CAI-NJ Jan. 2019 (w)

“Changing the cladding to a different material or design may be considered a ‘material alteration’ of the common elements which would be prohibited by the Condominium Act...”

CLADDING... from page 31.

For Condominium Associations (“CA”), the Board must review their Master Deed to determine if cladding is defined as a common element. If defined as a com- mon element, then the New Jersey Condominium Act provides at N.J.S.A. 46:8B-14, that the “association, acting through its officers or governing board, shall be responsible for … The maintenance, repair, replace- ment, cleaning and sanitation of the common elements.” Based upon this definition, in most CA situations, the cladding will be the association’s responsibility to replace. For Homeowners Associations (“HOA”) the Board must review their association’s Declaration of Covenants and Restrictions and By-Laws to determine if the cladding areas are part of the Common Property owned by the HOA, such as on a Clubhouse, and therefore, the Association’s responsibility to replace. If, however, the cladding is on homes owned by the HOA members, then the Association must review their governing docu- ments to determine if the documents shift the responsibil- ity for replacement of the cladding to the Association. Some HOA documents shift the responsibility for exterior building elements to the association in order to maintain the aesthetic design and uniformity of the buildings. - In cases where the association is looking to replace the cladding with a different material or design, and the materi- al or design complies with municipal zoning and approval requirements, the Board will still need to review whether the association’s governing documents restrict the Board’s power to make such a change. Many times, a review of the public offering statement (“POS”) may describe what the developer intended to use on the buildings as cladding. For example, the POS may state that the buildings were to be clad in brick. If the board wants to replace that with a different material such as vinyl siding, members may have the right to object if the Board is not given direct authority in its governing documents to make such a change. Some documents may set forth a requirement that the membership approve any material alteration of the common elements/ property and boards would need to obtain the required vote in order to change the cladding material of design.

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Statutory Limitations: The New Jersey Condominium Act provides that “[t]here shall be no material alteration of or substantial addition to the common elements except as authorized by the master deed.” Changing the cladding to a different material or design may be considered a “material alteration” of the common elements which would be prohibited by the Condominium Act unless the Master Deed authorizes the board to make such change or the membership votes in favor of such change. This may be the most challenging aspect of any board’s decision to change the cladding, since most documents are silent on the board’s power to materially alter the common elements and a vote of the membership may be extraordinarily difficult to obtain. Additionally, there is no clear guidance on what would constitute a “material alteration.” Therefore, boards should carefully consider changing the cladding material and design and certainly consult with the association attorney to ensure that they are not overstepping their powers. Financing: To pay for the cladding project, a Board must determine how it will be funded. Associations that are responsible for the replacement of cladding may have capital replacement reserve funds available to apply to the project but may find that those funds are insufficient to cover the cost of the cladding project. In other cases, the board may find that there are no funds currently available for the project. If existing association funds are not available or insufficient, the board must determine their authority to raise the funds through assessment and/or borrowing. - Capital Replacement Reserves: The goal of well man- aged associations is to have adequate reserves available to fund replacement projects when common elements/ property reach the end of their Useful Life. However, commonly boards find that the project is required before the end of the claddings anticipated Useful Life and full funding for the replacement has not been collected in the

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