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Delli Santi v. Golden Key Realty

A-0740-10T3 (N.J. Super. App. Div. 2011) (Unpublished)

CONSUMER FRAUD ACT; DEEDS; MERGERS — New Jersey’s Consumer Fraud Act overrides the common law doctrine of merger by deed such that a consumer can sue based on a representation that merged into the deed delivered at closing.

A commercial property owner purchased an income-producing residential property. According to the listing, it included a detached commercial building and enjoyed a variance allowing occupancy by a pattern-making business and two studio apartments. After the purchase, the municipality’s zoning officer told the property owner that the detached building was located in a single-family zone and could not be lawfully used for commercial purposes or as a rental. The property owner transferred the property to a family trust and then she and her husband sued the listing real estate broker under the Consumer Fraud Act (CFA).

The lower court dismissed the suit, holding that the property owners lacked standing because the property had been transferred to the family trust and because the lower court thought that the prior representations were merged into the deed. The property owners sought reconsideration of the decision.

The Appellate Division upheld dismissal as to the husband as plaintiff because he lacked standing. He never had individual ownership interest in the property, and therefore he lacked a sufficient stake in the litigation. It reinstated the wife’s claim because the CFA overrides the common law doctrine of merger, if otherwise applicable. Thus, covenants or warranties that would have been extinguished by the passage of title can still be maintained as the basis for suit under the CFA. Further, there was no evidence that the wife had relinquished her right to sue the broker in her individual capacity as a property owner by later conveying the property to the trust.

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