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DKM Residential Properties Corporation v. The Township of Montgomery

363 N.J. Super. 80, 831 A.2d 110 (App. Div. 2003)

UNIFORM CONSTRUCTION CODE; ENFORCEMENT—(NOTE: Decision Reversed by the New Jersey Supreme Court on January 24, 2005) The means of enforcing the Uniform Construction Code after completion of construction and passing of title is to cite the owner of the property, not the builder, and to let the owner file an action against the builder.

(NOTE: The following decision was reversed by the New Jersey Supreme Court on January 24, 2005)

Several homeowners in a residential development found leaks in their homes. They retained professional engineers to determine the problem. Those engineers pointed to allegedly defective installation of the “Exterior Insulation and Finish System” (EIFS). The homeowners complained to the municipal construction official who issued a Notice of Violation to the builder. The Notice of Violation alleged that the builder improperly applied EIFS to nine houses in violation of the Uniform Construction Code (UCC). Later, the construction official issued several additional Notices of Violation citing the same problem for a total of 62 buildings. The notices were never served on any of the homeowners. None of the homeowners were “threatened with revocation of [their] certificates of occupancy or penalties for failure to bring their properties into compliance with the UCC.”

The contractor contended that neither the UCC nor the regulations under the UCC “expressly or impliedly authorized the municipal construction official to cite [a] builder for alleged construction code violations years after transfer of title.” The municipality disagreed, claiming that “its construction official used fairly and necessarily implied powers to accomplish the goals of the UCC.” It argued that the New Jersey Department of Community Affairs (DCA) continued to bring enforcement actions against builders for violations of the Uniform Construction Code long after a builder conveys all ownership interests in its projects. The Court replied that even if the DCA had a long standing, consistent practice in taking enforcement actions against builders in circumstances like the case at hand, “such a practice is not determinative of its validity.” Local enforcement of the UCC is vested in a municipality’s construction official (and appropriate sub-code officials). They are responsible issuing and approving construction permit applications, conducting construction inspections, issuing stop orders, and issuing certificates of occupancy.

The UCC states that “‘[n]o building or structure hereafter constructed shall be used or occupied in whole or in part’ until the enforcing agency issues a certificate of occupancy.” Such a certificate is issuable when the construction work is completed in accordance with the building permit, the UCC and other applicable laws. Certificates of occupancy “certify that the building or structure has been constructed in accordance with the provisions of the construction permit, the code, and other applicable laws and ordinances.” The regulations have very few references to a construction official’s authority after issuance of a certificate of occupancy. An enforcing agency “may revoke a certificate of occupancy whenever a condition of a certificate has been violated.” Nonetheless, after a certificate has been issued, a construction official’s power is limited. The official is not permitted to enter a premises for the purpose of inspection unless “upon reasonable grounds to believe that a condition of a certificate of occupancy has been violated.”

The Court identified the issue as being about the scope of the enforcement power created by the UCC, but not the scope of municipal power. It recognized that under the UCC, “it might appear that extending the enforcement power to [contractors after issuance of a certificate of occupancy and transfer of title] furthers the goal of [the UCC] ‘[t]o insure adequate maintenance of buildings and structures throughout the State and to adequately protect the health, safety and welfare of the people.’” On the other hand, the Court knew that if a contractor could be subjected to the Notice of Violation enforcement procedure years after completion of the real estate project, developers might be discouraged in considering innovative or economical construction techniques. Further, there was no question that a municipal construction official could issue a Notice of Violation “to the appropriate party.” This left the question as to whether the builder, after a certificate of occupancy has been issued and title transferred, is an appropriate party. Here, the municipal construction official never cited the owner. Under the UCC, it is clear that an owner must be cited.

With that as background, it seemed plain to the Court “that the means of enforcing the construction code provided by the Legislature and authorized by the [UCC], after completion of construction and passage of title, is to cite the owner of the property and hold the owner directly responsible for compliance. The owner in turn has available remedies against the builder who has either breached his express contract with the owner or violated a standard of care, a standard which may be defined by the construction code itself.”

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