TRIANTAFYLLOS THANASOULIS, PLAINTIFF-APPELLANT, v. WINSTON TOWER 200 ASSOCIATION, INC., DEFENDANT-RESPONDENT.

Plaintiff, a nonresident owner of a unit in a condominium
complex, challenges a rule adopted by the owners' association
(Association) increasing the parking fee for tenants of
nonresident owners from $25 to $75 a month, while leaving
untouched the $25 fee charged to resident owners. Plaintiff
attacks the rule as being unreasonable and unconstitutionally
discriminatory. The parking facilities are part of the "common
elements." The Association had the right to operate the parking
facilities, to fix parking fees and to lease or rent the spaces.
Plaintiff's

Page 411

practice was to lease an indoor parking space for $25 a month for
which he charged his tenant $75 per month. After the Association
heard about this, it increased the parking fee for nonowners and
required the tenants to execute parking space leases with the
Association.

The trial judge found that the higher fee structure for tenants
was discriminatory but not illegal. He concluded that the fee
structure was not unconstitutional because there was no state
action and the rule was not unreasonable inasmuch as it did not
burden nonresident owners any more than resident owners. Summary
judgment dismissing the complaint was entered accordingly.
Plaintiff now appeals.

A condominium association stands in a fiduciary relationship to
the unit owners. Siller v. Hartz Mountain Assoc., 93 N.J. 370,
382 (1983), cert. den. 464 U.S. 961, 104 S.Ct. 395, 78
L.Ed.2d 337 (1983); Papalexiou v. Tower West Condominium,
167 N.J. Super. 516, 527 (Ch.Div. 1979). A two-pronged test has
been established to determine whether the Association breached
its fiduciary duty: (1) whether its action was authorized by
statute or its own bylaws, and, if so, (2) whether the action was
fraudulent, self-dealing or unconscionable. Siller, supra, 93
N.J. at 382; Papalexiou, supra, 167 N.J. Super. at 527. The
scope of judicial review is limited to these two questions, which
are issues of law. Papalexiou, supra, 176 N.J. Super. at 527;
see generally Note, Judicial Review of Condominium
Rulemaking, 94 Harv.L.Rev. 647, 658-667 (1981). As long as the
Association acted reasonably and in good faith the courts will
not second guess its conduct. Papalexiou, supra, 167 N.J.
Super. at 527.

It is undisputed that the parking fee schedule under attack was
unanimously adopted by the Board of Directors of the Association
and plaintiff does not attack its validity on procedural grounds.
Hence the first prong of the Papalexious test has been met.

Page 412

As to the second prong of the test the judge concluded that the
increased fee was reasonable and was adopted in good faith. He
stated:

The defendant has established that the common
property has to be supported by assessment against
those, against all owners. So that the receipt of
additional funds from non-owner [sic] runs to the
benefit of all owners, meaning that they would then
have to pay that much less by way of assessment. So
that the act of discrimination by charging more is
really for the benefit of all owners of the
association, not a detriment to the owners, and that
is the duty of the board of directors to exercise
their best judgment in their actions to benefit all.

I don't see that Mr. Thanasoulis is in any way hurt
by this. Because he does not charge for the parking
space. The tenant makes a direct agreement with the
association.

We reject plaintiff's contention that the fee change was
unreasonable or made in bad faith because N.J.S.A. 46:8B-32
created a presumption of unconscionability as to the new leases
between the Association and tenants. We read N.J.S.A. 46:8B-32
to be limited to leases made between the developer and owners'
associations that are not controlled by the unit owners. See
Siller v. Hartz Mountain Assoc., supra, 93 N.J. at 382 n. 10;
Berman v. Gurwicz, 178 N.J. Super. 611, 620 (Ch.Div. 1981).
Here the Association was completely controlled by the unit
owners.

