THE CHANGING LANDSCAPE OF RESIDENTIAL REAL ESTATE ENVIRONMENTAL DUE DILIGENCE

Caution Message Representing Danger Beware Or WarningThe process of purchasing a new home can be a double-edged sword to prospective purchasers, especially first time buyers: while it is a time filled with excitement and a sense of accomplishment, it is also one of great stress and responsibility. Beyond the ordinary tasks of engaging an attorney, finding adequate mortgage financing, scheduling movers and the quandaries of interior design, the additional responsibilities being placed on prospective homebuyers through a recent Appellate Division court decision gives new emphasis to the phrase “buyer beware”. The Appellate Division has recently ruled in State Farm Fire & Casualty Co. v. Shea, 2012 N.J. Super. Unpub LEXIS 2008 (App. Div. 2012), cert. den., 213 N.J. 386 (2013) that when a buyer of residential property knew, or should have known (emphasis added), that an underground oil tank existed on its property and leaked, resulting in the contamination of an adjacent property, the buyer is liable for the proportionate share of the cleanup costs of such contamination of the neighbor’s property.

Attorneys often advise their clients to obtain thorough home inspections from a reputable company, inclusive of radon and wood destroying insect testing. In extenuating circumstances, a sweep test for an oil tank may also be suggested based on the age of the home or history of the property. (The existence of a well or septic tank and lead paint are other important hazards to be addressed in residential real estate transactions, but will not be discussed herein.) Because of the additional obligations being imposed on homebuyers in Shea, the conventional wisdom and advice of real estate practitioners may have to change.

The Appellate Division rejected Shea’s notion that the trial court imposed upon him an affirmative duty to conduct a pre-purchase environmental investigation. The record states that two pipes were actually present in Shea’s backyard: one being a fill pipe and the other a vent pipe. The court’s finding placed an affirmative obligation on Shea to further investigate the existence and purpose of the vent on his property and to take whatever measures were warranted in response thereto. Because of his failure to mitigate, the court denied Shea the benefit of the innocent purchaser status under the New Jersey Spill Compensation and Control Act (Spill Act). The liabilities pursuant to the Spill Act concerning knowledge of environmental contamination can be found in N.J.S.A. 58:10-23.11G(d)(2): “…a person must have undertaken at the time of acquisition, all appropriate inquiry into the previous ownership and uses of the property.” Shea’s failure to perform due diligence on the property he was purchasing not only resulted in environmental contamination, but also restricted any claim he may have asserted under the innocent purchaser defense.

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The landscape of residential real estate environmental due diligence is indeed changing. Although I do not believe that the findings in Shea will result in mandatory Phase I or Phase II studies on impending residential purchases, I do, however, believe that this case will place a greater burden on homebuyers to conduct more thorough environmental investigations in residential real estate transactions in New Jersey. A purchaser who opts to buy a home without the full benefits of a home inspection or an oil tank sweep do so at their own peril. Should they wish to proceed against the advice of counsel, I will have clients execute a waiver that relinquishes our firm from any and all claims resulting from their decision.

The cost of remediating a significantly contaminated area on a residential property can sometimes exceed the value of the home. I think it is important for prospective buyers to attend any and all inspections they schedule to be performed on the property – if something does not look right, bring it to the attention of your home inspector so that they make note of it in their report. Not only should real estate attorneys be aware of Shea and its potential implications, but home inspectors should also be educated about this decision so that they can adequately document home inspections more thoroughly for their clients. The cost of not doing so will prove to be very costly in the long run.

 

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Joseph M. Vigliotti, Esq.
Winne Banta Hetherington Basralian & Kahn, P.C.
Court Plaza South – East Wing
21 Main Street, Suite 101 | P.O. Box 647
Hackensack, New Jersey 07601
(201) 487-3800
jvigliotti@winnebanta.com

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COURT PERMITS FAX AND EMAIL ATTORNEY RESCISSION LETTERS

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On March 14th, the New Jersey Superior Court seemed to join the 21st Century by authorizing email or fax cancellation of broker-drafted residential real estate contracts during the three day attorney review period.  Surprisingly, prior to this decision, attorneys had been relegated to operating pursuant to a 30 year old decision of the New Jersey Supreme Court which specified that such cancellation had to be communicated by “certified mail, telegram or personal delivery”.

