New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

People commonly think of home ownership in the form of owning a single family house situated on its own parcel of land.  However, increasingly, condominiums, and to a lesser extent, co-operatives, are providing  alternative forms of home ownership.  What are these forms of ownership and what is the difference between them?

In New Jersey, condominium ownership is no longer unusual.  It is a form of common ownership in which title to individual units vests in each unit’s owner.  In addition, each unit owner also owns a percentage interest in the common areas which are shared by the unit owners, e.g.,  the land, building exteriors and any facilities for the unit owners’ common use.  Descriptions of both the individual units as well as the common areas are set forth in a Master Deed which is recorded in the County Clerk’s Office in the county where the condominium is situated.  Thus, condo owners own their unit plus a percentage interest in the condominium’s common areas. 

Co-operatives appear  more prevalent in New York City and North Jersey than Central Jersey. In this form of common ownership, the owner’s interest in an individual unit is held in the form of a leasehold interest.  The individual owner acquires a proprietary lease to his/her unit.  In addition, each unit “owner” owns shares of stock in the co-operative corporation which owns the underlying land and improvements on the land as well as those facilities intended for the common use of the owners of the co-operatives.  Co-op owners have a leasehold interest in their unit and their only ownership rights to the common areas are through ownership of  shares of stock in the co-op corporation which owns the common areas.

Condos  are managed  by  unit owners associations which manage the improvements for which they are responsible, i.e.,  the land and the common purpose facilities. Some co-ops are similarly  managed by associations.  In others, the co-operative corporation itself manages the land, and improvements it owns.  Both condo and co-op forms of ownership generally charge the owners of their units a monthly maintenance fee.   In condominiums, real estate taxes are assessed against the individual owners.  In co-operatives, however, real estate  taxes are assessed against the co-operative corporation, not the individual owners. 

Financing a condominium can be accomplished in the same manner as any other fee simple purchase, by mortgaging the unit owner’s interest in the unit.  However, since a co-op owner has a leasehold interest in his unit, lending institutions generally  require a pledge of the unit owner’s stock and an assignment of the leasehold interest as collateral.  Some lenders, however, now provide a leasehold mortgage.  For certain co-operatives created prior to 1988, financing may be difficult to obtain.

Condominium ownership is a form of ownership created by statute, and did not exist before 1970 when the Condominium Act, N.J.S.A. 46: 8B-1 et seq. was enacted in New Jersey.   Co-operative ownership was originally created in New Jersey under common law.  However, the Co-Operative Recording Act of New Jersey, N.J.S.A. 46:8D-1 et. seq. effective May 9, 1988 provided a statutory basis for the creation of co-operatives.  Pursuant to the 1988 law, a Master Declaration and Master Register of Units is recorded in the County Clerk’s Office to create the co-operative.  Unit transfers are accomplished by recording the proprietary lease or assignment of the lease.  Co-operatives in existence prior to the effective date of the Co-Operative Recording Act are not subject to these statutory provisions. 

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As residents of  Princeton Borough and Princeton Township are well aware, their municipalities  have undertaken a revaluation of the real estate within their boundaries for tax assessment purposes.   The last revaluation performed in Princeton Borough and Township was in 1996.  Recently, each municipality notified property owners by first class mail of their preliminary assessments.  The preliminary values were established by Appraisal Systems, Inc., an independent professional appraisal firm hired by the Princetons to perform their revaluations.  The date of the property revaluation is as of October 1, 2009.  These new values, once confirmed, will become a property’s new assessment, effective with the 2010 tax year. 

 

The purpose of the revaluation is to cause the tax burden to be more fairly shared by the properties, based on new tax assessments resulting from current true values of properties.

 

The Mercer County Board of Taxation ordered the Princetons to undergo a revaluation of the real estate within their borders when the individual assessment - sales ratios varied too widely within each municipality.  This ratio is determined by dividing the assessed value of a property by an accurate sales price, with the result being a percentage.  For example, if a property is assessed at $100,000 and sold for $200,000, the assessment sales ratio is 50%.  By 2008, these percentages were 40% in the Borough and 47% in the Township. 

