Most restrictions can be found as covenants contained in a deed, in a declaration of restrictions or on a legend on a filed map. Restrictions generally limit or otherwise affect how a property owner can use their lands. Perhaps they involve the distance a structure must be set back from a property line or other structure (unrelated to zoning setback requirements). Or, maybe they involve how a structure may be used (unrelated to land use ordinances). Or, they might even limit who can use the property. Some restrictions are referred to as nuisance restrictions because they prohibit the use of the property conveyed for any noxious or offensive purpose. Restrictions against public policy, such as those restricting use due to race, national origin, etc., are not enforceable.

Restrictions set forth in a deed transferring title, or those appearing in earlier deeds in the chain of title, are binding on a property owner. This is one of many reasons to perform a title search when buying a property - to determine if there are any recorded restrictions which will affect an owner's use of the property.

Some of the more common restrictions involve a neighborhood plan which may impose limitations on the size and dimensions of lots, the location of structures on a lot or how the structures may be used. Many of these types of restrictions were originally imposed prior to the existence of local zoning ordinances. Thus, a land owner could impose his/her own restrictions on a tract which was to be developed. Sometimes, associations were created with authority to approve or disapprove new structures on the lots. In more recent times, developers impose restrictions on subdivisions which are meant to supplement existing zoning requirements, often imposing more extensive restrictions in an effort to preserve a particular neighborhood scheme as envisioned by the developer.

Restrictions can also be imposed by property owners conveying only a portion of their property who want to benefit or protect the remaining portion they are retaining. For example, a property owner who subdivides off part of his/her property may want to prevent anyone owning the newly created lot from building within a certain distance (which may exceed the local zoning requirements) from their remaining lot. The subdividing property owner may also want to impose a restriction to retain the right to approve any new structure on the new lot.

Unless a restriction is deemed to be personal to the grantor imposing it, or there is a specified termination date, the passage of time alone will not serve to terminate a restriction.

As a result of the binding characteristics of restrictions, it is important to review the back title to a property being purchased to ascertain what, if any, restrictions may affect ownership rights to the property.

• Failing to disclose that a tennis court would be constructed on an adjoining property.  Tobin v. Paparone Construction Co. 137 N.J. Super. 518 (Law Div. 1975).
• Concealment of a defective septic system.  DiBernardo v. Mosley 206 N.J. Super. 371 (App. Div. 1986) cert. denied 103 N.J. 503 (1986).

In response to the potential pitfalls involving disclosure issues, most real estate brokers now provide sellers with an extensive disclosure form to complete and sign.  This form is then provided to potential buyers.  Completing this form accurately and thoroughly helps to protect the seller (and the realtor) from claims of misrepresentation or non-disclosure.

Berkeley later sold his share of the lands to others.  In 1676, the successors to Berkeley’s interests and Carteret signed an Agreement dividing the colony into East and West Jersey.  The portion originally owned by Carteret became East Jersey and the portion originally owned by Berkeley became West Jersey.  These two provinces each came to be ruled by a Board of Proprietors who represented owners of fractional shares of each province.  Subsequent transfers of title to these lands were made by the Board of Proprietors and then subsequently by those who had been granted title and their successors in interest.

As recently as 1998, certain remaining lands in East Jersey were purchased by the New Jersey Department of Environmental Protection.  However, no such agreement was entered into for any remaining West Jersey lands.  As a result, it is possible that when researching title to property once located in West Jersey that the research may lead to the West Jersey Board of Proprietors as owners. 

Some lands in New Jersey were also acquired from Native Americans.  For example, the Newark area was purchased from Native Americans in 1667.  In 1669, Carteret purchased some lands from Native Americans as well.  However, by 1758, any remaining land or claims to lands by Native Americans were extinguished by a treaty between the Native American tribal chiefs and then Governor Bernard on behalf of the British Crown and the colonists. 

There has been some controversy as to the actual location of the Division Line between East and West Jersey.  This resulted in three separate dividing lines - each originating near Little Egg Harbor and traversing the State on a diagonal, ending at varying points in northwest New Jersey depending on which line is followed.  One of the lines, known as the Keith Line, has been perpetuated by parts of Province Line Road here in Mercer County.

After the division of the New Jersey lands into the provinces of East and West Jersey, the provinces were later subdivided over time into counties.  There were only eight original counties; four in East Jersey and four in West Jersey.  The original counties of East Jersey were:  Bergen; Essex; Middlesex; and Monmouth.  Out of these counties came Hudson (from Bergen), Passaic (from parts of Bergen and Essex), Union (from Essex), Ocean (from Monmouth), Somerset (from parts of Middlesex and Essex) and Mercer (from parts of Burlington, Middlesex and Somerset).