We now affirm the judgment dismissing the complaint
substantially for the reasons expressed by Judge Huot in his oral
decision of July 19, 1985. We are completely satisfied that all
issues raised in this appeal are clearly without merit. R.
2:11-3(e)(1)(A) and (E). We add only that the record is barren of
any proof which even remotely suggests that plaintiff suffered an
economic loss by virtue of the rule change. Also, plaintiff
failed to demonstrate a "sufficiently close nexus" between the
State regulating condominiums by statutes and the parking rule
implicated here so that it can be said that the parking rule
change emanates from or is attributed to State action. State v.
Schmid, 84 N.J. 535, 545 (1980), app.dism. sub nom. Princeton
Univ. v. Schmid, 455 U.S. 100, 102 S.Ct. 867, 70 L.Ed.2d
855 (1982). The Condominium Act, N.J.S.A.

Page 413

46:8B-1 et seq., did not command or compel passage of the new
rule and there is no State actor involved in the administration
of the new rule. See Callen v. Sherman's, Inc., 92 N.J. 114,
124-125 (1983). Hence the new parking rule is not
unconstitutional and does not represent a breach of the
Association's fiduciary duty to any of the unit owners.

Affirmed.

R.S. COHEN, J.A.D., dissenting.

Plaintiff Triantafyllos Thanasoulis owns a condominium
apartment unit in Winston Towers, a highrise residential
development in Cliffside Park. He rents the apartment to a tenant
who lives there. Plaintiff brought this suit to challenge two
condominium by-law amendments adopted by defendant owners'
association. One imposes a monthly charge for parking spaces
three times greater for tenant-occupants than for owner-occupants
of the condominium units. The other prohibits rental of a
condominium unit by a new purchaser until after he or she lives
in the unit for at least one year, except in hardship cases.
Plaintiff asserts that as a unit owner he has the right to a
parking space on terms equal to those afforded to
owner-occupants, and the right to rent the parking space to his
tenant on terms he chooses. Plaintiff also asserts that, although
the prohibition on rentals does not apply to him, but only to new
purchasers, it improperly depreciates the value and marketability
of his unit. The Chancery Division upheld the differential
parking charges as a reasonable action of the Association, and
held that plaintiff did not have standing to challenge a rental
prohibition which expressly excepted him. I disagree on both
scores.

A condominium unit owner holds exclusive title to the unit and
shares title to the common elements with the other unit owners.
The unit is an individual parcel of real property, which the
owner may deal with "in the same manner as is otherwise permitted
by law for any other parcel of real property." N.J.

Page 414

S.A. 46:8B-4. Common elements may include the land on which the
condominium project is built, parking areas, lobbies, hallways,
elevators, and central services and utilities, not reserved to a
particular unit or group of units. N.J.S.A. 46:8B-3d. Unit
owners have the common right to use the common elements for their
reasonable intended purposes. N.J.S.A. 46:8B-6. The
proportionate undivided interest of a unit owner in the common
elements is inseparable from the unit, and

any conveyance, lease, devise or other disposition or
mortgage or other encumbrance of any unit shall
extend to and include such proportionate undivided
interest in the common elements. . . . [N.J.S.A.
46:8B-6]

Common element spaces may not be converted to the exclusive use
of a single owner without unanimous consent of the other owners.
Makeever v. Lyle, 125 Ariz. 384, 609 P.2d 1084 (Ariz. App.
1980).

There may be "limited common elements." They are

those common elements which are for the use of one or
more specified units to the exclusion of other units.
[N.J.S.A. 46:8B-3k]

Limited common elements are owned in common but are used
exclusively. There is no individual ownership of limited common
elements. It is only the use which is restricted. They may
include yards, balconies, terraces, patios or stoops. See
Wendell Smith, New Jersey Condominium Law (1985), Sec. 6:5b, p.
53-54. Parking spaces may be common elements or limited common
elements. Juno By the Sea North Condominium v. Manfredonia,
397 So.2d 297 (Fla. Dist. Ct. App. 1981) pet. for rev. den.
402 So.2d 611 (Fla. 1981); Norris v. Edwin W. Peck, Inc.,
381 So.2d 353 (Fla. Dist. Ct. App. 1980). Parking spaces may be
sold as separate units, may be made available for assignment to
unit owners by the developer or later by the association, or may
not be individually assigned at all. Board of Managers of Surf
East Condominium v. Cohn, 90 Misc.2d 1054, 396 N.Y.S.2d 999
(City Ct. 1977). Wayne S. Hyatt, Condominium and Home Owner
Associations (1985), Sec. 7.41, p. 169.