 

The valuation of properties must be performed in accordance with state law as set forth in N.J.S.A. 54:4-1 et seq.  For every property, the revaluation appraiser creates a property record card which contains specific information about the physical attributes of the property (e.g., dimensions, age, condition of any buildings, etc.) and other information which may be of assistance to the appraiser (existing appraisals, recent sales, rent amounts, etc.).  The card is created with information obtained based on an actual inspection of the individual premises.  If entry onto the premises is not possible, the valuation will be an estimated one. 

 

In the Princetons, the preliminary valuations have now been established and letters notifying taxpayers recently mailed.  Each taxpayer will be provided with an opportunity to attend an individual informal review of the value proposed with a representative of Appraisal Systems, Inc.  At such time, Appraisal Systems, Inc. may consider revisions to its proposed valuation which may increase or decrease (or result in no change to) the proposed assessment, based on additional input from the taxpayer.

 

Taxpayers will have until May 1, 2010 to file an appeal with the Mercer County Board of Taxation if they are not satisfied with their new assessment.  Thereafter, an appeal can be taken to the State Tax Court within 45 days, with further appeals possible. 

 

Once the revaluation is completed and new property assessments are made by the tax assessor, a new municipal tax rate will be determined.  Taxpayers will then know to what extent, if any, their taxes will change due to their new assessment.

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Our recording system, having its roots in England, is basically a system for determining priority of legal claims against real estate. Thus, when one acquires title to real estate, or mortgages property, those instruments affecting title are usually recorded in the county clerk’s office. 

N.J.S.A. 46:21-1 entitled, “Recorded deeds or instruments as notice to subsequent judgment creditors, purchasers and mortgagees,”  makes clear the purpose of our recording statutes.  It states:

Except as otherwise provided herein, whenever any deed or instrument of the nature or description set forth in section 46:16-1 of this title, which shall have been or shall be duly acknowledged or proved and certified, shall have been or shall be duly recorded or lodged for record with the county recording officer of the county in which the real estate or other property affected thereby is situated or located such record shall, from time to time, be notice to all subsequent judgment creditors, purchasers and mortgagees of the execution of the deed or instrument so recorded or of the contents thereof.

N.J.S.A. 46:16-1 sets forth a non-exclusive list of instruments entitled to be recorded.  While, the recording of a document does not affect it’s validity as between the parties to the document, the consequences of not recording is set forth in N.J.S.A. 46:22-1:

Every deed or instrument of the nature or description set forth in section 46:16-1 of this title shall, until duly recorded or lodged for record in the office of the county recording officer in which the affected real estate or other property is situate, be void and of no effect against subsequent judgment creditors without notice, and against all subsequent bona fide purchasers and mortgagees for valuable consideration, not having notice thereof, whose deed shall have been first duly recorded or whose mortgage shall have been first duly recorded or registered; but any such deed or instrument shall be valid and operative, although not recorded, except as against such subsequent judgment creditors, purchasers and mortgagees.

Thus, the principal purpose of New Jersey’s Recording Act is to protect subsequent judgment creditors, bona fide purchasers, and bona fide mortgagees against assertion of prior claims to land based upon unrecorded instruments.

 

This statutory scheme, is referred to as a “race-notice” system.  A party who is a bona fide purchaser, mortgage holder, etc., for value and without any actual or constructive notice of adverse interests, is entitled to the protection of this statute.

 
The requirements for recording an instrument affecting title or an interest in real estate are not onerous; the instrument needs only to:   

• be in English or accompanied by an English translation;
• bear a signature;
• be acknowledged or proved as required by statute;
• have the names appear typed, printed or stamped beneath the signatures of any parties to the instrument and the officer before whom it was acknowledged or proved;
• have the required recording fee paid;
• include the name and signature of its preparer on the first page and the tax block and lot number if the instrument is a deed conveying real property   

If the instrument meets all the requirements for recording, the county recording officer will then copy it into the record and return the original document to the person submitting it for recording.
   
 

It becomes important to record all instruments affecting title to real estate to protect the recording party, as it will be generally presumed that all persons who deal with the property after that will do so with knowledge of the recorded instrument.

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The popular federal tax credit of up to $8,000 provided to first-time home buyers who purchase a home in 2009 due to expire November 30th has been extended until April 30, 2010.  In addition, a new tax credit up to $6,500 will be available to certain "step-up" (or downsizing) homebuyers who are current homeowners who have resided in their homes for at least five years.