The decision by Somerset County Superior Court Judge Edward Coleman in Conley v. Guerrerorecognized that, today, parties and their attorneys can communicate by means which were virtually unheard of in 1983.  That was the year when the Supreme Court adopted a settlement reached between the New Jersey State Bar Association and the New Jersey Association of Realtor Boards, which required that all real estate contracts prepared by realtors specify that rescission notices must be made by certified mail, telegram or personal delivery.

Judge Coleman agreed that since such contracts can be drafted, modified, signed and delivered by email or fax, it makes sense that they should be permitted to be terminated in the same manner.  This decision comes as welcomed relief to most attorneys, many of whom had already resorted to email and fax termination letters waiting for this issue to be resolved.

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David S. Lafferty, Esq.
Kelly, Kelly, Marotta & Lafferty, LLC
25 East Spring Valley Avenue
Suite 320
Maywood, New Jersey 07607
(201) 368-7713 phone
(201) 368-7723 facsimile

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WHAT TO DO IF YOUR SPOUSE CAN’T COME TO THE CLOSING

Article courtesy of Robin Gronsky of Gronsky Law

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It’s almost time for the closing and you discover that your spouse will need to be on a business trip during the time that you are supposed to close on your house purchase.  What do you do?

You can ask the sellers if they would be willing to move the closing to a date that would allow your spouse to be at the closing.  The date that is set in the contract as the “Closing Date” is not set in stone.  It can be pushed forward or back, depending on the needs of the parties.  But, the sellers are not required to agree to a change of the Closing Date.

There is another solution.  Your spouse can sign a Power of Attorney that will allow you to sign on his/her behalf.  The Power of Attorney is prepared by your lawyer and must be approved by your lender and your title agency.  There are specific clauses that must be in the Power of Attorney so it is not a do-it-yourself job.

Once the Power of Attorney has been approved, you will have the ability to sign any document on behalf of your spouse that concerns the purchase of your new home.  It does mean that you will be signing each document twice (and that is a lot of signing).  But it allows you to close on your home without totally inconveniencing everyone.  So, don’t worry if one of you can’t come to the closing.  There are always solutions.

Email Robin Gronsky at Rgronsky@Gronskylaw.com to find out how she can become your trusted legal advisor, helping you when you buy or sell real estate.

Robin M. Gronsky
Attorney at Law
315 North Pleasant Avenue
Ridgewood, New Jersey  07450
RGronsky@GronskyLaw.com
(201) 251-8001

 

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HOW TO ACHIEVE A SUCCESSFUL CLOSING

Article is courtesy of Thomas W. Randall, Managing Partner at Randall and Randall LLP

As a real estate attorney who also manages a litigation practice, I can attest to the positive and negative trends which have emerged from the real estate market. On the positive side of the ledger there is some optimism that the real estate market has started to turn the corner, with stable prices and predictions of modest growth.

Unfortunately, there is an uptick in litigation. This is not surprising given some buyer’s remorse from the past market and tighter lending conditions. To be proactive, a buyer and seller should follow these steps to help achieve a successful closing:

  • Retain an experienced real estate attorney. Buying or selling a home is a legal transaction and significant financial investment. Retaining a family attorney friend who doesn’t know the difference between a deed and a divorce may create problems resulting in costly litigation later should problems arise. Be certain to retain the services of an attorney who practices real estate law and who can properly guide you through the transaction.
  • Communicate your concerns and goals up front. Many pitfalls can be avoided through proper drafting of the contract of sale. Provide your attorney with essential information to ensure that the final contract documents contain the necessary inspections, contingencies, deadlines, representations, and other protections.
  • Be financially prepared and disclose. If you are buying, be ready to proceed with inspections and financing to meet closing and lending requirements. For sellers, full disclosure of material defects that are known by the seller is critical.

Thomas W. Randall may be reached at:

Randall and Randall LLP
287 Kinderkamack Road Westwood, NJ
rrslaw@aol.com
(201) 664-0505

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