West Jersey’s original counties were: Burlington; Cape May; Gloucester; and Salem.  Out of these counties came Atlantic (from Gloucester), Camden (from Gloucester), Cumberland (from Salem), Hunterdon (Burlington), Morris County (from Hunterdon), Sussex (from Morris) and Warren (from Sussex).   

As a result of the emergence of newer counties from the older ones, when researching a title to a property, it is sometimes necessary to search title records from a predecessor county from which the newer county originated.  So for example, if one goes back far enough in the title of a Mercer County property, one may have to visit the County Clerk’s office for Burlington, Middlesex, or even Essex counties.

While quiet title actions have historical roots, the remedy available today  in New Jersey is a statutory one pursuant to N.J.S.A. 2A:62-1 et seq..  It is a remedy which permits a person who is in peaceable possession of lands in New Jersey to settle disputes over the title to his land. A person in "peaceable possession" may, when title to his lands or any part of them is denied or disputed, or when a lien or encumbrance is asserted against his lands, use this process  "to settle the title to such lands and to clear up all doubts or disputes" concerning the land.   N.J.S.A. 2A:62-1.

Such an action would be commenced in the Superior Court of New Jersey, Chancery Division.  In order to commence such an action, the party seeking relief must allege that he is in "peaceable possession" and that no action is pending to enforce or test the validity of the defendant's claim to title or an encumbrance.  After proving this, the burden then falls on the defendant to prove his claims.

Sometimes a plaintiff is not able to be in "peaceable possession".  If the lands involved are "wild, wood, waste, uninclosed or unimproved," and if no other person is in actual possession of the lands,  there will be a presumption that plaintiff is in "peaceable possession" if the plaintiff can claim ownership pursuant to a duly recorded deed in New Jersey and that, as owner under the deed, he (or his grantors) has been assessed and  paid taxes for the five (5) years preceding the commencement of the quiet title action.  N.J.S.A. 2A:62-2.

Actions to quiet title may be tried by a jury, upon the application of either party. N.J.S.A. 2A:62-4.

A plaintiff may use a quiet title action to remove any claims created through adverse possession.  Other examples of quiet title actions include removing claims of any heirs, devisees and personal representatives of a long deceased past owner of an interest in the property; or claims of those alleging a lien or encumbrance against the property. 

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Attempted private mortgage recessions such as these, need to be handled promptly by qualified counsel. The credit lender’s appraiser should be put on notice and invited to put his carrier on notice of the pending claim. The appraiser should also be requested to review the appraisal used for the original underwriting to make certain that the facts contained therein are accurate and to verify the comps used. There should simultaneously be a demand for the insurance company’s new appraisal. Payments should be made to the Company in the regular fashion even if they are returned initially. Counsel should review the Company’s Master Policy and any exclusions and give the Company any required notice pursuant thereto in anticipation of the pending litigation.

While this recommended course of action often puts credit lenders and their appraisers (often with mutual business interests and longstanding relationships) at odds, New Jersey’s Entire Controversy Doctrine makes a second lawsuit against the appraiser itself impossible. Counsel, experienced and sensitive to these relationships, can normally soften the prospects of the pending suit by a telephone call explaining the circumstances and promising full cooperation in the litigation prior to issuing his written demand.

If litigation is commenced it is imperative to ascertain if the financial institution has other insured loans with the Company and it is normally advisable to seek declaratory relief in the Complaint seeking to maintain coverage on all those other  loans where policies exist. Additionally, it may be time to take stock and ascertain the possible exposure of those other loans since the Company’s intentions to “rescind” its policies may signify well-founded concerns for its adequate capitalization. Prudence would suggest that a lender at least recognize the additional risks such mortgage insured loans may poise to a lender’s portfolio. Certain or all of these loans may well be singled out for “special handling”.

If the lender has any concern about the appraisal questioned or any other appraisals insured by the Company then it should hire an independent review appraiser to offer an independent view on the appraisal or appraisals. If there are any weaknesses in the case it is better to know up front. This may well affect the negotiation strategy with both the Company and the appraiser’s insurance company.

In these “recession” situations, it’s a simple “shoe-in” to seek guidance and move swiftly in order to preserve the credit lender’s rights. Normally the bank’s counsel will need a copy of the notifying letter, a copy of the appraisal used by the Company to determine that the underlying appraisal was “false”, a copy of the original appraisal and a copy of the Company’s Master Policy currently in effect with the credit lender.

Under certain circumstances, a single taxpayer can exclude up to $250,000.00 of gain on both federal and state income tax returns and married taxpayers can exclude up to $500,000.00. For married couples, the $500,000.00 exemption requires that they file a joint return in the year their residence is sold.
 

