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Island Venture Associates v. New Jersey Department of Environmental Protection

359 N.J. Super. 391, 820 A.2d 88 (App. Div. 2003)

DEEDS; RECORDATION; RESTRICTIONS—A state agency that requires a deed to contain a restrictive covenant as a condition for a property’s development has the responsibility to see that the deed contains the restriction; otherwise a buyer without knowledge of the restriction is entitled to rely on the record.

A landowner intended to subdivide its coastal property into separate lots to build residential housing. As a condition for development, a state agency required that one of the lots be used only as a marina. The landowner filed a master deed relating to the ownership and maintenance of the lots but neglected to include in the master deed the restrictions against residential development of several lots. A buyer of one of the lots challenged a state agency’s determination that it was bound by the restriction and not permitted to build housing, notwithstanding its lack of knowledge or notice of the restriction. A lower court agreed, finding the restriction binding on the buyer even though it was not discoverable by a diligent title search. It relied on a earlier case in which the Appellate Division found that, in order to protect a municipality’s zoning enforcement, an innocent buyer was bound by a variance condition that was not discoverable by a title search. In that earlier case, the Appellate Division attempted to balance the interests of the buyer with that of the municipality. That Court noted that variance conditions are not required to be recorded, and if the variance conditions were unenforceable against subsequent buyers, a municipality’s interest in enforcing its zoning laws would be trumped. The earlier case also noted that innumerable conditional variances in many municipalities could be at risk.

Here, the Appellate Division balanced the state agency’s requirements against the public’s interest in the integrity of the recording statutes and found the deed restriction should not apply to this buyer. The purpose of the recording statute is to provide reasonable limits on a buyer’s obligation to search the public record and to protect a buyer who makes a diligent search of the public record. A buyer is entitled to rely on what is in the public record and not be surprised by unrecorded restrictions. With respect to the state agency’s interest in protecting the coastline, the Court noted that the state agency failed to review the master deed with the restriction filed before it was recorded by the purchaser’s predecessor-in-title. If the agency had reviewed the restriction then and required the description to be corrected, the buyer would have discovered the residential development restriction during its title search.

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