Waiver of Subrogation Rights Prevents Lawsuit Between New Jersey Condominium Unit Owners and Association

Is a condominium association responsible for damage to individual condominium units caused by negligent maintenance of common elements? The answer is, “it depends.”

In Schoolhouse Commons at Union Ave. Condo. Ass’n v. CCTS Tax Liens I, L.L.C., L-2469-10, 2012 WL 95593 (N.J. App. Jan. 13, 2012), a New Jersey condominium association was allegedly negligent in maintaining a common water pipe that leaked, causing water damage to the unit below. When the association sued the unit owner for failing to pay assessments, the unit owner countersued for damages to its unit caused by the leaky pipe. The trial court dismissed the unit owner’s claim and the unit owner appealed. The appellate court had to determine the rights and responsibilities of the parties.

The respective rights and responsibilities of unit owners and condominium associations are governed by the [New Jersey] Condominium Act [], the master deed creating the condominium, and the condominium association's by-laws. … The determination whether [the unit owner] may maintain an action against [the association] and [the property manager] for the damage to its unit caused by their alleged negligent maintenance of the common elements turns on the sections of the [association] by-laws regarding the parties' obligations to obtain insurance and precluding subrogation actions.

The association’s by-laws required the association to carry insurance over the building and required the unit owners to carry insurance over their personal property. All policies were required to waive subrogation rights, cutting off the rights of the insurance companies to pursue action against the real party responsible for damage. The court concluded that these provisions demonstrated that the condominium by-laws were drafted with the intent of preventing unit owners and the association from suing each other over damage to their respective properties.

Similarly, we conclude that the [association] by-laws, which require [the association] to obtain insurance on the condominium property and the unit owners to obtain property damage coverage for their own personal property, and require both policies to include waiver of subrogation provisions, contemplate that there will be no litigation between unit owners and the association based on alleged damage to the condominium units or the personal property contained in them. (Emphasis added).

While state statutes will likely apply to all condominiums in a given state, condominium deeds, declarations of condominium, and condominium by-laws may vary for each respective property, and require individual analysis to determine if the outcome in the case above would result at a different location.

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