 301-
10 (Tax 1983) (addressing taxation of vacant land, campsites,
with access to limited improvements, in a condominium campground
community), overruled in part on other grounds by Twp. of W.
Milford v. Van Decker, 235 N.J. Super. 1, 22 (App. Div. 1989),
aff'd 120 N.J. 354 (1990).
High Point argues that Glenpointe only stands for the
proposition that the value of a unit may involve only land, but
not that a unit may consist only of undeveloped land. High
Point notes that in Glenpointe, physical construction of the
units had begun and was at various stages of completion. High
Point contends the Act requires that a unit include improvements
to land.
We disagree. A unit may exist under the Act, even if it
does not yet have an actual use. A unit is defined as a part of
property "designed or intended for any type of independent use."
N.J.S.A. 46:8B-3(o) (emphasis added). The taxation of phantom
units constitutes taxation on the basket of property rights
17 A-2118-13T2
associated with the unit, including the unit's undivided
interest in the common elements.9
Although we have found no case in New Jersey directly
addressing the issue of taxation of phantom units, other
jurisdictions have persuasively held that a developer is liable
for taxes on unbuilt units. In Saddle Ridge Corp. v. Bd. of
Review, 784 N.W.2d 527 (Wis. 2010), the court affirmed taxation
of phantom units, and rejected arguments like those High Point
presents here: that unbuilt units were not "units" under the
state's condominium statute, and taxation of phantom units
amounted to taxation of the vacant land that was part of the
condominium's common elements. Id. at 536. The Wisconsin court
endorsed the reasoning that a condominium is created when the
declaration and plat are recorded. Id. at 540. The court
reasoned that if unbuilt units are not taxable, a developer
could be immune from taxation unless and until it commenced
construction. Id. at 539. See also Vill. at Treehouse, Inc. v.
Prop. Tax Adm'r, 321 P.3d 624, 625-28 (Colo. App. 2014)
9
We need not address the appropriate means of valuing such
property. See N.J.S.A. 54:4-23.
18 A-2118-13T2
(approving taxation of development rights to construct unbuilt
condominium units).10
Having concluded that Lakewood was empowered to tax the
phantom units as individual properties, separate from the common
elements of the condominium, we reject High Point's argument
that it was entitled to separate notice of Lakewood's complaint
to foreclose on the tax sale certificates. Lakewood was obliged
to send notice to the owner of record of the phantom units —
Unisave. See Twp. of Montville v. Block 69, Lot 10, 74 N.J. 1,
19-20 (1977) (stating that the owner of record is entitled to
actual notice of in rem foreclosure action). Constructive
notice through publication was sufficient notice to other
parties, including High Point. See N.J.S.A. 54:5-104.42.
High Point misplaces reliance on Wynwood Condo. Ass'n v.
Twin Trees Dev. Co., 250 N.J. Super. 510 (Ch. Div. 1991). That
case involved the mistaken transfer to a third party of property
— a drainage basin — that was contained in a condominium's
master deed. Id. at 514. The third-party property owner of
record failed to pay taxes. Ibid. Notice of the tax sale
foreclosure action was provided to the owner of record, but not
10
Our conclusion that phantom units are subject to taxation is
also supported by the substantial authority in other states,
concluding that phantom units are subject to assessments, which
we discuss below.
19 A-2118-13T2
the condominium. Id. at 517. In that case, in light of the
initial error in the transfer of the property, the court held,
given "the unusual set of facts," that the condominium was
entitled to actual notice of the foreclosure action. Id. at
519. The distinction between that case and the one before us is
obvious. The foreclosure here did not involve property
consisting of part of the common elements; the foreclosure
pertained to the phantom units. In light of the foregoing, we
need not reach the issue whether High Point was time-barred from
challenging the foreclosure judgment.
In sum, we discern no substantive basis to disturb the 1980
foreclosure judgment. We therefore affirm the trial court's
determination dismissing High Point's challenge to the judgment.
B.
