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CalAttorney2
CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10238
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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The HOA provided a reserve fund bank balance of $15K at the

Customer Question

The HOA provided a reserve fund bank balance of $15K at the time I purchased my home. Now, they are saying that the balance will actually be $6K as they are redistributing surplus to themselves and the previous sellers for common surpluses.
My question is related to NJ law.
1) Are HOA allowed to misrepresent the reserve fund balance to buyers or is this fraudulent?
Submitted: 8 months ago.
Category: Real Estate Law
Expert:  CalAttorney2 replied 8 months ago.

Dear Customer,

This appears to be fraudulent.
Reserve funds are not "redistributed" they are kept in reserve for future repairs.

While I do not know if you are interested in retaining an attorney to dispute $9,000.00, from a strictly procedural aspect, that would be the most efficient way of dealing with this claim. But you can certainly sue both parties for breach of contract (the Association for the governing documents, and the seller for the purchase agreement), and for fraud (both parties) yourself.

Short of filing a lawsuit, you can try to mediate the dispute with them - contact your local bar association and request referrals to mediators, a third party neutral can often help you reach a mutually agreeable resolution. Use the bar association's referrals to contact a mediator or two, the mediator will then contact the other party to set up a mediation session, and you can go from there - hopefully resulting in a formal or written settlement agreement, and save yourself the time and expense of litigation.

Customer: replied 8 months ago.
Can you please reference that NJ Statutes that specifically pertains to reserve fund and the preclusion of refund from reserve fund?
Expert:  CalAttorney2 replied 8 months ago.

Section 46:8B-15

  • "All funds collected by an association shall be maintained separately in the association's name. For investment purposes only, reserve funds may be commingled with operating funds of the association. Commingled operating and reserve funds shall be accounted for separately, and a commingled account shall not, at any time, be less than the amount identified as reserve funds. A manager or business entity managing a condominium, or an agent, employee, officer, or director of an association, shall not commingle any association funds with his or her funds or with the funds of any other condominium association or the funds of another association as defined in section 3 of P.L.1977, c.419 (C.45:22A-23)."

http://law.onecle.com/new-jersey/46-property/8b-15.html

Customer: replied 8 months ago.
Does this statute prohibit refund from the reserve fund? I know most state has this in their statutes but I'm having trouble locating it in the NJ statute
Expert:  CalAttorney2 replied 8 months ago.

New Jersey's Reserve Fund statutes do not have a lot of depth. But remember, you are not limited just to the statute, you still have the common law (breach of contract and fraud), and even the very basic statute appears to have been violated here.

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