New Jersey Condo Conversion Law: What Boards and Owners Need to Know

Which agency does your conversion go through?

The Department of Community Affairs. Offering plans register through its Planned Real Estate Development program, which everyone here calls PRED, and the program sits in the Bureau of Homeowner Protection inside the Division of Codes and Standards. The regulations are at N.J.A.C. 5:26, and Subchapter 9 is the conversion subchapter. The duty is to register the offering plan with the Department before any unit in your building is offered for sale.

What if your building falls outside the Act?

New Jersey gives you a way to ask. You apply to the Director for a Letter of Exemption under N.J.A.C. 5:26-2.3, in writing, setting out the reasons; if the Director agrees, the letter states the facts the determination rests on, and a denial has to state its basis and can be taken to a hearing. You will hear this step called a no-action letter. That is New York's name for a New York process, and the phrase appears nowhere in the New Jersey regulation. Asking for it by its New Jersey name saves your counsel a phone call.

What do tenants in the building have to be given?

If your building has tenants, this is usually the part that governs your schedule. New Jersey's Anti-Eviction Act protects a tenant against eviction because of a conversion, a tenant who does not buy has to be given notice before vacating, and senior and disabled tenants carry protections of their own on top of that. The periods commonly reported run into years, and we have not been able to confirm them against the statutory text itself, so the period that governs your building has to be read out of the current statute and never taken from a summary. That is a reason to establish it at the start of your process instead of the middle of it.

Can a municipality prohibit a conversion outright?

A qualifying New Jersey municipality can, by ordinance, prohibit the conversion of an affordable rental housing unit to condominium or cooperative ownership. Two things have to be true of the municipality: a population density above 25,000 per square mile on the most recent federal decennial census, and a rent control ordinance it has adopted. While such an ordinance is in effect, an application for registration of a conversion of an affordable rental housing unit in that municipality is deemed null and void.

Two corrections to how you may have seen this described, including in older material of ours. The act names no county anywhere; the test is statewide and it is a test of the municipality. And what the ordinance reaches is an affordable rental housing unit, while rent control appears only in the definition of the qualifying municipality; they are two separate tests and your building has to be measured against both. The screen therefore belongs in every New Jersey feasibility study, and no longer only in the ones along the Hudson.

Has that restriction ever touched a Hutton building?

Two of Hutton's own completed New Jersey deals, Harbor Towers (West New York) and Park Hudson (North Bergen), are in Hudson County. Both closed well before this law existed, Harbor Towers in 2001 and Park Hudson in 2009, so it could not have applied to either transaction.

Has New Jersey changed its rules the way New York has?

No. New York has been reworking its offering-plan rules for rental conversions, and New Jersey has not enacted an equivalent; a targeted search of the primary sources turned up nothing to the contrary. The one significant recent enactment here is the municipal prohibition above, which restricts conversion for a single category of housing instead of easing it. If you have read something about New York and wondered whether it reaches your New Jersey building, ask us. The answer usually takes one conversation.

What is worth establishing before you spend anything?

Three things, and none of them requires a decision to convert. Whether your municipality has adopted an ordinance under the 2020 act, and whether any unit in your building is affordable rental housing. Whether you have tenants, and what the current statute gives them. And what your own documents require of a shareholder vote, because New Jersey law sets part of that and your bylaws and proprietary lease set the rest.

Settling all three costs your cooperative nothing. We will read your governing documents, your financial condition and your underlying loan obligation, and tell your board where your building stands under each of the rules above, with no cost and no obligation to the corporation or its members. New Jersey is the state we have worked in longest. Every question on this page has a specific answer for your building once somebody has actually read it.