A condominium is created by the recording of a master deed,
N.J.S.A. 46:8B-8, in which, among other things, the units are

Page 415

identified and the common elements and limited common elements
are described, and by-laws are set forth to govern the
administration and management of the property. N.J.S.A.
46:8B-3c; 46:8B-9. The deed must set forth, in percentages, the
proportionate undivided interest of each unit in the common
elements and limited common elements. N.J.S.A. 46:8B-3c. A
master deed may be amended, but not to "change a unit" without
the consent of its owners. N.J.S.A. 46:8B-11. The by-laws may
also be amended. N.J.S.A. 46:8B-13.

The association of unit owners is responsible for the
administration of a condominium. N.J.S.A. 46:8B-3b. It assesses
and collects funds for the payment of "common expenses,"
N.J.S.A. 46:8B-14, which are the expenses for which the unit
owners are proportionately liable, N.J.S.A. 46:8B-17, including
the expenses of administration, maintenance, repair and
replacement of the common elements. N.J.S.A. 46:8B-3e. The
master deed or the by-laws may create a class of limited common
expenses, for which some but less than all of the unit owners are
liable. Smith, op. cit. supra, Sec. 6:2p. In the Winston Towers
master deed, the terraces or balconies appurtenant to the units
are designated as limited common elements. Expenses relating to
them are made common element expenses, shared by all units,
unless occasioned by the owner's negligence, misuse or neglect,
in which the case the owner is responsible alone.

Winston Towers contains 614 apartment units. It includes a
multilevel parking garage with 903 spaces and a parking yard with
100 spaces. They were all constructed by the developer and
transferred to the condominium for management by the association.
The cost of building the parking facilities was presumably
included by the developer in the sales price of the individual
units, just like the cost of the hallways and elevators. The
master deed identifies the parking facilities as common elements
and deals with them in the following language:

9. Parking and Garage facilities: The parking and
garage facilities within the Property shall be part
of the Common Elements and, subject to the provisions
of the By-Laws, will be operated by the Association
which shall have the right

Page 416

to lease all or part of the operation thereof on such
terms and conditions as it may determine. Each Unit
Owner, upon application, will be entitled to rent
annually at least one garage space. Rentals for
garage space will be established by the Association
and shall be payable as the Association shall direct.
All revenue received by the Association from the
garage operation shall be applied in accordance with
the By-Laws.

The Amended Offering Plan contains consistent language.

Pursuant to its authority to rent garage spaces, the
Association established a monthly rental schedule which applied
to all units. $25 was charged for a single indoor space, $40 for
a tandem space, and $20 for an outdoor space. In June 1981, the
board of directors of the Association adopted the revised
schedule of charges challenged in this suit. Owner-occupied units
continued to pay the same amounts, but tenant-occupied units were
now to be charged $75 for a single indoor space, $125 for a
tandem space, and $50 for an outdoor space. Apartment rental
leases were required to include provisions setting forth the new
parking space rental rates and requiring payment by the tenant
directly to the Association, with the unit owner remaining liable
for non-payment.

The thinking that produced the new schedule of charges was
expressed in a certification of the president of the Association:

In adopting these new regulations, the Board of
Directors in no way sought to impose any greater
burden upon those renting units at the condominium.
Rather, the Board of Directors recognized that Unit
Owners who were leasing their units and, in the
process, subleasing their parking spaces, were
charging tenants substantially more for parking space
rent than the $25.00-per-month charge to the Unit
Owner. As a result of the non-resident Unit Owner's
attempt to commercially exploit the below-market
parking rental fee charged by the Association,
profits from the parking garage rentals were flowing
to individual Unit Owners, instead of the
Association, and its members, generally. The economic
benefits of owning and operating the parking garage
do not run to any individual Unit Owner, but rather
to the Association for the good and welfare of all
Unit Owners, as is clearly set forth in the Amended
Offering Statement, Master Deed and By-Laws.

It is apparent that the Association treated the parking
facilities as common elements which were owned by all the unit
owners, which is perfectly true, and were therefore free of the
interest of any individual owner, which is plainly untrue. The
master deed grants to each unit owner the right to rent one

Page 417

parking space. That is a right, appurtenant to unit ownership, to
secure the temporary conversion of a part of a common element for
exclusive use.