However, we part company with the trial court's
determination that as a consequence of its foreclosure judgment,
Lakewood removed the phantom units from the condominium, and
obtained fee simple ownership of the undeveloped parcel. The
court's conclusion was predicated on the developer's right to
remove unsold units pursuant to section 13 of the master deed,
20 A-2118-13T2
and the court's determination that the judgment of foreclosure
was equivalent to a deed of revocation of the phantom units.11
The Act, as in effect in 1980 when Lakewood obtained title
to the phantom units, authorized removal of condominium property
upon the unanimous vote of the unit owners.
Any condominium property may be removed from
the provisions of this act by a deed of
revocation duly executed by all unit owners
or the sole owner of the property and the
holders of all mortgages or other liens
affecting all units and recorded in the same
office as the master deed.
[L. 1969, c. 257, § 26 codified at N.J.S.A.
46:8B-26.]
The statute was amended in 1985 to authorize removal with a vote
of eighty percent of unit owners. L. 1985, c. 3, § 1. Once a
deed of revocation is recorded, "the unit owners as of the date
of recording of such deed shall become tenants-in-common of the
11
The metes and bounds of the land that HPDC transferred to
Unisave in the HPDC-to-Unisave deed constituted a large part of
the land that HPDC previously subjected to condominium ownership
in the master deed; it included land under both the phantom
units and units that were ultimately completed and form part of
the existing association. Lakewood's argument presumes that the
phantom units remained part of the condominium until it obtained
foreclosure judgment on the tax sale certificates, and only then
removed them from the condominium. In other words, Lakewood
does not contend that the HPDC-to-Unisave deed removed the
phantom units, as well as those apartments built or unbuilt and
contained in buildings 1 through 10, 22 through 50, and parts of
13 and 14, which were transferred by the deed. We therefore
need not address whether such a removal by the HPDC-to-Unisave
deed would have been effective under the Act.
21 A-2118-13T2
property unless otherwise provided in the master deed or deed of
revocation." N.J.S.A. 46:8B-27.
We reject Lakewood's argument that section 26 of the Act
pertains only to the termination of an entire condominium, and
not the partial removal or withdrawal of units. The plain
language of the provision, which refers to "[a]ny condominium
property," encompasses any unit or units of property within the
condominium. See State v. Rosecliff Realty Co., 1 N.J. Super.
94, 100 (App. Div. 1948) ("The word 'any' means '. . . one out
of many . . .' and is given the full force of 'every' or
'all.'") (citation omitted), certif. denied, 1 N.J. 602 (1949).
Lakewood's reading would also lead to an absurd result. On
one hand, unanimous consent would be required to remove an
entire condominium property, to shield unit owners of the
potential prejudicial impact of termination. On the other hand,
according to Lakewood's reading, a developer may reserve unto
itself the power — without any say from unit owners — to remove
or withdraw all but a slight portion of an entire condominium,
to comparable prejudice of the affected owners.12
12
We note that the amended Uniform Condominium Act § 1-
103(11)(iv), 7 U.L.A. 504 (1980) (U.C.A.), empowers a developer
to retain the power to "withdraw" real estate from a
condominium. See ibid. (defining development rights to include
right to withdraw property). However, the power is
circumscribed, to protect the interests of unit owners. See
(continued)
22 A-2118-13T2
The recitals in High Point's master deed also recognize
that unit owners' approval was required for the partial removal
of unsold units. The prime consideration in determining the
meaning of a deed is the intent of the parties. Normanoch Ass'n
v. Baldasanno, 40 N.J. 113, 125 (1963). The recitals reflect
the grantor's intent. See generally Genovese Drug Stores, Inc.
v. Conn. Packing Co., 732 F.2d 286, 291 (2d Cir. 1984) ("[A]n
expression of intent in a 'whereas' clause of an agreement
between two parties may be useful as an aid in construing the
rights and obligations created by the agreement, but it cannot
create any right beyond those arising from the operative terms
(continued)
U.C.A. § 2-105(8) (requiring a description of those areas
subject to withdrawal); U.C.A. § 2-110(d) (governing the
exercise of the power to withdraw, providing that if the
declaration does not describe portions subject to withdrawal,
then none of the real estate may be withdrawn once one unit has
been conveyed; and if portions are subject to withdrawal, then
no portion may be withdrawn after one unit in that portion has
been conveyed). New Jersey's statute does not expressly address
the subject. Consequently, if a developer is uncertain whether
economic conditions will justify the complete build-out of a
planned condominium, the developer may approach the project in
phases, adding new sections to the master deed as conditions
permit, rather than attempt to withdraw unbuilt or unsold units
from the condominium. See Smith, Estis & Li, supra, ch. 4 at
27-35 (discussing phasing of condominium projects); Lowell E.