 

The original 2009 tax credit was part of the American Recovery and Reinvestment Act of 2009.  On November 6, 2009, President Obama signed the "Worker, Homeownership and Business Assistance Act of 2009" into law.  The first-time homebuyer tax credit is equal to 10% of the purchase price of a home, up to a maximum credit of $8,000.  It is available to certain first-time home buyers who purchase a main residence on or after January 1 and before December 1, 2009.   This tax credit has now been extended to April 30, 2010.  Closing must occur by April 30th, or a binding contract must be entered into by that date with closing to occur within 60 days.  First-time home buyers who purchased their main home in 2008 are entitled to a credit of up to $7,500. The new credit for step-up homebuyers starts on December 1, 2009.  This article is limited to a discussion of the tax credit available for 2009 purchases, including the recent extension and expansion of that credit.

 

There are some limitations on the available credit as extended.  First, the credit is only available for homes costing up to $800,000.  Homes costing in excess of $800,000 are not eligible.  Purchasers under the age of 18 cannot claim the credits.

 

There are income limits as well.  Under the original provisions, you were  allowed the full amount of the credit, i.e., $8,000,  if your modified adjusted gross income was $75,000 or less, if single, and $150,000 or less, if married filing jointly.  These income levels have been increased by the recent legislation so that you are allowed the full credit with an income up to $125,000 for single filers and $225,000 for married filers.  The credit is not available to taxpayers with incomes greater than $145,000 for single filers and $245,000 for married filers.  Between these two income levels for each type of filer, the credit is gradually phased out.  

 

The credit is available to first-time home buyers who are purchasing a main home, i.e., principal residence, whether it is a house - new or resale - mobile home, condominium, cooperative apartment, etc.  The purchase must occur by April 30, 2010, or the purchaser must have entered into a  binding contract by midnight April 30, 2010 with closing to occur within 60 days.   The purchase date is the closing date, when title transfers to the buyer.  For someone who is constructing their main home (not buying it from a home builder), the purchase date is the date you first occupy it.

 

If the home ceases to be your main home within three years of the closing date, it is possible that the credit will be recouped by the government.

 

A first-time home buyer is someone over age 18, who has not owned another main home during the 3-year period immediately preceding the closing date of the qualifying purchase.  If you or your spouse owned a main home during the three preceding years, then neither will qualify for the credit. 

 

The new tax credit of 10% of the purchase price of a home, up to $6,500, is available starting December 1st to homeowners (and their spouses) who have lived in their current home for five consecutive years out of the eight years preceding the closing on their new home.

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Goblins and ghosts.  Eerie graveyard scenes.  With Halloween coming, cemeteries always take on some added  interest. New Jersey cemeteries are governed by the "New Jersey Cemetery Act, 2003."  N.J.S.A. 45:27-1 et seq.  Under the Act, a cemetery is defined as "any land or place used or dedicated for use for burial of human remains or disposition of cremated human remains...."  N.J.S.A. 45:27-2.

 

General supervision and regulation of all cemetery companies and their property, equipment and facilities is exercised by a 10 member New Jersey Cemetery Board.  N.J.S.A. 45:27-1 While many historical cemeteries exist in New Jersey, any cemetery established after December 1, 1971 must be owned and operated only by a governmental entity, religious organization or a cemetery company organized in accordance with the New Jersey Cemetery Act.  N.J.S.A. 45:27-6.  Those cemetery companies organized after December 1, 1971 must be nonprofit corporations N.J.S.A. 27-7(a).

 

Before selling grave sites, cemetery companies are required to survey or map out that part of the cemetery where graves exist, showing the location of the graves with roadways, paths and building areas as the cemetery company directs.  N.J.S.A. 45:27-16(b).  The map shall be kept at the cemetery's office and made available for inspection by owners of the interment spaces.  N.J.S.A. 45:27-17 (b) & (c).

 

The Cemetery Act also requires a cemetery company to keep records of the owner of each interment space that has been conveyed by the company and each transfer of an interment space to which the company has consented.  A transfer of an interment space is not complete until it is recorded on the books of the cemetery company and any required fees paid.  N.J.S.A. 45:27-19(b).

