Article VI of its By-Laws requires the Association to prepare an annual budget that reflects the anticipated Common Expenses for the ensuing fiscal year. Common Expenses include, but are not limited to, the estimated costs for the operation, repair and maintenance of the Common Elements, the estimated costs for the operation of the Association and amounts which are to be placed in separate accounts as reserves for deferred maintenance, replacements, and capital improvements of the Common Elements. The estimated annual operating budget, based upon full occupancy and prevailing costs as of 1988 for the Condominium, as it is now proposed, appears as Exhibit 2 of this Public Offering Statement. Included with this estimated budget is an estimate of the initial annual Common Expense assessment to be levied against the Units as well as letters of budget and insurance adequacy.
The Association acquires the funds needed to meet the budgeted Common Expenses through the assessment of an annual charge (the "Common Expense Assessment") which is to be paid by each Unit Owner in monthly installments. The Common Expense Assessments for the Units will be based upon the relative square footage of each Unit as compared with the Condominium as a whole, except that owners of the Affordable Housing Units shall only pay one-half the amount that would normally be assessed for a Unit of that size. This adjustment shall be made in the following manner: after the amount of Common Expenses attributable to each Unit has been calculated, the amount of Common Expenses attributable to each Affordable Housing Unit shall be reduced by one-half. The balance of the Common Expenses that would normally appertain to the Affordable Housing Units shall be aggregated and then divided among the non-Affordable Housing Units in proportion to their relative interests in the Common Elements. The manner of calculating The Common Expense Assessment attributable to the Affordable Housing Units shall not affect the rights of the owners of these Units to enjoy and use the Common Elements, nor shall it affect their relative percentage of interest in the Common Elements.
If the costs incurred by the Association for any particular year exceed those estimated in the Budget, the Board can impose an emergency assessment to cover the deficiency. In addition, Article X of the By-Laws empowers the Board of Directors to levy a Special Common Expense Assessment to defray the cost of any other repair, replacement or renovation of the Common Elements or a new capital improvements assessment. If the assessment is to provide a new capital improvement which costs more than $20,000.00 and which has not been included in the Association's budget, two-thirds (2/3) in interest of the Unit Owners must approve the expenditure through a Special Common Expense Assessment. These expenditures are assessed against the Unit Owners who are benefited by them in the same manner as the Common Expense Assessments.
Annual, emergency, and other assessments are personal obligations of each Unit Owner under the terms of the Master Deed. Payment of these charges is secured by a continuous lien which is placed on each Unit. If a Unit Owner fails to pay, the Board can accelerate the outstanding assessments and institute a lawsuit to foreclose upon the Unit. The Association can also file a lawsuit against a delinquent Unit Owner to compel the payment of any delinquent assessments.
In any period that the Developer controls the Board, the Developer reserves the right to subsidize the budget of the Association. The Developer represents that any such subsidy, if undertaken, is intended to fund budget deficiencies beyond the Association's control, and not for the purpose of artificially reducing maintenance charges payable by Unit Owners other than the Developer. There is no assurance that there will not be a change in prevailing economic conditions resulting in increased Common Expense Assessments in future years of operation. Nothing herein is meant to be construed as obligating the Developer to subsidize any budget deficiency. Additionally, the Developer can implement the subsidy and remove it at any time; purchasers should therefore be aware that removal of any subsidy could result in increased Common Expense Assessments. In the event that Developer does choose to end any such subsidy which may be implemented, an appropriate amendment to the Plan will be filed with the New Jersey Department of Community Affairs. Developer will pay the Common Expense Assessment levied against any Unit it has not yet conveyed for which a Certificate of Occupancy has been issued by the Township.
While the Developer maintains a majority of representation on the Association's Board, the Developer shall post a fidelity bond or other guarantee acceptable to the Department of Community Affairs in an amount equal to the annual budget. Beginning with the first anniversary of the date of the recording of the Master Deed, and for succeeding years thereafter in which the Developer maintains a majority of representation on the Board, the amount of the bond or other guarantee shall also include accumulated reserves.