The purpose of the amendment to the by-laws was to prevent an
owner from profiting by charging a tenant a garage rent greater
than the below-market rate uniformly charged to unit owners. In
determining that owner-lessors should not be allowed to charge
tenants garage rents greater than the below-market rates, the
Association improperly converted to the use of all unit owners a
property right granted by the master deed to individual unit
owners.

Condominium ownership is a form widely used in common law
jurisdictions only recently. It combines the ceding of certain
liberties by individuals with the assurance of freedom from some
of the burdens of home ownership. As a seminal Florida case put
it:

.

. . inherent in the condominium concept is the
principle that to promote the health, happiness, and
peace of mind of the majority of the unit owners
since they are living in such close proximity and
using facilities in common, each unit owner must give
up a certain degree of freedom of choice which he
might otherwise enjoy in separate, privately owned
property. Condominium unit owners comprise a little
democratic sub society of necessity more restrictive
as it pertains to use of condominium property than
may be existent outside the condominium organization.
[Hidden Harbour Estates, Inc. v. Norman,
309 So.2d 180, 182 (Fla.App. 1975)]

The treatment of the rights of individual unit owners by the
majority, represented by the owners' association, is a matter of
only recent attention. During the years in which the condominium
form of home ownership first spread, legislative and judicial
concern understandably focused on the need for buyer protection
from developers, and particularly from developers' efforts to
burden the condominium community with long-term contracts
favorable to the developers. See N.J.S.A. 46:8B-12.1, 12.2,
31-38; Note, Condominium Regulation: Beyond Disclosure, 123
U.Pa.L.Rev. 639 (1975). Now, concern must also focus on
condominium community self-government and the challenge it
presents to find an appropriate level of governmental involvement
in this private but consequential relationship.

Page 418

See generally Note, Judicial Review of Condominium
Rulemaking, 94 Harv.L.Rev. 647 (1981).

The level of involvement should correspond to the broad range
of power granted to condominium associations. N.J.S.A.
46:8B-14, 15; Wayne S. Hyatt, Condominium and Homeowner
Association Practice: Community Association Law (1981), 177
ff. Associations have many characteristics of government, with
similar capacity to affect the lives of community members. See
Reichman, Residential Private Governments: An Introductory
Survey, 43 U.Chi.L.Rev. 253 (1976). A troublesome matter is
their ill-defined power to amend the by-laws in unexpected ways,
and thus alter the structure of the community and the relations
among its members.

The courts have not yet developed a consistent approach to the
rule-making activities of condominium associations. State
statutes do not ordinarily define the permissible subject matters
or limit the substance of association rulemaking. See Note, 94
Harv.L.Rev. at 649.

A few courts have undertaken to review such rulemaking
according to constitutional standards, on the model of Shelley
v. Kraemer, 334 U.S. 1, 68 S.Ct. 836, 92 L.Ed. 1161 (1948)
(judicial enforcement of restrictive covenants is state action).
See White Egret Condominium, Inc. v. Franklin, 379 So.2d 346
(Fla. 1979); cf. Crowley v. Knapp, 94 Wis.2d 421, 437 n. 2,
288 N.W.2d 815, 823 n. 2 (1980). Contra, Owens v. Tiber Island
Condominium Ass'n., 373 A.2d 890 (D.C. 1977). New Jersey has
not adopted this approach. The actions of private entities like
condominium associations are not state action without such a
close nexus between state regulation and the challenged actions
of the regulated entity that those actions can be said to emanate
from or to be attributed to state government. State v. Schmid,
84 N.J. 535, 545 (1980), app. dism. sub nom. Princeton Univ.
v. Schmid, 455 U.S. 100, 102 S.Ct. 867, 70 L.Ed.2d 855
(1982). See Callen v. Sherman's, Inc., 92 N.J. 114, 124
(1983) (statutorily authorized distraint procedures including
permissible aid of state officers held to be state action).
Page 419

A larger number of courts have held association rulemaking,
like administrative agency rulemaking, to the standard of
"reasonableness," requiring, in various similar formulations,
that an association (1) not exceed the scope of its authority, as
defined by statute, the master deed and by-laws, and (2) not
abuse its discretion by enacting arbitrary or capricious rules
bearing no relation to the condominium's purpose of promoting the
owners' health, happiness and enjoyment of life. The
"reasonableness" rule was formulated in Hidden Harbour Estates,
Inc. v. Norman, 309 So.2d 180, 182 (Fla. Dist. Ct. App. 1975),
and Ryan v. Baptiste, 565 S.W.2d 196 (Mo. Ct. App. 1978).
See also Johnson v. Hobson, 505 A.2d 1313 (D.C. 1986).

