New Jersey Court Orders Homeowners To Tear Out Renovations After Battle With Homeowners Association

April 5, 2023

By: Carl L. Engel

On March 31, 2023, the Appellate Division of the New Jersey Superior Court, in the case Nicholas Holdings LLC v. Curtis Point Property Owners Association, reversed a trial court’s order that a homeowner must remove all fixtures and furnishings from the third floor of his house.  The man was one of more than a dozen residents who were sued for violating their association’s prohibition against third-story dwelling spaces.  The Appellate Division reasoned that, because the homeowner had testified that he only used the space for storage, there was an issue of fact for the jury as to whether he was in violation of the applicable regulation.  The residents who did not appeal the trial court’s decision, however, will still need to remove fixtures and furnishings from the third floors of their homes.

In 2000, Manuel J. Lopes purchased a residence in the Curtis Point development, which is in Brick Township, New Jersey.  The residences in Curtis Point are all governed by the Curtis Point Property Owners Association (CPPOA) and its rules, regulations, and bylaws.  Among the restrictions on houses in Curtis Point is “no dwelling may exceed two stories of living space.” 

In 2001, Mr. Lopes submitted an application for a construction permit to the Brick Township Zoning Board, because he wanted to make improvements to the storage attic on the third floor of the property.  The Board approved his application and issued a permit, but on the condition that he also obtained approval from the CPPOA.  The CPPOA soon issued its approval, stating that his proposed improvements met the deed restrictions. 

Nicholas Holdings LLC also owns property in Curtis Point.  In 2017, it submitted a plan to the CPPOA’s architect for a renovation to the third floor, which included an office, home theater, bathroom, and balcony.  When the architect reviewed the plan, however, he found that it did not comply with the CPPOA’s restrictions because it exceeded the two-story height limit.  Nicholas Holdings then filed a lawsuit against CPPOA for breach of contract and breach of fiduciary duty.  Nicholas Holdings also sued Mr. Lopes and eighteen additional individual homeowners for breach of contract and unjust enrichment, based on allegations that they were all using the third floors of their properties for “living space” in violation of the deed restrictions.

On January 30, 2020, the trial court found that habitable attics were not permitted under the deed restrictions imposed on Curtis Point, entered summary judgment for Nicholas Holdings, and ordered the individual defendants to remove the following from their third floors: (i) finished floors, both hardwood and carpeted; (ii) partitions, including sheetrock, drywall, and doors; (iii) access to outdoor decks; (iv) bathrooms; (v) refrigerators; (vi) televisions; and (vii) any furniture or finishings.  Of all the homeowners, only Mr. Lopes appealed the decision.

The Appellate Division reversed the trial court’s decision as to Mr. Lopes.  The appellate division found that, although the CPPOA’s regulations prohibited more than two stories of “living space,” they did not define that term.  The trial court had found that Mr. Lopes’s third floor was a “living space” because there was a half-bathroom there.  However, the trial court had observed also that “where space is used only for storage, it is not a story.”  The Appellate Division found that the trial court had incorrectly applied the restriction to Mr. Lopes because, even though there was a half-bathroom on this third floor, he had testified that it was used “solely for storage and not for living space.”  The Appellate Division held that this testimony created an issue of fact that must be tried before a jury, and reversed the trial court’s judgment against Mr. Lopes.

This case illustrates the power that homeowners’ associations can assert over members who fall out of compliance, as the trial court ultimately ordered members in violation to tear out floors, partitions, and fixtures from their houses.  Even Mr. Lopes may still have to do so, if the jury finds that he uses his third floor as a “living space.”  Not only can associations enforce their regulations, but (as Nicholas Holdings did here) members also may bring actions to enforce restrictions against other members, even where the association itself declines to do so.  Therefore, prospective homebuyers should read homeowners’ association regulations closely when deciding to buy in a particular development, because their compliance with disagreeable terms can be forced at their great expense.