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Nobrega v. Edison Glen Associates

327 N.J. Super. 414, 743 A.2d 864 (App. Div. 2000)

CONSUMER FRAUD; DEVELOPERS; CONTAMINATION—The New Residential Construction Off-Site Conditions Disclosure Act does not immunize a developer from liability under the Consumer Fraud Act where there is knowing failure to disclose adverse environmental conditions.

A condominium property was located in close proximity to two Superfund sites contaminated by hazardous substances. The buyer of one of the condominium units asserted that it wasn’t until after she had bought her unit that she first began to hear rumors of contamination on nearby industrial sites and that she later learned that some unit owners who wished to sell were experiencing untoward difficulties in doing so. She further claimed that a time came when the resale of units had come “to a virtual halt,” and the developer had resorted to renting units to transients. She and the other claimants in this case alleged that the value of their condominium units had fallen to about forty percent of what the market value would have been had the complex not been located near the two Superfund sites. The gravamen of their complaint was simply that the developer knew of the existing two Superfund sites; that they did not; and that the developer owed them the duty of disclosure of that material fact before selling the units. The developer moved to dismiss on the pleadings, relying upon the New Residential Construction Off-Site Conditions Disclosures Act. The developer claimed that under the Act it was retroactively immunized from all liability for non-disclosure of off-site conditions. The Act was passed after the New Jersey Supreme Court imposed upon residential developers and their agents the obligation to disclose to prospective buyers of new residential construction those adverse off-site conditions known to them but not readily observable to buyers that materially affect the subject of the sale. The Act, however, severely limited the scope of the disclosure obligation and applied those limitations retroactively. The Act also expressly excepts from its reach the obligation to make those disclosures respecting off-site conditions that are imposed by some specified statutes and “any other statutory provision.” The primary issue before the Court was whether “any other statutory provision” included the provisions of section 2 of the Consumer Fraud Act. If the Disclosure Act is applicable, the “sole obligation of the seller of new residential construction is to provide the prospective purchaser with a notice, in a statutorily prescribed formulation, of the availability of lists of off-site conditions in the municipal clerk’s office and the buyer’s right to cancel the contract within five days of its execution. ... A seller is, moreover, completely immunized from liability for non-disclosure provided the statutory notice is given notwithstanding the fact that the lists have not yet been compiled by the municipal clerk, the municipal clerk has not yet received the lists or made them available, or there is any error or omission in the list.” The Appellate Division had no doubt that the Consumer Fraud Act was the kind of provision that required disclosure of off-site conditions. It based its conclusion primarily “on the clear and unequivocal” statement of the Governor in signing the bill that became the Disclosure Act. That statement noted that the purpose of the Disclosure Act was to balance “the need for consumers to know of the existence of off-site conditions and the need for sellers to know the extent of their duty to disclose.” The Governor’s statement went on to say that “[m]ost important, the bill accomplishes this, I am assured by both sponsors and all interested parties, without interfering with any remedies that may be available in appropriate cases to prospective buyers under the Consumer Fraud Act [citation], or any other relevant statute. Based on these assurances, I have signed the bill.” In the Court’s view, nothing could be plainer or more unequivocal as an “exposition of legislative intent as understood by” the Governor. The Court further concluded that the buyer’s action fell under both the common law and the Consumer Fraud Act not only “for affirmative and intentional misrepresentation” but also “for non-disclosure of off site physical conditions known to it and unknown and not readily observable by the buyer if existence of those conditions is of sufficient materiality to affect the habitability, use, or enjoyment of the property, and, therefore, to render the property substantially less desirable or valuable to the objectively reasonable buyer.” The Court was further persuaded that it was only the applicability of common-law causes not comprehended by the Consumer Fraud Act that the legislature intended to abrogate by passing the Disclosure Act. This left the question as to whether an intentional and knowing failure to disclose material off-site conditions actionable under the Consumer Fraud Act, as opposed to an innocent or negligent failure, was embraced by the immunity of the Disclosure Act. The Court was convinced “that an intentional and knowing omission, so clearly constituting an unconscionable commercial practice, was not intended by the Legislature to be immunized.” In conclusion, the Court was persuaded that the Governor understood the Disclosure Act as preserving the remedies available to home buyers under the Consumer Fraud Act. Therefore, such a reading was consistent both with the text of the Disclosure Act and its legislative purpose and intent. As a result, the summary judgment of the lower court dismissing the Consumer Fraud Act count was reversed and the matter was remanded for further proceedings.


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