An Act concerning homeowners' associations and supplementing Title 46 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. No officer, board member or employee or member of the immediate family of an officer, board member or employee shall have an interest in a business organization or engage in any business, transaction, or professional activity, which is in substantial conflict with the proper discharge of duties to the association.

b. The association shall not, during the period in office of the officer or board member and for one year subsequent to that period:

(1) award a contract to an officer or board member, or to a member of the immediate family of an officer or board member, or to a business organization in which the officer or board member holds more than a 5 percent interest or is an employee of the business organization; or

(2) employ for compensation, an officer or board member or member of the immediate family of an officer or board member.

c. No officer or board member shall use or attempt to use that office to secure unwarranted privileges or advantages for the officer or others.

d. No officer or board member shall act in official capacity in any matter where the officer or board member, an immediate family member, or a business organization in which the officer or board member has more than a 5 percent interest, has a direct or indirect financial or personal involvement that might reasonably impair the objectivity or independence of judgment of the officer or board member, or is an employee of the business organization.

e. No officer or board member shall undertake any employment or service, whether compensated or not, which might reasonably be expected to prejudice the independence of judgment of the officer or board member in the discharge of duties to the association.

f. No officer or board member or employee, or member of the immediate family of an officer or board member, or business organization in which an officer or board member holds more than a 5 percent interest or is employed by, shall solicit or accept any benefit offered for the purpose of influencing the officer or board member, directly or indirectly, in the discharge of duties to the association.

g. No officer or board member shall use, or allow to be used, the officer or board member's position, or any information received through it that is not generally available to all unit owners, to secure financial gain for the officer, board member, any member of the immediate family of the officer or board member, or any business organization with which the officer or board member is associated.

h. In awarding contracts to management companies and other service providers, the association shall:

(1) disqualify any contractor in which a sponsor holds an interest until three years after termination of sponsor control; and

(2) require that any contractor disclose the names of any association officer board member or managing employee, or member of the immediate family of an officer or board member, employed by the contractor or subcontractor.

i. At the request of a unit owner, the Department of Community Affairs shall investigate allegations of a violation of this section. If the department finds a violation by a board member or officer, it shall order the removal of the board member or officer, and may declare void any action of the board related to the violation. If the department finds a violation by a managing employee, it shall report the violation to the association.

2. This act shall take effect immediately.

STATEMENT

This bill prohibits certain conflicts of interest officers or board members or employees hired to manage the common elements of a homeowners' association. In general, the bill prohibits self-dealing, and is patterned after the public conflicts of interest law. The bill prohibits the awarding of a contract to an entity in which a board member or member of the immediate family of an officer, board member or managing employee has a financial interest. The board may not contract with or engage in any business, transaction, or professional activity, which is in substantial conflict with the proper discharge of duties to the association or in which the officer holds or to a business organization in which the officer or board member holds more than a 5 percent interest or is employed. The bill also prohibits the employment for compensation of an officer or board member, or member of the immediate family of an officer or board member.

The bill prohibits an officer or board member to act in an official capacity in any matter where the officer or board member, an immediate family member, or a business organization in which the officer or board member has more than a 5 percent interest, has a direct or indirect financial or personal involvement that might reasonably impair the objectivity or independence of judgment of the officer or board member or is employed by the business organization.

The bill designates the Department of Community Affairs to investigate allegations of violations of the bill. If the department finds a violation by a board member or officer, it shall order the removal of the board member or officer, and may declare void any action of the board related to the violation. If the department finds a violation by a managing employee, it is to report the violation to the association.

Homeowners' associations are required to be formed pursuant to State statutes. Many have large budgets, but there is currently no State oversight over their budgets or guidelines concerning the avoidance of conflicts of interests that may arise.