Sweet, Condominium Law and Practice, § 54.03(1)[d] (2015)
(discussing issues raised by failure to complete a project,
phantom units, and the desirability to eliminate phantom units
by amending a condominium's declaration, although such amendment
"can usually be adopted only by the unanimous consent of the
developer and all unit owners").
23 A-2118-13T2
of the document."); see also Monks v. Provident Inst. for
Savings, 64 N.J.L. 86, 89 (Sup. Ct. 1899) (stating "parties to a
deed or contract are estopped from contradicting or disputing
these recitals, and they must be taken as true so far as they
may aid and assist in the interpretation of the contracts").
The third "whereas" clause notes that the developer may
want to remove unsold units if "it is not feasible to continue
the development and sale of the Entire Tract." Apparently
referring to N.J.S.A. 46:8B-26, the next recital states that "in
order to so remove the Removed Units, the Condominium Act
requires that a Deed of Revocation be executed by all unit
owners . . . ." Thus, the recitals reflect the intent that
unanimous consent of unit owners was required to remove any
unsold units.
The substantive provision of the master deed, section 13,
granted HPDC and its successors the irrevocable right to remove
unsold units. But the removal power is not unqualified.
Section 13 also includes the automatic grant of powers of
attorney to execute deeds of revocation. The powers of attorney
were granted "for the purpose of executing such Deed(s) of
Revocation or other instrument necessary to effect the
foregoing" — where "foregoing" refers to the preceding paragraph
that addressed HPDC's right to remove unsold units.
24 A-2118-13T2
Thus, HPDC attempted, through the master deed, to avoid the
necessity of actually obtaining the unanimous consent of the
unit owners. HPDC did so by including in the master deed a
provision whereby unit owners automatically granted to HPDC, and
its successors, irrevocable powers of attorney to exercise their
votes. HPDC's purpose is set forth in the fifth recital clause.
"[I]n order to facilitate the execution of any such Deed(s) of
Revocation," HPDC reserved unto itself the "irrevocable right to
remove the Removed Units . . . and . . . to execute any such
Deed(s) of Revocation as attorney-in-fact for all such required
parties without any further consent or the necessity for
execution of any further instrument or document by any such
party."
High Point questions the validity of the developer's
retention of the right to remove property from the condominium.
High Point argues the master deed provision violates section 26
of the Act, which requires unit owners' consent. The powers of
attorney were clearly designed to avoid the stricture of section
26. Although not expressly addressed by High Point, section 7
of the Act may bar such powers of attorney. Section 7 states:
"Any agreement contrary to the provisions of this act shall be
void." N.J.S.A. 46:8B-7. Section 13 of the master deed may be
deemed an agreement contrary to the Act.
25 A-2118-13T2
Although we have found no case in New Jersey interpreting
N.J.S.A. 46:8B-7, we note that the current version of the U.C.A.
expressly provides that powers of attorney may not be used to
evade statutory requirements. U.C.A. § 1-104. The comment
recognizes the potentially abusive use of powers of attorney to
evade consumer protections found elsewhere in the statute.
One of the consumer protections in this
Act is the requirement for consent by
specified percentages of unit owners to
particular actions or changes in the
declaration. In order to prevent declarants
from evading these requirements by obtaining
powers of attorney from all unit owners, or
in some other fashion controlling the votes
of unit owners, this section forbids the use
by a declarant of any device to evade the
limitations or prohibitions of the Act or of
the declaration.
[U.C.A. § 1-104, comment 2.]
