Quick Answer
In Siller v. Hartz Mountain Associates, decided June 16, 1983, the New Jersey Supreme Court held that a condominium association, not individual unit owners, has the exclusive right to sue a developer over defects in the common elements, as long as the association is carrying out its maintenance and repair duties. The Court also said an association's governing body owes unit owners a fiduciary duty "comparable to the obligation that a board of directors of a corporation owes to its stockholders."
For boards, the case is the starting point for two ideas: the association is the proper plaintiff for common-element claims, and board decisions must be properly authorized and free of fraud, self-dealing and unconscionable conduct.
At a Glance
| Item | Detail |
|---|---|
| Case | Siller v. Hartz Mountain Associates, 93 N.J. 370, 461 A.2d 568 (1983) |
| Court | Supreme Court of New Jersey; opinion by Justice Schreiber |
| Argued and decided | Argued February 9, 1983; decided June 16, 1983 |
| Community | Harmon Cove condominium, Secaucus |
| Statute | Condominium Act, N.J.S.A. 46:8B-1 through -38 (sections 46:8B-12, -14, -15 and -18 are discussed in the opinion) |
| Result | Affirmed in part, reversed in part, remanded for trial |
| Remedy or penalty | Not applicable (a standing and fiduciary-duty ruling) |
The Dispute
Five sets of unit owners in Harmon Cove sued the developer, Hartz Mountain Associates, and two owner associations: the condominium association and a recreation association. The owners alleged defects in the units and the common areas, including insulation, caulking, heating, driveways, sound insulation, the marina dock area, the pool, the boardwalk and soil settlement.
The associations were ready to settle the defect claims with the developer. The Court's opinion describes a settlement under which the developer would pay $400,000 to the two associations and receive a general release, with an exception for repair and replacement of certain underground utility breaks for three years. The owners sued to stop the settlement and also charged that the boards had breached their fiduciary duties and that the developer had kept unlawful influence over the associations.
The trial court dismissed the claims against the developer for lack of standing, but let the claim against the associations go forward. The Appellate Division affirmed. The Supreme Court granted certification.
What the Court Held
The association may sue for common-element damage
The Court reasoned from the statute's structure. The association must maintain, repair and replace the common elements (N.J.S.A. 46:8B-14), may assess owners for common expenses, may "enter into contracts, bring suit and be sued" (46:8B-15(a)), and no owner may do repair work on the common elements "except through the association and its officers" (46:8B-18). Those pieces together showed that the association may sue third parties for damage to the common elements and apply the money to repairs.
That right is exclusive, with exceptions
The Court held that "so long as it carries out those functions and duties," unit owners may not pursue individual claims for damage to or defects in the common elements based on their tenant-in-common interest. It gave practical reasons: individual suits would each involve only a fraction of the damage, and any recovery would have to go back to the association to pay for repairs anyway.
The opinion also left owners some room:
- An owner may act on a common-element claim if the association fails to, but that claim is "derivative in nature," and the association must be named as a party.
- An owner may sue the developer on the association's behalf while the developer still controls the association, because of the "inherent conflict of interest."
- An owner keeps individual claims for damage to the owner's own unit and property. The Court noted that doors and windows opening from a unit are not common elements as defined in the statute or the master deed there.
The fiduciary duty
The Court wrote that the governing body has "a fiduciary relationship to the unit owners, comparable to the obligation that a board of directors of a corporation owes to its stockholders." It added that acts of the governing body "should be properly authorized" and that "fraud, self-dealing or unconscionable conduct at the very least should be subject to exposure and relief."
Applied to the facts
As to claims confined to the common areas and facilities, the Court agreed the association had exclusive standing. The owners could still proceed on their claim that the boards acted wrongly in the settlement, and on their individual claims for damage to their own units. The case went back for trial. The Court did not decide whether the settlement was good or bad, and it did not decide whether the case could proceed as a class action.
