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Cohen v. W.B. Associates, Inc.

380 N.J. Super. 436, 882 A.2d 456 (Law Div. 2005)

DEVELOPERS; DISCLOSURE — A seller who fails to strictly comply with the provisions of the New Jersey New Residential Construction Off-Site Conditions Disclosure Act is barred from claiming immunity from suit under the Act.

A land development company created a residential subdivision in which it was constructing homes for sale. A married couple entered into a contract with the developer to purchase a lot and home in the subdivision. The contract made reference to a facility located across the street from the development that had once been used as a psychiatric center. It did not specify the facility’s current use. However, it provided the addresses and telephone numbers of the municipal offices that the couple could contact in order to obtain a list of off-site disclosures. Two months after executing the contract, the couple discovered that the facility was now a jail. As a result, the couple attempted to cancel the contract and recoup their deposit. The developer refused to cancel the contract and return the deposit. The couple filed an action against the developer for, among other things, fraud, misrepresentation, negligence, and breach of contract. It its defense, the developer argued that it was immune from prosecution under the New Jersey New Residential Construction Off-Site Conditions Disclosure Act. The Act provides that a developer who fully complies with the provisions of the Act is immune from suit. The couple asserted that the developer should not be immune under the Act because it purposefully withheld information about the jail and the information provided in the contract about the facility was misleading.

The Court ruled in favor of the couple, holding that the developer was barred from raising the Act as a defense. It analyzed the legislative intent behind the Act, which was to enforce a seller’s obligation to inform a buyer of its due diligence duties when purchasing property. It held that the Act required the developer to disclose any conditions that may have materially affected the value of the land being purchased, including conditions that were not part of the development. It ruled that the developer’s duty under the Act is met only when it provides the buyer with the exact notice required under the Act. It further held that any deviation from the statutory language by the developer, even if factually accurate, may suggest to the buyer that further investigation is not warranted. In this case, it ruled that the developer’s casual reference to the jail as a former psychiatric facility effectively played down the couple’s duty to investigate the facility. Thus, the Court concluded that the developer was barred from claiming immunity under the Act because, by making an ambiguous reference to the facility across the street from the development, it failed to strictly comply with the provisions of the Act.

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