 

The conveyance document for the interment space shall include the actual amount paid for the space, a description of the space sufficient to indentify it, the dimensions of the space and any other information that may be required by the New Jersey Cemetery Board. N.J.S.A. 45:27-19(c).

 

Conveyances issued by a cemetery company shall indicate whether the company is transferring title to the interment space or only a right to burial in the space. N.J.S.A. 45:27-28(a). Subject to certain restrictions, the owner of an interment space has the right to transfer that space, or an interest in that space, to any person.  The transfer shall be effective on recordation by the cemetery company of the transfer.  N.J.S.A. 45:27-28(b).

 

Once human remains have been buried in a grave or crypt, transfer of title can be made by the owner by will, if specifically identified in the will; otherwise, title will pass first to the surviving spouse and the owner's children, if any, per stripes, as equal tenants in common.  N.J.S.A. 45:27-28 (c)(1)(a).  If an owner leaves a surviving spouse, and has children from a prior marriage or relationship, then those children and the surviving spouse shall be owners of the grave or crypt as tenants in common.  N.J.S.A. 45:27-28(f).

 

Transfer of ownership of an existing grave or crypt containing human remains can also be made to an existing co-owner or to an heir at law of the person buried in the space.  N.J.S.A. 45:27-28(c)(2) & (3).

 

When there are two or more owners of an interment space, each owner's interest may only be transferred by that owner or such owner's authorized representative.  N.J.S.A. 45:27-29(a)(1).  Co-owners may also designate one or more of the co-owners to represent them by filing a written notice of such designation with the cemetery company.  N.J.S.A. 45:27-29(b).  In such event, the cemetery company shall follow the direction of the representative as to interment in the space.  If no such representative is designated, the cemetery company may rely on the direction of any of the co-owners of the space.

 

Title to cemetery plots is not such a scary topic, so don't be spooked by the subject!

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When buying and selling real estate, in nearly every transaction, a written contract is prepared for all parties involved to sign.  One reason for this is obvious - to make certain that all parties can clearly see, and are in agreement with, all the terms and conditions of the transaction.  This avoids any misunderstandings as to such important terms as the sales price, the description of the property being sold, the closing date, and any contingencies.  However, another important reason to have a signed written agreement is to comply with New Jersey’s statutory requirements for enforcement of such agreements for the transfer of an interest in real estate.
 

New Jersey has enacted a law setting forth certain requirements essential for the enforceability of agreements to transfer an interest in real estate.  Those requirements have been codified in N.J.S.A. 25:1-13, the N.J. Statute of Frauds, which states that an agreement to transfer an interest in real estate shall not be enforceable unless:

a.  A description of the real estate sufficient to identify it, the nature of the interest to be transferred, the existence of the agreement, the identity of the transferor and transferee are established in a writing signed by or on behalf of the party against whom enforcement is sought; or
   
b.  A description of the real estate sufficient to identify it, the nature of the interest to be transferred, the existence of the agreement and the identity of the transferor and the transferee are proved by clear and convincing evidence.
 

In most instances, parties to a real estate transaction comply with Subsection (a) above.  A standard written contract identifies the buyer and the seller, describes the property being sold, the type of title being transferred, and is then signed by all parties.  In addition to compliance with the statutory requirements, these agreements also set forth many other terms, conditions and contingencies between the buyer and the seller so that each party will understand their obligations under the sales contract.
 

Even with the existence of Subsection (b) above, which provides a statutory basis for enforcing certain agreements for the transfer of real estate without a signed document, the New Jersey courts have not always found an agreement to be enforceable when the alleged agreement is oral.  This appears particularly so when the negotiations between parties indicate that the parties intend to be bound only by a formal written contract.  See Prant v. Sterling, 332 N.J. Super. 369 (Ch. Div. 1999), affirmed 332 N.J. Super. 292 (App. Div. 2000) and Morton v. 4 Orchard Land Trust, 362 N.J. Super. 190, (App. Div. 2003), affirmed 180 N.J. 118 (2004).   
 

Thus, it is important to put any agreement for the transfer of real estate in writing with all significant terms included and to have it signed by all parties to the transaction to help insure the agreement’s enforceability.