Why It Matters for Associations
- Who sues. Our reading: in a New Jersey condominium, claims about defects in common elements belong to the association. Owners who bypass the board face the exclusivity rule unless an exception applies.
- Developer-controlled boards. The Court treated developer control as a conflict that allows owners to bring the claim. The Legislature later addressed timing of association claims against developers; see the related page on P.L.2021, c.379.
- Board accountability. The Court did not adopt a labeled standard of review in this opinion. The later Thanasoulis opinion (1988) quoted the fiduciary language from Siller and applied the statute and master deed. We do not read Siller as stating a "business judgment rule" by name.
- Documentation. Because "properly authorized" matters, boards should be able to show the vote, the authority in the governing documents and the reasons for a settlement.
- Limits of the holding. The opinion concerns condominiums under the Condominium Act and claims against a developer. It does not by itself decide how the same ideas apply to a homeowners' association that is not a condominium.
Related New Jersey Law
- Fox v. Kings Grant Maintenance Association (2001): owner control of common elements
- Thanasoulis v. Winston Towers 200 Association (1988): limits on association powers
- Palisades at Fort Lee Condominium Association v. 100 Old Palisade (2017)
- P.L.2021, c.379: tolling for association defect claims
- N.J.S.A. 46:8B-15: association powers and fines
- New Jersey HOA laws and regulations
Board Checklist
- Route every construction-defect or common-element claim through the board and association counsel, not individual owners.
- Record the board vote and the authority relied on before any settlement with a developer or contractor.
- If the developer still holds board seats, ask counsel how conflicts are being handled for claims against the developer.
- Separate common-element damage from damage inside units when a loss occurs, and tell owners which claims remain theirs.
- Keep minutes that show owners were informed of litigation and settlement decisions.
- Check the master deed to see which components (for example windows and doors) are common elements.
- Have counsel confirm filing deadlines for any defect claim.
Frequently Asked Questions
Can a unit owner sue the developer over a defective roof or parking lot?
Under Siller, claims about common elements belong exclusively to the association as long as it is carrying out its duties. An owner may proceed derivatively if the association fails to act, or on the association's behalf while the developer controls it.
Can an owner sue over damage inside the unit?
Yes. The Court said an owner's right to seek compensation for damage to the unit and personal property is not extinguished by the association's exclusive right on common-element claims.
What fiduciary duty do board members have?
The Court described it as comparable to a corporate board's duty to stockholders, and said acts should be properly authorized and that fraud, self-dealing or unconscionable conduct should be subject to relief.
Did the Court approve the $400,000 settlement?
No. It held the association had exclusive standing for common-area claims but allowed the owners to continue their claim about the boards' conduct, and sent the case back for trial.
Does Siller apply to HOAs that are not condominiums?
The opinion interprets the Condominium Act. Whether a court would apply the same reasoning to a non-condominium community is a question for counsel.
Is Siller still good law?
We did not run a citator check. The Supreme Court cited it in Fox (2001) and Thanasoulis (1988). Confirm current treatment with counsel.
Where This Comes From
We read the full text of the Supreme Court's opinion in Siller v. Hartz Mountain Associates, 93 N.J. 370 (1983), as published at law.justia.com, and the Court's later descriptions of Siller in Fox and Thanasoulis. We did not run a citator check, and we give no pinpoint page cites.
How APM Helps
Association Property Managers provides remote HOA and condo management for associations in New Jersey, starting at a flat $99/month per community with no per-door fees or long-term contracts. See remote management in New Jersey, browse every New Jersey state-law guide, or request a free proposal, delivered within three business days. Laws and licensing rules differ by state, and we confirm the requirements for New Jersey when we build your proposal.
Legal disclaimer: This article is general information, not legal advice. Laws change and associations differ. Confirm the current statute text and how it applies to your governing documents with a licensed New Jersey attorney before acting.
Ready to work with Association Property Managers?
Get a free, itemized proposal for your community — delivered within 3 business days.
Request a Free Proposal