On Friday, the Appellate Division issued an unpublished decision that concluded a seven-year legal battle over whether or not a contract existed for the purchase of a $45,000,000 apartment building.  The case emanated from a 2011 negotiation and bidding process where the defendant owner accepted the plaintiff’s offer to purchase the property for forty-five million dollars, but never signed a written contract.  Defendant’s basis for not signing was that it desired to avoid an extremely large capital gains tax obligation and therefore insisted that it first secure a suitable 1031 exchange property before signing the contract.  After months without signature, plaintiff initiated litigation arguing that a valid, enforceable contract existed. 

The plaintiff alleged claims of breach of contract, breach of the implied covenant of good-faith and fair-dealing, promissory estoppel and fraud.  After five years of litigation in the trial court, all of the claims were dismissed and a two-year appeal process followed.  On February 14, 2019, the Appellate Division affirmed the trial court’s dismissal of all claims.  

While the court acknowledged that in certain circumstances the Statute of Frauds permits enforcement of an oral agreement for the sale of real property, it found that such was not the case in these particular circumstances.  Despite there being what the trial court described as an “avalanche of correspondence”, the court nevertheless found that there was no legally-enforceable contract in the absence of the defendant’s signature.  The court referenced that throughout months of communications regarding the formal written contract, there were frequent statements that the communications were, "not contractually binding on the parties," were, "only an expression of the basic terms and conditions to be incorporated into a formal written agreement, " that, "the parties shall not be contractually bound unless and until they execute a form of contract which contract shall be in form and content satisfactory to each party and its counsel in their sole discretion," and that "[n]either party may rely on this letter as creating any legal obligation of any kind."  This decision should serve as a reminder to purchasers of real property that any due diligence or other actions taken prior to a seller signing a contract are done so at their own risk.  Until the there is a fully-executed contract, there will likely be no legally-enforceable contract except in limited circumstances.  (SDK Troy Towers, LLC v. Troy Towers, Inc.)

In the past few years, all New Jersey counties have begun to accept documents concerning real property that need to be recorded (such as deeds, mortgages, etc.) electronically, and some counties have imposed a "convenience fee" to electronically record such documents.  On February 11, 2019 the Appellate Division outlawed these fees by striking down Essex County's $3 charge.  Noting that the "clear object" of the relevant statute was to, "establish a uniform schedule of fees to be charged by all county registers or clerks," the court held that no law permitted the charging of such fees, and the counties lacked the legal authority to institute their own fees for the e-recording documents.  Consequently, counties will not longer be permitted to charge these fees absent further appeal to the Supreme Court or action by the State Legislature.  (New Jersey Land Title Association v. Dana Rone, County Register of the County of Essex)

In, New Jersey there is a difference between real and personal property.  Real property is land and includes items that are affixed to the land, usually buildings and other improvements.  Personal property is anything else.  However, there is a third category of property that falls in between real and personal property.  Items that fall within this third category are called fixtures.  Fixtures often start out as personal property and become so attached to the real estate that they essentially become part of the real estate while still holding a separate identity. 

When buying or selling property, it is important to understand whether something is a fixture that will stay on the property after closing, or personal property that the seller can remove.  A purchaser may view the property and assume that the window treatments, wall-mounted television, or swing set is included with the property.  On the other hand, the seller may be intending to take these items with them when they move.

When assessing whether or not property is a fixture, courts look at several factors.  These factors include the following:

• The homeowner's intent when the personal property was installed, i.e. whether or not the homeowner intended the property to permanently become part of the real estate;
  
• How the homeowner attached the property, i.e. screwing it into the wall;
  
• Whether or not the property was meant to be used with the real estate, i.e. built-in electronics or wall-to-wall carpeting;
  
• What the contract between the parties says; and
  
• Whether or not the buyer considered the property when the offer was made.

In or to avoid any misunderstandings, it is important that buyers and sellers make sure that their contracts clearly set forth what is included in the sale so that there are no misunderstandings and everyone has the same expectation regarding what will remain with the property at closing.