Other courts, including one in New Jersey, have looked to the
corporation board of directors as a model for standards of
association conduct, employing the "business judgment rule" to
test the validity of association board actions. Papalexiou v.
Tower West Condominium, 167 N.J. Super. 516 (Ch.Div. 1979);
Rywalt v. Writer Corp., 34 Colo.App. 334, 526 P.2d 316
(1974).

Only once has the New Jersey Supreme Court dealt with
condominium unit owner-association relations. Siller v. Hartz
Mountain Assoc., 93 N.J. 370, cert. den. 464 U.S. 961, 104
S.Ct. 395, 78 L.Ed.2d 337 (1983). The context was a dispute
with the developer over construction defects. The association was
held to have sole standing to sue the developer over defects in
the common elements, but each owner was the proper party to sue
with respect to damages to the individual unit. If the
association settled the common elements suit in a wrongful
manner, the owners could maintain a suit against the association
on that account.

In that context, the Supreme Court discussed the association's
responsibilities to the owners:

The associations board of directors, trustees or
other governing body have a fiduciary relationship to
the unit owners, comparable to the obligation that a
board of directors of a corporation owes to its
stockholders. Acts of the governing body should be
properly authorized. Fraud, self-dealing or
unconscionable conduct at the very least should be
subject to exposure and relief. See, e.g.,
Papalexiou v. Tower West Condominium, 167 N.J.
Super. 516, 527

Page 420

(Ch.Div. 1979); Ryan v. Baptiste, 565 S.W.2d 196,
198 (Mo. Ct. App. 1978); Hidden Harbour Estates,
Inc. v. Norman, 309 So.2d 180, 182 (Fla.D.Ct.App.
1975). [93 N.J. at 382-383].

Although the Supreme Court analogized an association's
relationship to the owners to that of a corporate board of
directors to the stockholders, its citation of Ryan and Hidden
Harbour may mean that in an appropriate case the Court will
adopt a more comprehensive rule of reasonability on the pattern
of those cases.

At the very least, an association's amendment of by-laws must
be procedurally correct (a concern not raised in this case) and
reasonable in the Hidden Harbour sense. Reasonableness is not,
however, the whole answer. A perfectly reasonable regulation may
fail because it touches subject matter on which the association
may not regulate. Juno By the Sea North Condominium v.
Manfredonia, 397 So.2d 297 (Fla. Dist. Ct. App. 1981) pet. for
rev.den. 402 So.2d 611 (Fla. 1981) (association may not require
each unit to be cleaned by a service retained by it). An
association may not take action to deprive unit owners of their
interest in common elements. Stuewe v. Lauletta, 93 Ill.
App.3d 1029, 49 Ill.Dec. 494, 418 N.E.2d 138 (1981); Makeever
v. Lyle, 125 Ariz. 384, 609 P.2d 1084 (Ariz. App. 1980). In
addition, a procedurally correct and substantively reasonable
amendment should not create invidious classifications or unfairly
diminish the rights of some unit owners for the benefit of
others. Cf. Le Febvre v. Ostendorf, 87 Wis.2d 525,
275 N.W.2d 154 (Wis.App. 1979).

