## Facts

- Harmon Cove was a multi-phase condominium development in Secaucus, New Jersey, governed by New Jersey’s Condominium Act and by recorded governing documents.
- Hartz Mountain Associates developed the project and helped form nonprofit corporations to manage common elements and recreational facilities through unit-owner assessments.
- Individual unit owners alleged serious construction defects affecting both individual units and common areas/facilities.
- The unit owners alleged the developer dominated or controlled the associations for a substantial period and that the developer and associations planned to settle construction-defect claims on terms alleged to be unreasonable and inadequate.
- The statutory and contractual scheme placed maintenance and repair of common elements under association control, funded by assessments, and barred individual owners from independently undertaking common-element work.
- The associations were authorized to institute, prosecute, defend, or settle litigation concerning the common elements.
- The unit owners sought temporary restraints to prevent the proposed settlement and challenged any attempt to compromise individual-unit claims without adequate protection for owners.

## Issues

1. Whether condominium associations have primary or exclusive authority to assert and settle claims against a developer for defects in the common elements.
2. Whether, and under what circumstances, individual unit owners may sue the developer for (a) common-element defects and (b) defects in their individual units when the association is alleged to be conflicted or developer-controlled.
3. Whether an association’s settlement of construction-defect claims is binding on unit owners without judicial scrutiny, and what fiduciary limits apply to such settlements.

## Decision

- The Supreme Court of New Jersey affirmed in part and reversed in part the lower courts’ rulings.
- The Court held that a condominium association may sue in a representative capacity to protect unit owners’ rights and interests in the common elements and is ordinarily the proper party to pursue common-element defect claims.
- The Court rejected a rule that would categorically extinguish individual owners’ ability to proceed, recognizing limited owner standing where the association wrongfully refuses to act, acts in bad faith, or is improperly controlled or conflicted.
- The Court held that association settlements of common-element claims are constrained by fiduciary duties and may be challenged by unit owners; courts may review the adequacy and fairness of a contested settlement.
- The matter was remanded for further proceedings consistent with these standards, including evaluation of the proposed settlement and the associations’ conduct.

## Legal Principles

- Condominium associations have statutory and contractual authority to manage, maintain, and repair common elements and to litigate and settle common-element claims in a representative capacity.
- Because common-element repairs and funding are centralized in the association, the association is generally the appropriate plaintiff for common-element construction-defect litigation, avoiding duplicative actions and inconsistent results.
- Association directors and officers owe fiduciary duties to unit owners, including duties of loyalty and due care, when pursuing or settling claims affecting shared property interests.
- Individual unit owners retain standing to protect their interests where the association breaches fiduciary obligations (e.g., bad faith, wrongful inaction, self-dealing, or improper developer influence), and owners retain claims that are personal to their individual units.
- A challenged association–developer settlement may be subject to judicial review to determine whether it was reached through faithful representation and informed decisionmaking and whether it is fair to unit owners.

## Conclusion

The court held that condominium associations are the primary vehicle for pursuing and settling common-element construction-defect claims, but owners are not foreclosed from acting when fiduciary failures or conflicts impair representation; settlements reached under such conditions may be examined in court for fairness and compliance with fiduciary duties.


Siller v. Hartz Mountain Assocs., 93 N.J. 370, 461 A.2d 568 (N.J. 1983)