Real Estate Buyers in New Jersey Retain Right to be Informed of Off-Site Conditions Pursuant to Consumer Fraud Act
A recent decision of the New Jersey Superior Court, Appellate Division, continues to compel sellers of new residential housing to advise purchasers of adverse off-site conditions, despite a law enacted in 1995 which provides immunity from damage claims if the seller meets the statutory notice obligations.
In Nobrega v. Edison Glen, 327 N.J. Super. 414 (App.Div. 2000), 2000 WL 46064, the plaintiffs purchased units in a condominium development in Edison, New Jersey, which is within two miles of two Superfund sites. Eileen Nobrega, plaintiff, unit owner and President of the Condominium association asserted that during 1993 or 1994, she learned that other unit owners encountered difficulty in the resale of their condos, including: (1) a 40% depreciation of the value of their units; and (2) "a virtual halt" of condo resales. In addition, the condo developers removed unsold condos from the market because they would not sell and instead were leasing them to transient tenants.
Plaintiff's 1997 complaint against the developer set forth a cause of action under the New Jersey Consumer Fraud Act, claiming that "the defendants employed unconscionable commercial practices and/or fraud or other unlawful acts in connection with the sale and/or advertising of the units at the Condominium in violation" of the Act. The alleged violation was the failure to disclose the presence of the nearby Superfund sites.
The defendant developer argued that the 1995 New Residential Construction Off-Site Conditions Disclosure Act, N.J.S.A. 46:3C-1 to -12 ("Disclosure Act"), limited the scope of its disclosure obligations. The Disclosure Act was enacted in response to Strawn v. Canuso, 140 N.J. 43 (1995), which imposed upon residential real estate developers and their agents the obligation to disclose to prospective purchasers of new residential construction any adverse, but not readily observable, off-site conditions.
The defendants' motion to dismiss was based on their assertion that under the Disclosure Act, they were retroactively protected from liability for non-disclosure of hazardous off-site conditions. They relied on the design of the Act, which requires people who own, lease or maintain a potentially dangerous off-site condition to provide the clerk of each municipality in which such a condition exists, with a list of those conditions and their location(s). In addition, the New Jersey Department of Environmental Protection is required to provide the municipal clerks with lists of local contaminated sites. The sole obligation of the seller, defendants argued, was to give notice to the potential home buyer outlining the availability of this list of off-site conditions, with the right to cancel the contract within five days following execution.
The trial judge agreed with the defendants that the Disclosure Act barred the plaintiffs' common law claims, and found that the Disclosure Act was intended to override the Consumer Fraud Act. The Appellate Division reversed, finding that sellers of new residential properties can be held liable under the Consumer Fraud Act for failing to inform the buyers of nearby Superfund sites.
The Court cited legal precedent and public policy considerations in concluding that, as a matter of justice and fair dealing, buyers of new homes are entitled to the benefit of an implied and far-reaching warranty of habitability. Id. at *4. Moreover, the Disclosure Act provides that "it shall not be interpreted to affect the disclosure requirements for conditions off-site contained in . . . any other statutory provision." Id. at *3, citing N.J.S.A. 46:3C-10d. The Court focused on Governor Whitman's statement when she signed the Disclosure Act, that:
. . . [the purpose of the Act was to balance] "the need for consumers to know of the existence of off-site conditions and the need for sellers to know the extent of their duty to disclose,"
"[m]ost important, the bill accomplishes this, I am assured by both sponsors and all interested parties, without interfering with any remedies that may be available in appropriate cases to prospective buyers under the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq., or any other relevant statute. Based on these assurances, I have signed the bill."
Thus, the Appellate Division ruled that the Disclosure Act expressly exempted obligations imposed by other statutes and was not intended to preempt the protections afforded under the Consumer Fraud Act.
Discovery was not completed in this case and as such, plaintiffs were allowed the opportunity to prove that there was intent and knowledge on behalf of the defendants in concealing from them the close proximity of the two Superfund sites.
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