It is also unclear that Lakewood succeeded to the powers of
attorney. It is apparent that the grant of the powers of
attorney was presumed to run with each unit, such that the grant
was binding against the unit owners' successors and assigns, and
to avoid the necessity that subsequent owners execute powers of
attorney. We presume that the provision stating the grants were
"coupled with an interest in the subject matter" was intended to
accomplish that result.
However, it is far from clear that the power to exercise
the powers of attorney ran with Unisave's property, as Lakewood
26 A-2118-13T2
asserts, such that Lakewood succeeded to Unisave's rights when
it obtained title to the phantom units. Unisave conceivably
could have defaulted on taxes of only some of the phantom units.
Under that scenario, accepting Lakewood's reasoning, both
Unisave and Lakewood would possess the powers of attorney
simultaneously with the potential of exercising them
inconsistently — an absurd result.
However, we leave for another day the issue whether the
powers of attorney violate the Act — which lacks the express
reference found in the U.C.A. — or public policy. We also do
not resolve whether, if enforceable, the powers of attorney ran
with the land. Even if they were enforceable, and ran with the
land, they were not self-effectuating.
We thus differ with the trial court, which concluded that
the phantom units were removed by the entry of the foreclosure
judgment. The Act requires the filing of a deed of revocation
executed by the unit owners or, arguably, their attorneys in
fact. See N.J.S.A. 46:8B-26. No such deed was filed.
The foreclosure judgment does not suffice. The judgment
does not mention a "deed of revocation," or state expressly that
property was being removed from the condominium. The
foreclosure judgment includes no metes and bounds of the
27 A-2118-13T2
property obtained.13 It refers to each separate unit by its
building and apartment number. We thus conclude that Lakewood
currently holds title to the phantom units, which remain
integrated with the entire tract as described in the master
deed. Lakewood may choose to file a deed of revocation, to
secure its right to the land, removed from the association's
common area. If Lakewood does so, then the issue of the
enforceability of the powers of attorney may be joined.
C.
Finally, we address High Point's argument that if Lakewood
does hold title to the phantom units, then it is liable for
assessments since 1980.14 Although no New Jersey case has
apparently addressed the issue, liability for assessments is
consistent with liability for taxation, which we discussed
13
The metes and bounds of property identified in the HPDC-to-
Unisave deed does not separately describe the undeveloped
parcel; rather, it describes all the land covered by the master
deed's metes and bounds, except for a portion in the northwest
corner, where, apparently, the units that were not transferred
were located.
14
In its September 2012 complaint, High Point similarly alleged
that Lakewood's liability reached back to December 5, 1980.
Yet, in its prayer for relief, it sought judgment only for
slightly over six years of assessments, starting January 1,
2006, plus interest. High Point did so apparently in
recognition of the six-year statute of limitations. See
N.J.S.A. 2A:14-1. However, High Point does not explain the
basis of its claim for assessments between January and September
2006.
28 A-2118-13T2
above. The Act provides that "common expenses shall be charged
to unit owners" without limitation to owners of partially built
or unbuilt units. N.J.S.A. 46:8B-17. Department of Community
Affairs regulations, pursuant to the Planned Real Estate
Development Full Disclosure Act, N.J.S.A. 45:22A-21 to -56,
contemplate assessments on units "under development." See
N.J.A.C. 5:26-8.6(b) ("When the association has made a common
expense assessment, the assessment shall be assessed against the
units individually owned and under development in proportion to
the benefit derived by the unit from the items included in the
budget.").
There is also persuasive authority from other
jurisdictions, applying their respective statutes, for the
proposition that phantom units are subject to assessments. See
Mountain View Condo. Homeowners Ass'n v. Scott, 883 P.2d 453,
457 (Ariz. Ct. App. 1994) (recognizing view that U.C.A. does not
"distinguish between completed and uncompleted units in . . .
levying assessments for maintenance, repair and administrative
expenses attributable to the common elements"); Hatfield v. La
Charmant Home Owners Ass'n, 469 N.E.2d 1218, 1221-22 (Ind. Ct.
