On Friday, the Appellate Division issued an unpublished decision that concluded a seven-year legal battle over whether or not a contract existed for the purchase of a $45,000,000 apartment building.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.)
Almost two decades ago, a Point Pleasant property owner was granted approval to build a two-family residence in a single-family zone. However, such approval was conditioned upon a provision that one unit was always owner-occupied, with such restriction enforced through a recorded deed restriction. On February 11th, in a published decision, the Appellate Division upheld a trial court finding that such a restriction, "impermissibly discriminated against renters, and wrongfully predicated the allowable use of the property on the identities of its occupants." In doing so, the court reiterated prior guidance that a zoning board can only regulate how the land is used, and not any particular person who owns or occupies the land. While the court understood the zoning board's desire to maintain the environment of a single-family zone, the panel found that if it wished to do so, "it never should have approved a variance for this two-family dwelling in the first place." Finally, although the action had taken place well outside the 45-day period to challenge certain government actions, the court applied the interests of justice exception from Hopewell Valley Citizens Grp. v. Berwind Prop. Grp. Dev. Co. (Tirpak v. Borough of Point Pleasant Board of Adjustment)
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 an unpublished decision issued on January 31st, the Appellate Division upheld a determination by the Middle Township Planning Board that the square footage inside a proposed Starbucks that was devoted to customer seating was properly excluded from the calculation of the required number of parking spaces for the site. At issue was a local ordinance requiring one parking space for each fifty square feet of gross floor area that was, "devoted to customer service," while also requiring one parking space for every four seats in the establishment. Starbucks successfully argued that requirement of one space per every four seats already addressed the parking needs for the square footage devoted to seating areas, and that to include the square footage of the seating area in determining the square footage "devoted to customer service" would be "double dipping". This interpretation was important as the plan submitted by Starbucks only included twenty-six parking spaces, much less than the required forty-one spaces that would have been required had they not been successful. However, the Appellate Division upheld the determination of the trial court, and affirmed that only eighteen spaces were required by ordinance and therefore no parking variance was necessary. (Delco, LLC v. Middle Township Planning Board, et. al.)
In an unpublished decision that was issued today, the Appellate Division reversed a trial court's award of $50,832.17 to a stucco subcontractor and dismissed the subcontractor's claim for the unpaid contract balance with prejudice. The two-judge appellate panel did not disturb the trial court's finding that the general contractor did, in fact, breach its contract with the subcontractor. However, despite the breach of contract, the court reversed the Law Division judge and held that the subcontractor could not recover any damages whatsoever since the subcontractor failed to prove what portion of the monies owed constituted lost profit. The appellate panel stated that the trial court, "omitted, however, the second step: calculating 'the difference between the contract price and the cost of performance or production'." This ruling confirms that the burden of proving lost profits is on the party seeking damages, and evidence must be presented that is sufficient to enable the court to identify what portion of the monies due represent the subcontractor's profit. (Professional Stone, Stucco & Siding Applicators, Inc. v. JMOC Builders, Inc.)
In an unpublished trial court opinion released today, a Superior Court Judge in Bergen County dismissed the claims of a condominium association against the sponsor/developer of the condominium complex related to construction defects that were discovered by the Association. After dismissing the Association's contractual claims based on the statute of limitations, the Court found that all other claims asserted by the Association, including claims under the New Jersey Consumer Fraud Act ("CFA") were barred by the ten-year statute of repose. Noting that the New Jersey judiciary has shown, "an unwillingness to recognize a fraud exception to the statute of repose," the court held the CFA claims were subject to the statue of repose, were not filed within ten years after the TCO was issued, and therefore were barred by the statute of repose. (Vela Townhomes Condominium Assoc. Inc. v. Rosen Partners LLC)
In a recent case decided on January 24, 2019, the New Jersey Supreme Court confirmed that the State's Consumer Fraud Act ("CFA") can apply in business to business transactions. Noting that the CFA has been continuously expanded by the State's Legislature over the years, the Court found that the sale of a custom-manufactured all wheel drive truck and tow body was included in the definition of "Merchandise" under the CFA and therefore the CFA claim was wrongfully dismissed by the trial court. The Court noted that so long as, "any member of the public could purchase the product or service," it would be covered under the CFA, "regardless of whether such a purchase is popular." The Court also provided future guidance by setting forth four factors to consider in determining whether the nature of a business-to-business transaction would subject a seller to liability under the CFA. The factors are as follows:
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:
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.