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Cider Press Homeowners Association, Inc. v. Congress Title Division FNTIC

A-2600-00T1 (N.J. Super. App. Div. 2002) (Unpublished)

RECORDING; MALPRACTICE— A title company has no contractual duty to a homeowner’s association to file a declaration of covenants for a developer and absent its agreement to assume such a duty, it has no liability to the association if the declaration is not recorded.

A developer hired an attorney to represent it before a planning board to secure a subdivision. As a condition of approving the subdivision, the board required the formation of a homeowners’ association to be responsible for maintaining a detention basin on the site. The attorney prepared a draft of the declaration of covenants and forwarded it to the board’s attorney, along with a cover letter in which he indicated he would “file” the declaration once it was approved by the board and properly executed. Once the approvals were in place, the developer closed title on the land that was to be developed into the new subdivision. The attorney and the title company were present at the closing, but neither recorded the declaration of covenants. The developer built and sold about forty homes before he discovered that the declaration of covenants had not been recorded and asked the attorney to prepare them again and have them recorded. Shortly thereafter, the homeowners’ association was formed. The homeowner’s association sued the attorney for legal malpractice, the title company for negligence, and also sued the homeowners whose deeds were recorded before the declaration was finally recorded. The lower court dismissed the complaint against the attorney and the title company on summary judgment. It noted that the association had not been formed until several years after the attorney’s representation of the developer, and that the developer had conceded that it was his responsibility to record the declaration and was not within the scope of the attorney. To succeed, the association needed to, but failed to, show that the attorney assumed responsibility to record the declarations and that the association relied on the attorney, to its detriment. The lower court found that the title company’s responsibility could only be based on the title policy or on its failure to perform a duty it voluntarily assumed. Since the title insurance commitment and title policy were not issued to the homeowners’ association, there was contractual relationship that obligated the title company to perform a duty for the homeowners’ association, nor was there evidence that it voluntarily assumed the duty. The Appellate Division affirmed. It focused on an attorney’s duty of care to a non-client. An attorney owes a duty of care to the non-client when, with the attorney’s permission, his or her client invited a non-client to rely on the lawyer’s legal services, and the non-client relied on the attorney’s legal services; or when the attorney knows that his or her client intends to have the legal services benefit a non-client. Here, because the homeowners’ association was formed several years after the attorney assisted the developer in obtaining subdivision approval, it was too remote from the attorney’s representation of the developer to be afforded protection. The Court also agreed that the title company was not liable to the homeowners’ association since it had no contract with the association and that the homeowners’ association failed to provide proof that the title company assumed, but failed to perform, a duty to record the declaration of covenants.

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