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Most contracts for the sale of real estate designate a date for the closing.  While buyers and sellers generally prepare to close on that date, it is not always possible.  Delays are not unusual and frequently reasonable under the circumstances.  So how definitive is the closing date in the contract?

Most contracts for the sale of real estate in the central and northern areas of New Jersey refer to the closing date as an “on or about” or “on or before” date.  This means that while the closing date has been agreed upon, neither party can legally require the other to actually close on that date.  The reason for providing flexibility in the closing date is due to the sometimes uncertain nature of the parties’ schedules, availability of buyers’ funds, lender delays, mover’s schedules, etc., etc., etc.

In order to avoid any unreasonable delay in closing, a specific written notice can be provided to the uncooperative party to set a firm and final date.  Generally, once the contract closing date has passed and all contingencies and conditions in the contract have been met or waived, either the buyer or the seller can make “time of the essence” by providing certain written notice to the other party setting a specific time, date and location for closing.  The time period given the other party of the “time of the essence” date must be reasonable under the circumstances.  (Generally, but not always, this is deemed to be 10-14 days).  While cooperation in agreeing upon a closing date is usually in both parties’ best interest, some situations require a unilateral enforcement of a closing date.  If the uncooperative party does not then close, they may be deemed in breach of the contract.

It should be noted that “South Jersey” contracts (generally those counties south of Mercer County) routinely provide for a “time of the essence” closing which would require the consent of both parties to change the closing date.

Effective as of July 30, 2009, lenders now have new requirements to provide certain disclosure notices to borrowers which may affect closing dates.   In 2008, the Housing and Economic Recovery Act was passed to protect home borrowers from predatory lending practices and provide borrowers with disclosures regarding the cost of their loans in advance of closing.  Regulations were enacted which now require lenders to provide initial mortgage disclosures to a borrower seven (7) business days in advance of any closing.  If there is an increase of more the .125% in the Annual Percentage Rate, initially calculated, then a new disclosure statement must be provided to a buyer three (3) business days in advance of closing.  Thus, with these new regulations, it is possible that a closing date, even if agreed upon by all parties, may have to be delayed to comply with these new regulations.

Thus, both buyers and sellers should be aware from the outset that the closing date listed in a contract, may not be definitive and that all parties should remain flexible in determining a firm and final date.

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Would you like to have a federal tax credit of $8,000 simply because you purchased a home this year?  As part of the American Recovery and Reinvestment Act of 2009, a tax credit equal to 10% of the purchase price of a home, up to a maximum of $8,000, is available to certain first-time home buyers who purchase a main residence on or after January 1 and before December 1, 2009.   First-time home buyers who purchased their main home in 2008 are entitled to a credit of up to $7500. This article is limited to a discussion of the credit available for 2009 purchases.
 

Who is entitled to such a credit?  First-time home buyers are if  purchasing a main home, i.e., principal residence, whether it is a house - new or resale - mobile home, condominium, cooperative apartment, etc.  The purchase must occur on or after January 1, 2009 and before December 1, 2009.  The purchase date is the closing date, when title transfers to the buyer.  For someone who is constructing their main home (not buying it from a home builder), the purchase date is the date you first occupy it. 

Who qualifies as a first-time home buyer?  You (and your spouse, if married) must not have owned another main home during the 3-year period immediately preceding the closing date of your qualifying purchase.  If you or your spouse owned a main home during the three preceding years, then neither will qualify for the credit.
 

Are there income limits?  Yes, your modified adjusted gross income must be less than $95,000, if  single, or less than $170,000, if married filing jointly. You are allowed the full amount of the credit, i.e., $8,000,  if your modified adjusted gross income is $75,000 or less, if single, and $150,000 or less, if married filing jointly.  Between these two income levels, the credit is phased out at the higher income levels.

This credit is not available to nonresident aliens, or for homes located outside the United States, for  homes acquired by gift or inheritance, or those acquired from a related person.  The IRS defines a related person for this credit to be: your spouse, ancestors (parents, grandparents, etc.) or lineal descendants (children, grandchildren, etc.); a corporation in which one of the buyers owns more than 50% in value of the outstanding stock of the corporation; or a partnership in which you own more than 50% of the capital interests or profits interest.
 

