## Facts

- Panther Valley is a private common-interest residential community governed by a property owners association through an elected board.
- Elinor Mulligan owned a home in the community and, as a member, was subject to recorded covenants, restrictions, and bylaws.
- In 1998, the association’s membership adopted amendments to the declaration and bylaws; Mulligan sued to invalidate five amendments.
- One amendment sought to bar any person classified as a Tier 3 registrant under New Jersey’s Megan’s Law from residing in the community.
- Another amendment authorized the association to record a “Notice of Continuing Violation” in county land records when a member persisted in violating governing documents, without requiring notice before recording.
- Other amendments: (1) fee shifting to require a member to pay the association’s attorneys’ fees when the association prevailed, (2) procedures for member inspection of association records, and (3) qualifications for board membership.
- Mulligan argued the Tier 3 residency restriction burdened alienation of property and raised public-policy concerns by restricting housing for a disfavored class.

## Issues

1. What standard governs judicial review of amendments to a common-interest community association’s governing documents: the corporate business-judgment rule or a reasonableness test?
2. Was the amendment authorizing recording of a “Notice of Continuing Violation” without prior notice to the homeowner valid?
3. Were the legal-fees, records-inspection, and board-qualification amendments reasonable and enforceable?
4. Could the court determine the validity of the Tier 3 registrant residency ban on the record presented?

## Decision

- The Appellate Division held that challenged amendments are evaluated for reasonableness, not presumed valid under the business-judgment rule.
- The court affirmed invalidation of the “Notice of Continuing Violation” amendment because it allowed recording in land records without prior notice to the affected owner.
- The court upheld as reasonable the amendments on attorneys’ fees, inspection of records procedures, and qualifications for board membership.
- The court declined to issue a definitive ruling on the Tier 3 residency ban due to an insufficient record to evaluate broader policy consequences.
- Disposition: affirmed in part and reversed in part.

## Legal Principles

- Amendments to a homeowners association’s declaration/bylaws that affect owners’ rights are reviewed for reasonableness rather than insulated by the corporate business-judgment rule.
- An association rule that permits recording a land-record notice affecting title interests without prior notice to the owner is unreasonable and invalid.
- Fee-shifting provisions in favor of an association may be reasonable when tied to successful enforcement and designed to allocate enforcement costs to noncompliant members.
- Associations may impose reasonable procedures for member inspection of corporate records, so long as access is not unduly burdened.
- Reasonable eligibility requirements for board service are generally permissible governance measures.
- Courts may withhold decision on amendments raising substantial public-policy questions when the evidentiary record is inadequate.

## Conclusion

The Appellate Division applied a reasonableness standard to HOA governing-document amendments, invalidated a provision authorizing recording a continuing-violation notice without prior notice, upheld several governance-related amendments (fees, records access procedures, and board qualifications), and deferred judgment on a Tier 3 registrant residency ban because the record did not permit an informed public-policy determination.


Mulligan v. Panther Valley Prop. Owners Ass’n, 766 A.2d 1186 (N.J. Super. Ct. App. Div. 2001)