New Jersey Law Requires Discriminatory Restrictive Covenants to Be Removed from Deeds and Association Documents

New Jersey condominium and homeowners’ associations should review their governing documents to ensure compliance with a new law requiring the removal of discriminatory restrictive covenants.

New Jersey condominium and homeowners’ associations should review their governing documents to ensure compliance with a new law requiring the removal of discriminatory restrictive covenants. Gov. Phil Murphy signed the legislation (A-5390/SB-2861) into law on November 8, 2021, and it took effect immediately.

Restrictive Covenants Under the LAD

Restrictive covenants in deeds for real property that establish certain restrictions on the ownership or use of real property were already prohibited under the New Jersey Law Against Discrimination (LAD). This prohibition includes restrictions on the basis of race, creed, color, national origin, ancestry, age, marital status, affectional or sexual orientation, familial status, disability, liability for service in the Armed Forces of the United States, nationality, sex, gender identity or expression, or source of lawful income used for rental or mortgage payments.

The new law goes one step further by requiring an unlawful and unenforceable restrictive covenant that currently exists in a deed for real property to be removed. According to its sponsors:

Unsuspecting homeowners or potential homebuyers who encounter restrictive language in a deed and do not understand the intricacies of the “Law Against Discrimination” may be discouraged from buying a home or continuing to reside in a home for which the ownership document, the deed, contains this language. Furthermore, a person who has purchased a home without realizing that such language is contained in the deed may feel shocked and upset after reading the deed.

New Deed Prohibitions

Under A-5390/SB-2861, a deed recorded on or after January 1, 2022, may not contain a reference to the specific portion of a restrictive covenant purporting to restrict the ownership or use of real property as prohibited by the LAD, specifically N.J.S.A. 10:5-4 and 10:5-12. Additionally, a county clerk or a register of deeds and mortgages must refuse to accept any deed submitted for recordation that references the specific portion of any such restrictive covenant.

To address deeds recorded with such restrictive covenants, the new law creates a mechanism for property owners to release such a restrictive covenant by recording a “Certificate of Release of Certain Prohibited Covenants” with the county clerk, or register of deeds and mortgages, as appropriate, in the county where the real property is located. There is no filing fee, or any other fee, charged to the owner of a real property for the filing of this certificate. Property owners may record a certificate prior to recordation of a deed conveying real property to a purchaser, or when a real property owner discovers that such a prohibited covenant exists and chooses to affirmatively release it.

New Requirements for Homeowners’ and Condo Associations

The new law also requires homeowners’ or property owners’ associations, cooperative corporations, condominium associations, and planned communities to be proactive in removing prohibited restrictions from their governing documents. Within 90 days of the enactment, boards must review the association’s governing documents to determine whether those documents contain any restriction, covenant, or condition, that prohibits or limits the conveyance, encumbrance, rental, occupancy, or use of real property as prohibited under the LAD.

If an association finds such an unlawful restriction, covenant, or condition in any of those documents, it must amend the document or documents to remove the restriction, covenant, or condition. Removal of a prohibited restriction, covenant, or condition does not require approval of the members of the association, notwithstanding any provision of the governing documents to the contrary.

If, after the review and amendment of governing documents has been completed, a board receives a written request from a member of the association to remove from those documents language that the member believes to be an unlawful restriction, covenant, or condition that prohibits or limits the conveyance, encumbrance, rental, occupancy, or use of real property as prohibited by the LAD, the board must immediately undertake a review of the document or documents. The review must be completed within 30 days of the member’s written request. If the board determines that the member is correct, the board must amend the document or documents to remove the restriction, covenant, or condition within 30 days of its determination.

Notably, the new law does not establish a private cause of action by or against an association, a board, a member, or the public for acting or not acting to remove or not remove an unlawful restriction, covenant, or condition.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact Christopher Dzwilewski, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.