The determination of whether gain on the sale of a residence can be excluded from a homeowner's income for tax purposes depends on whether the property has been owned and used by the taxpayer for a period of two or more years during the five year period preceding the sale. The five year period ends on the date title is transferred. The two year time period, for both ownership and use, does not need to be a consecutive. The time can be aggregated over the five year period. There is, however, a limitation on how often this exclusion of gain can be used. The exclusion can only be applied to one sale every two years.

For married couples to qualify for the up to $500,000.00 exemption, in addition to filing a joint return, either the husband or wife must meet the ownership requirement and both spouses must meet the use requirement. In addition, neither spouse shall be ineligible for the exclusion because he or she sold a property within the past two years. If the married couple does not share a principal residence, an exclusion of up to $250,000.00 is available on a sale that qualifies as the principal residence of one of the spouses.

If a single homeowner, who is eligible for the exclusion of gain benefit, marries someone who elected to use the exclusion benefit within the two years prior to the marriage, the now married taxpayer is only allowed a maximum exclusion of $250,000.00. If a taxpayer has more than one home, only the sale of the principal home qualifies for the exclusion of gain benefit.

There is an exception to the two year requirement for sales which permits a reduced amount of gain to be excluded from income. A reduced exclusion can apply to a sale resulting from a change in the taxpayer's place of employment, health, or certain unforeseen circumstances. In such situations, a taxpayer is provided a reduced exclusion based on the portion of the two year period for which ownership and use requirements are met.

The Taxpayer Relief Act of 1997 modified Section 121 of the Internal Revenue Code to provide this exclusion of gain benefit. It replaced the prior law which provided rollover and one-time exclusion provisions for the sale of taxpayers' residences and replaced it with a simpler law which no longer requires a taxpayer to continually "trade up" to benefit from substantial tax savings.

New Jersey provides an equitable remedy known as partition. The term “partition” means the division of property among co-owners. Real property held by co-owners as a tenancy in common or a joint tenancy (but not by spouses as tenants by the entirety or by N.J. registered domestic partners) may be partitioned. The process for doing this is governed by New Jersey statutory law. N.J.S.A. 2A:56-1 et seq. Any co-owner can seek a partition, provided he/she has not previously waived their right to do so.

While properties can be physically divided by the Court and distributed among the co-owners, this is not common and generally applies only to vacant land. If there is to be a physical division, then the Court may appoint a commissioner to recommend a proposed division of the property. More often, the Court will order a sale of the property and an equitable division of the proceeds among the co-owners. The Court may direct the sale of property if it appears that a partition of the property cannot be made without great prejudice to the owners, or persons interested in the property. See N.J.S.A. 2A:56-2. The Court may also order a partition which would permit one co-owner to purchase the interest(s) of the remaining co-owner(s) in lieu of a physical division of the property or a court-order sale.

It is not unusual for a party to a partition action to seek an adjustment by the Court of sale proceeds to take into account any taxes paid by an owner in excess of the owner’s fair share, or repairs or other improvements made by a co-owner which increased the value of the property. A co-owner may also want an adjustment for the use of the premises by another owner or by another owner’s failure to properly maintain the property.

In certain instances, frequently with commercial property, the Court may decide to appoint a receiver to oversee the property and collect rents and other income and pay expenses during the course of the litigation.

Co-owners should recognize that anytime it is necessary to resort to the courts significant additional expenses are incurred, whether it is for attorneys to properly represent co-owners’ interests or for commissioners to propose a division of the land or receivers to oversee the property. It is always worthwhile to attempt to work out an amicable solution among the co-owners. However, if that is not possible, there remains a partition action with the Court.

Under the roll back provision, if the use of the property is changed from agricultural/horticultural to another use, or if the land fails to qualify under the act, the municipal tax assessor will impose an additional tax.  This tax, called a “roll back” tax, is an amount equal to the difference, if any, between the taxes paid or payable on the basis of the farmland assessment and the taxes that would have been paid if the property had been assessed for non-agricultural purposes.  This “roll back” is effective not only for the current year but also for the two immediately preceding tax years.  The two prior years are reassessed and the property bears the full burden of the additional assessment.

The tax assessor for each municipality determines if a property qualifies for farmland assessment for the year.  This determination is based on an application for farmland assessment for the year, which must be completed and returned to the tax assessor’s office by the property owner on or before August 1 of the prior year, e.g., applications filed by August 1, 2008 are to qualify land for farmland assessment in 2009.  The tax assessor’s office will make a determination as to whether the property qualifies for farmland assessment for the year.  If the property no longer qualifies for farmland assessment and if there has been a change in use, roll back taxes will be instituted for the current year and the prior two (2) years.

When purchasing property which is assessed as farmland, a Buyer should confirm that an application for farmland assessment has been submitted and approved.  The Buyer should also be prepared to continue the farming use to take advantage of the reduced taxes resulting from the farmland assessment.  An unaware Buyer who ceases to use the property for farming may find the property subject to significant roll back taxes.