A purchaser of a Winston Towers apartment buys a bundle of
property rights, including the exclusive use of the unit, access
to the common elements, the exclusive use of certain limited
common elements and the right to rent a parking space. The latter
is the right to pay a fee to temporarily convert to exclusive use
a portion of the common elements. See Juno By the Sea North
Condominium v. Manfredonia, 397 So.2d 297, 301 (Fla. Dist. Ct.
App. 1981) pet. for rev. den. 402 So.2d 611 (Fla. 1981). It is
plain that the Association could not discriminatorily select a
class of owners and terminate their rights to

Page 421

parking facilities. Those rights are in the bundle granted in the
master deed. The deed may be amended but not to "change a unit."
N.J.S.A. 46:8B-11. Guaranteed access to parking facilities is
of such consequence to a high-rise condominium apartment in a
congested area that discriminatory termination of access
guaranteed by the master deed would constitute a prohibited
"change" of a unit.[fn1]

The master deed does not limit an owner's parking rights to
personal use while a resident. The owner has rights "to rent
annually at least one garage space." If an owner is permitted to
lease the apartment to a tenant, there is nothing to justify
barring an accompanying sublease of the appurtenant garage space.
Indeed, it may well be unlawful to lease appurtenant parking
rights separately from the unit. N.J.S.A. 46:8B-6.

If the owner's right to a garage space is an important and
inseparable part of apartment ownership, and if the owner has the
right to afford the use of the space to a tenant, what warrant is
there for the Association's charging a tenant three times as much
as an owner and requiring the owner to guarantee the tenant's
payments? There is no assertion by the Association that tenant
use of the garage creates higher costs.

The Association argues that the garage exists for the benefit
of all owners and, if there is a profit to be made by renting
spaces at market rates, it should belong to all owners. The
argument ignores the fact that the right to rent a space is
guaranteed to each owner just as is the right to exclusive use of
the apartment unit itself. The owner's profit on renting the

Page 422

apartment is not subject to confiscation by the Association, and
neither is the owner's profit on subleasing garage use to the
unit tenant. They are both profits gained by leasing the whole of
the owner's bundle of rights to another person. It should not
matter whether the apartment is leased for $1925 per month and
the garage space for $75, or if the apartment costs $2000 per
month and parking is afforded with no extra cost.

Paragraph 10 of the master deed suggests a parallel. It says:

Storage areas in the Building outside of the
Apartment Unit shall be part of the Common Elements
and the use thereof shall be allocated among the Unit
Owners as the Association may from time to time
prescribe.

Access to storage areas, like garage space, is one of the
property rights that constitute unit ownership. It is a right
granted by the master deed to be assigned exclusive use of part
of a common element. No one would argue that the Association
could deprive tenants of storage space or charge them a storage
area fee not charged to owner-occupants on the thesis that such
space is valuable and would cost tenants a lot to rent on the
outside. The reason is that the right to allocation of a storage
area is a right included in to unit ownership. It may not be
converted to the benefit of all owners at the expense of the unit
involved.

But, the Association would respond, we have the authority to
set garage rents. That is so, but that is not the authority to
act discriminatorily. It is not the right to require tenants to
rent from the Association at a price three times the rate charged
to owner-occupants. Such association power would confiscate from
owners a property right which they bought and paid for as part of
the unit purchase.

Some approaches to the issue of unfair by-law amendments refer
to the owner's knowledge, at the time of purchase, that the rules
could be changed thereafter. Others point to the contractual
nature of condominium ownership and the owner's conscious
decision to purchase and thus agree to subject individual rights
to the will of the majority.

Page 423

The trouble with these approaches is that they assert too much.
The buyer's awareness of the possibility of rule amendment cannot
reasonably be seen as consent to any amendment, no matter how
unfair. Cf. Montoya v. Barreras, 81 N.M. 749, 473 P.2d 363
(1970). Moreover, a contractual grant of authority to govern does
not include consent to majority imposition of rules
discriminatory and unfair to a minority. Every contracting party
has the duty to act so as to effectuate the implicit covenant of
good faith and fair dealing necessarily involved in the parties'
contractual relationship. Palisades Properties, Inc. v.
Brunetti, 44 N.J. 117, 130 (1965); Einhorn v. Ceran Corp.,
177 N.J. Super. 442, 449 (Ch.Div. 1980). The law should plainly
impose upon condominium associations a duty to deal fairly,
evenhandedly and in good faith with every unit owner.