App. 1984) (rejecting argument that "habitability" must precede
assessment); Pilgrim Place Condo. Ass'n v. KRE Props., Inc., 666
A.2d 500, 502 (Me. 1995) (stating "[n]o provision of the Act
29 A-2118-13T2
requires any distinction between built and unbuilt units in the
assessment for common expenses"); Bradley v. Mullenix, 763
S.W.2d 272, 275-77 (Mo. Ct. App. 1988) (stating that neither the
statute nor the condominium's declaration distinguished between
completed and unfinished units, and holding that developer was
liable for proportionate share of expenses attributable to
unfinished units); Centennial Station Condo. Ass'n v. Schaefer
Co. Builders, Inc., 800 A.2d 379, 384 (Pa. Commw. Ct. 2002)
(following Mountain View and Pilgrim Place); cf. Rafalowski v.
Old Cnty. Rd., Inc., 719 A.2d 84, 87-88 (Conn. Super. Ct. 1997)
(permitting a lesser assessment fee for unfinished units), aff'd
o.b., 714 A.2d 675, 675-77 (Conn. 1998).15
Pilgrim Place is particularly noteworthy as it involved a
bank's foreclosure on a developer's interest in a partially
completed condominium development. Pilgrim Place, supra, 666
A.2d at 501. Defendant KRE acquired title at the foreclosure
sale to twenty-four unbuilt units out of a total of forty-eight
units. Ibid. KRE built sixteen units during its control
period. Id. at 501-02. It paid no assessments on the unbuilt
15
We recognize this is not the unanimous view of other
jurisdictions. See, e.g., Meghan Coves Ass'n v. Meghan Coves
Prop., Inc., 50 P.3d 226, 230-31 (Okla. Civ. App. 2002) (finding
that under Oklahoma statutory law, the establishment of a unit
requires construction of a unit "rather than an idea expressed
on paper").
30 A-2118-13T2
units. Id. at 502. The court held that it was liable for
assessments associated with the unbuilt units until its control
period ended, at which time the right to develop the unbuilt
units expired, according to the condominium declaration. Ibid.
Nonetheless, a condominium association may be barred by
principles of waiver or laches from imposing retroactive
assessments. See Springside Land Co. v. Bd. of Managers of
Springside Condo. I, 869 N.Y.S.2d 101, 105-06 (App. Div. 2008)
(finding that a board waived its right to assess common charges
on unfinished units by waiting ten years to impose them, but
stating that waiver can be withdrawn as it pertains to the right
to assess future common charges). In any event, it is unclear
that assessments on phantom units should be equal to those
imposed on finished units. See N.J.A.C. 5:26-8.6(b) (stating
that assessments on "units individually owned and under
development" shall be "in proportion to the benefit derived by
the unit") (emphasis added); see also Ocean Club Condo. Ass'n v.
Gardner, 318 N.J. Super. 237, 240 (App. Div. 1998) (quoting
approvingly trial court decision stating that with respect to
units under development, "'[i]n such a setting, it would be
logical and equitable to only assess such units to the extent
that they benefit from the common elements which, during the
development stage, would understandably be less than for those
31 A-2118-13T2
units that are complete'"). We remand to the trial court to
address High Point's claim to assessments.
D.
To summarize, we conclude that Lakewood was empowered to
tax the phantom units, and to foreclose on the tax sale
certificate after the taxes were unpaid. However, Lakewood's
right to remove the phantom units required the unanimous consent
of the unit owners. We question whether the powers of attorney
are valid or were transferred with the phantom units obtained
through foreclosure. However, even if their validity and
transfer are assumed, they are not self-executing. Lakewood had
not executed or filed a deed of revocation; and the foreclosure
judgment does not suffice.
Consequently, Lakewood remains the owner of the phantom
units until an enforceable deed of revocation is filed.
Although Lakewood is potentially subject to assessments, its
liability for past assessments may be barred by principles of
waiver or laches; in any event, Lakewood's liability is limited
by the statute of limitations.
Affirmed in part, reversed in part and remanded. We do not
retain jurisdiction.
32 A-2118-13T2