By Paul Goldfinger, Editor @Blogfinger. Sources: Jack Bredin, researcher and another ( anonymous) source as well.
Last week, Don Stine, reporter at the Coaster, reported that two condominium associations in Ocean Grove had filed a suit against the OGCMA because they believe that the land lease fee (“ground rent”) agreements are illegal and/or invalid.
The lawyer on the case is James T. Hundley of OG, and the plaintiffs are the 22 unit Pathway Condominium Association at 30 Ocean Pathway and the 6 unit Dardanelle Condominium Association at 40 Ocean Pathway. Note that there are 26 condo associations in OG.,
Those of us who own houses in the Grove have paid a stable ground rent of $10.50 per year to the CMA. Because the price is so small, we know of no formal complaints about that. Some Grovers have thought that those ground rents might be illegal or at least controversial, but they considered it a “tradition” and simply wrote the check each year. In fact some Grovers voluntarily have sent more because $10.50 is so inexpensive.
Condominiums have been around for a long time in OG, and the condo owners have been charged ground rents in a different way than the single family homes are charged. In 2004, there were 308 condo units in the Grove. Now there are quite a few more.
Under the prior agreements negotiated by developers with the CMA, the condo’s represent a different use than a regular house. The CMA considered that condominiums are a “newer type of ownership” and thus are legitimately different for ground rent purposes than the historic model of a single family home on a single lot.
These leasehold agreements have nothing to do with property taxes between the condo owner and the Township. In that public model, the homeowner gets to look at the budget and even to comment on it, but with ground rents, we have a private agreement between developers and CMA, and the CMA does not have to defend any fee increases. The condo owners have simply paid the fees each year, despite some changes in the agreements and sometimes fee increases.
The CMA viewed condo’s as a sort of commercial venture, and each condo that came along would be considered on a case by case basis in terms of the leaseholds. Because the condos were different than traditional houses, the CMA felt justified in charging more, to change the charges whenever they wanted, and to do it with a sliding scale. The same holds true for commercial enterprises which are handled differently than residences.
Most of the earlier condominiums have had stable ground rent charges which, although higher than a regular house, have generally been quite reasonable, for example $50.00 or $100.00. That is why no condo owners have complained until now. Note that condo fees vary from unit to unit because each agreement is decided individually.
If we look back in history, the story of the leaseholds is murky, at least as I discovered when researching Ocean Grove history in the past. In 1870, the town, a planned community, was divided into 30 x 60 lots. There were tents and then the early construction of cottages. Rev. Stokes held a “sale” of lots, and James Bradley “bought” the first for $85.00. Every historical account I could find referred to these lots as having been purchased by individuals, with a deed being issued.
But somewhere along the line, the CMA came to once again own all the lots and lease the land to the homeowners. I can find no clear explanation as to what happened. In fact, is there any documentation that the CMA actually owns all the land in town?
Ted Bell, OG historian and author, told us that the leasing arrangement was the truth from the beginning, so for purposes of this discussion, we will consider that the CMA owns the land and is justified to charge lease fees.
So what happened that led up to this suit? We can speculate that the leasehold amounts charged for new condos in the last 4 or 5 years have gone up considerably, perhaps to $1,000 per year, on a sliding scale according to the Township assessments (recently raised substantially) on the condos and tied to the CPI.
The financial pressures on condo owners lately have become significant including higher property taxes, condominium association fees, common area charges, maintenance, and assessments for improvements. There also has been talk of shoddy workmanship in some of the new buildings and high turnover of the units because residents find that they are poor investments.
This lawsuit is quite fascinating and could have major implications (see below) in town if the CMA loses, and then others join a class action suit. It is possible that the CMA might have to make retroactive payments if they lose, although we are told that such an outcome would be unlikely.
The CMA is already in a precarious financial situation, so this is potentially an explosive and dangerous suit for them and for the financial stability of the town.
Below is the last statement made by the CMA regarding this matter, but we don’t know if the COO considers condominiums to be “residences.” In a post to follow, we will discuss the ramifications of all this. Please comment here or on the next post.
THE CZECH PHILHARMONIC from the film soundtrack The Secret Garden.