For 2009 purchases, if the home ceases to be your main home within 36 months of the closing date, you must repay the credit by including it as additional tax in your return for the year the home ceases to be your main home.  There are some exceptions to your obligation to repay the credit.   If you sell the home to an unrelated party, the repayment is limited to the amount of gain on the resale.  If the home is destroyed, condemned or disposed of under threat of condemnation,  you will have two years to acquire a new home to avoid repayment of the credit.  If as part of a divorce settlement, the home is transferred to one of the spouses, the  spouse receiving full title is responsible for any repayment the credit.  Repayment is not required if you die; however your surviving spouse may be required to repay his or her half of the credit.
 

To qualify for the credit, complete IRS Form 5405 and claim your credit amount on your 1040 return.  If your credit exceeds your tax liability, the IRS will refund you the difference.

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Most transfers of title to real estate are made subject to "easement and restrictions of record, if any." Easements may be varied, but usually involve access rights for utilities, or perhaps a driveway easement to share a driveway with a neighbor. But what about those restrictions? What are they?

 

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.

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Selling a home and wondering what physical conditions at the premises need to be disclosed to a potential new buyer?  Everyone wants to present a positive picture of their home, especially during a slow real estate market.  But it is usually in a seller’s best interest to thoroughly disclose any defects which are not readily observable.

Most residential resale properties are sold in “as is” condition.  This is usually intended to mean that the buyers have a right to make whatever inspections they seek and the sellers are not responsible after closing for any conditions later discovered by the buyers.

However, selling a home “as is” does not mean that a seller can deliberately misrepresent the condition of the property.  Sellers may be liable for common law fraud if they make a material misrepresentation of any present or past fact which they know or believe to be false, they intend the buyer to rely on, the buyer does rely on it and damages result.  The Jewish Center of Sussex Cty. v. Whale 86 N.J. 619, 624-25 (1981).  In such instances, a buyer may be entitled to rescind or terminate their contract with the seller, or may seek damages from the seller.

Our New Jersey courts have defined misrepresentation to include the failure to disclose certain conditions.  In Weintraub v. Krobatsch 64 N.J. 445 (1974) the buyers inspected a home during the day and found it acceptable.  Prior to closing, however, the buyers visited the property when it was dark and were astonished to discover that the house was heavily infested with crawling insects.  The buyer refused to close.  When the litigation which later ensued reached the New Jersey Supreme Court, the Court held that a seller is not only liable to a buyer for affirmative and intentional material misrepresentations, but also for non-disclosure of defects known to a seller, unobservable by buyers, and where the facts not disclosed would be of significant materiality to the buyers’ decision to purchase.  In such situations, a buyer would be entitled to rescind their contract.

Thus, our courts have indicated that sellers risk a contract being rescinded, or incurring liability for damages, if sellers do not disclose a defective condition which is 1) latent, 2) not reasonably observable to the buyer and 3) significant to the buyer’s decision to purchase Correa v. Maggiore 196 N.J. Super. 273 (App. Div. 1984).

Real estate brokers have similar responsibilities concerning disclosure issues. In addition to possible claims of common law fraud, realtors may also be subject to the New Jersey Consumer Fraud Act N.J.S.A. 56:8-1 et seq.  Under the New Jersey Consumer Fraud Act, a real estate broker representing a seller of a home previously occupied may be liable (in addition to affirmative acts of misrepresentation) for acts of non-disclosure of a defective condition if the condition was known to the broker, but not readily observable to the buyer.  Strawn v. Canuso 140 N.J. 43, 58-59, 65 (1995). (Subsequent to this decision, a statute was passed to address disclosure obligations for newly constructed residential real estate.  N.J.S.A. 46:3C-1 et seq.)  In instances of non-disclosure, it must be shown that the broker knowingly concealed a material fact about the premises with the intention that the buyers would rely on the concealment.  N.J.S.A. 56:8-2, Leon v. Rite Aid Corp. 340 N.J. Super. 462, 469 (App. Div. 2001).

Other examples of failure to disclose conditions which created liability for sellers or realtors and which have been addressed in New Jersey court cases include:

• 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.

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