by: Steven P. Gouin
A recent ruling from the New Jersey Appellate Division highlights how diligent a homeowners' association ("HOA") must be in enforcing restrictions in its governing documents. After a lengthy court battle, the court found that a South Jersey HOA had not engaged in selective enforcement of architectural restrictions or constitutional violations. However, notwithstanding this positive result, the Court’s decision in Nisch v. Ocean Beach & Yacht Club provides a cautionary tale for HOAs throughout the State, one they would be wise to heed if they want to avoid protracted and costly litigation.
The Ocean Beach and Yacht Club (“the Club”) is an HOA located in Toms River, New Jersey. In 1964, the Club adopted height restrictions applicable to its 490 homes. In 2007, the Club accidentally approved two construction applications in direct contravention to the applicable height restrictions. In both instances, the Club sought to backtrack and rescind its approval after the fact. As a result, the club was sued three times: Once by the first applicant who claimed “selective enforcement;” once by the second applicant who claimed it was necessary for him to build out of compliance; and once by a group of residents seeking clarification of the height restrictions.
The Appellate Division consolidated the appeals of all three actions. (The third suit, relating to the clarification of the height restrictions, was dismissed at the trial level, but the second applicant joined the third suit on his own behalf and appealed its dismissal.) First, the Court noted that a litigant has a “heavy burden” in proving selective enforcement: both a discriminatory effect and discriminatory purpose must be shown. The Court found that there was no selective enforcement here, since both the first and second applicant were ultimately allowed to keep structures that violated the applicable height restrictions. The Court also held that the Club’s independent height restrictions were not a usurpation of municipal zoning authority.
Despite the victory for the Club, the Nisch case highlights the need for HOAs to carefully and consistently make decisions regarding unit owners’ construction projects. Proving selective enforcement is difficult, but not impossible. HOAs should take time and care in reviewing the legal ramifications of individual construction projects, lest they issue an improper approval.