The thesis that condominium buyers consent in advance to by-law
amendments and knowingly contract for majority rule leads to a
hands-off judicial posture. The idea developed early in the
modern spread of condominium ownership when a few home buyers
consciously chose to embrace the new curiosity. Those days have
passed. Increasing numbers of housing buyers enter condominiums,
not because they understand and prefer that form of community
organization, but because affordable housing is often found in
condominium townhouse developments. Perhaps 15,000 of the 55,000
housing units built in New Jersey in 1985 were condominium
units.[fn2] It would be unrealistic for courts to give a wide
berth to condominium self-government on the thesis of buyer
awareness and consent. The fact is that most buyers purchase
condominium units because they are affordable; they do not
exercise choices of the

Page 424

kind that should dilute their rights to fair, even-handed and
good faith private government. See Note, 94 Harv.L.Rev. at
650-651, 653.

There may be some cases in which differences in judicial
approaches to condominium self-government will lead to different
results. This case is not one of them. Whether associations are
treated as subject to constitutional review, as restricted to
authorized and reasonable action taken for condominium purposes,
or as bound by a fiduciary relationship with the owners, an
association may not selectively create a class of individual
owners and deprive them of valuable elements of unit ownership.

The other dispute between plaintiff and the Association is the
validity of a new regulation barring rental of a unit by a new
purchaser unless the purchaser first lives in the unit for at
least a year, except in hardship cases. Since the new regulation
would not bar plaintiff from renting his unit, the Chancery
Division granted summary judgment on the thesis that plaintiff
had no standing to challenge the regulation's validity.

The problem with that ruling is that there was no information
before the court on the question how the new regulation affected
plaintiff. The mere fact that it did not apply to him is no
answer. If the regulation barred a new purchaser of plaintiff's
unit from admitting persons to his unit more than five feet tall,
it is quite certain that plaintiff would be immediately affected
by the shrinkage of the sales market for the unit. The resulting
loss of value would give him the "sufficient stake and real
adverseness" necessary to confer standing. Crescent Pk. Tenants
Assoc. v. Realty Eq. Corp. of N.Y., 58 N.J. 98, 107 (1971).

Page 425

It may seem likely that investors are a relatively small number
of the people seeking to buy condominium units, and that a person
buying a unit to live in will not be put off by a regulation of
this kind. However, my impressions of what seems likely furnish a
shaky foundation for rulings of law. Neither party offered any
evidence on the motion to show whether or to what extent the
regulation would affect the salability or value of plaintiff's
unit. In those circumstances, I would treat the matter of impact
on plaintiff's rights, and therefore the matter of standing, as
an unresolved issue of material fact, thus ruling out a summary
judgment on that matter.

The Chancery Division made the alternate ruling that, even if
plaintiff had standing to challenge the regulation, it should be
upheld because reasonable as to purchasers with notice. That is
not a sufficient ground to reject plaintiff's claim, which is
that a new restriction enacted long after he bought his unit
restricts the alienability of his property. If it does, and if
there is an effect on value significant enough to invoke judicial
protection, plaintiff has standing to make a claim. The question
of enforceability against new buyers with notice is not involved.

[fn1] It requires no proof that a high-rise condominium apartment
in a congested area with an available parking space is of greater
value than the same apartment without guaranteed parking. It
follows that such an apartment with parking for $25 per month is
worth more than an apartment with parking for $75 per month.
Thus, the rentability and obtainable rent for the apartment will
also be affected by the cost of the parking facility. Those facts
sufficiently answer any doubt that plaintiff is affected by the
parking fee schedule and the requirement of garage rental by the
tenant from the Association. The effect may not be major, but the
rights invaded are basic.

[fn2] This is a rough estimate. It is based on reliable but not
directly comparable figures. The Department of Community Affairs
reports the issuance of 55,000 new building permits in New Jersey
in 1985, with 17,500 or 32% in multi-family housing. It is likely
that the great majority of the multi-family units were built for
sale rather than rent, and that the bulk of the sales were in
condominiums. The DCA also reports approval of condominium
developments involving 11,000 units in 1984 and 18,000 in 1985.
These include an uncounted but probably small number of
conversions. According to the National Association of Realtors,
24% of the homes sold in the Northeast U.S. in the first nine
months of 1985 were co-ops and condominiums. Sunday Star Ledger,
January 26, 1986, Sec. 10, p. 73.