Proposed Readoption: N.J.A.C. 13:45A-29.1

Authorized By: Division of Consumer Affairs, Reni Erdos, Director.

Authority: N.J.S.A. 56:8-1 et seq. specifically 56:8-19.1.
Calendar Reference: See Summary below for explanation of exception to calendar requirement. Proposal Number: PRN 2003-138.

Submit comments by June 20, 2003 to:

Reni Erdos, Director
New Jersey Division of Consumer Affairs
PO Box 45027
Newark, NJ 07101

The agency proposal follows:

Summary

Pursuant to its rulemaking authority, N.J.S.A. 56:8-1 et seq., the Division of Consumer Affairs is proposing a new subchapter, N.J.A.C. 13:45A-29, codifying N.J.S.A. 56:8-19.1, which sets forth the requirements for exempting real estate brokers, broker salespersons, and salespersons from certain provisions of the Consumer Fraud Act if they are in compliance with the property condition disclosure requirements of the new rule and have obtained a property condition disclosure statement from a seller of a property.

Proposed new N.J.A.C. 13:45A-29.1(a) states that the rule implements the provisions of N.J.S.A. 56:8-19.1 and proposed new subsection (b) contains words and terms which are used in the subchapter.

Proposed new subsection (c) states that real estate licensees are not subject to punitive damages, attorney's fees, or both under N.J.S.A. 56:8-19 for the communication of any false, misleading or deceptive information to a buyer which had been provided to the licensee by or on behalf of the seller of real estate located in the State of New Jersey if certain conditions are met. The licensee must have no actual knowledge of the false, misleading or deceptive character of the information. The licensee must also make a reasonable and diligent inquiry to determine if the information is false, misleading or deceptive and must provide specific communications that will satisfy this requirement. These include reports by specified State licensees and governmental officials or employees and a property condition disclosure statement. Proposed new subsection (d) sets forth the form and minimal information which is required in the property condition disclosure statement.

This proposal has not been calendared pursuant to the requirements of N.J.A.C. 1:30-3.1, and, therefore, a 60-day comment period is provided pursuant to N.J.A.C. 1:30-3.3(a)5.

Social Impact

Proposed new rule N.J.A.C. 13:45A-29.1 will have a positive impact on the public and real estate licensees. The property condition disclosure statement will provide the public with an expansive and accurate account of the property to be sold and will ensure that the purchaser has all relevant information before a purchase is completed. Real estate licensees will benefit from no longer being subject to punitive damages, attorneys fees or both for the communication of false, misleading or deceptive information provided to the licensee by the seller if the licensee meets requirements contained in the new rule.

Economic Impact

Proposed new rule N.J.A.C. 13:45A-29.1 will have a beneficial economic impact on real estate licensees and the public. Licensees will benefit from no longer being subject to punitive damages, attorneys fees, or both if they meet certain conditions. Licensees will incur costs from providing the property condition disclosure statement form. The public will benefit from the accurate information that will be providedin the property condition disclosure statement by allowing the purchaser of the property to make an informed decision on whether to purchase the property.

Federal Standards Statement

A Federal standards analysis is not required because the proposed new rule does not have any applicable Federal standards or requirements.

Jobs Impact

The Division does not anticipate that the proposed new rule will increase or decrease jobs in the State.

Agriculture IndustryImpact

The proposed new rule will have no impact on the agriculture industry in this State.

Regulatory Flexibility Analysis

If, for purposes of the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq., the 78,400 real estate licensees are deemed "small businesses," then the following analysis applies.

The Act requires the Division to set forth the reporting, recordkeeping, and other compliance requirements of the proposed rule including the kinds of personal services likely to be needed to comply with the requirements. The Act further requires the Division to estimate the initial and annual compliance costs and to outline the manner in which it has designed the rules to minimize any adverse economic impact upon small businesses.

The compliance requirement in the proposed new rule, which codifies N.J.S.A. 56:8-19.1, states that in order to be exempt from punitive damages, attorneys fees or both, licensees must demonstrate that they had no actual knowledge of the false, misleading or deceptive character of the information conveyed by or on behalf of the seller and they have made a reasonable and diligent effort to determine the accuracy of the information supplied by or on behalf of the seller. The reporting requirement in the proposed new rule states that the real estate licensee may utilize reports from specified licensees or from government officials or employees to demonstrate that the real estate licensee has made a reasonable and diligent inquiry to ascertain whether the information is of a false, misleading or deceptive character. The recordkeeping requirement in the proposed new rule states that a property condition disclosure statement may be utilized to demonstrate that they have made a reasonable and diligent inquiry to ascertain whether the information is of a false, misleading or deceptive character. The Division believes that no professional services are likely to be needed to comply with the proposed new rule.

The Division believes that because the proposed new rule is intended to protect the public from fraudulent, misleading or deceptive information in the purchase of property, the provisions of the new rule must be applied uniformly to all real estate licensees regardless of the size of the business.

Smart Growth Impact

The proposed new rule shall have no impact on the achievement of smart growth or the implementation of the State Development and Redevelopment Plan.

Full text of the proposed new rule follows:

<<+SUBCHAPTER 29. PROPERTY CONDITION DISCLOSURE+>>

<< NJ ADC 13:45A-29.1 >>

<<+13:45A-29.1 Property Condition Disclosure Form+>>

<<+(a) This section implements the provisions of P.L. 1999, c.76, N.J.S.A. 56:8-19.1, concerning the exemption of real estate brokers, broker- salespersons and salespersons from provisions of the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq.+>>

<<+(b) The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise:+>>

<<+"Real estate licensee" means a real estate broker, broker-salesperson or salesperson licensed under N.J.S.A. 45:15-1 et seq.+>>

<<+"Property condition disclosure statement" means a writing, as set forth in (d) below, signed by the seller and containing information on the physical condition of the land and improvements thereon, if any, being sold.+>>

<<+(c) A real estate licensee shall not be subject to punitive damages, attorneys fees, or both under N.J.S.A. 56:8-19 for the communication of any false, misleading or deceptive information to a buyer which had been provided to the real estate licensee by or on behalf of the seller of real estate located in the State of New Jersey if the real estate licensee:+>>

<<+1. Had no actual knowledge of the false, misleading or deceptive character of the information; and+>>

<<+2. Made a reasonable and diligent inquiry to ascertain whether the information is of a false, misleading or deceptive character. A real estate licensee will have been deemed to have made a "reasonable and diligent inquiry" in circumstances including, but not limited to, those in which the false information communicated to the buyer can be shown to have been:+>>

<<+i. Provided in a report or upon a representation by a person, licensed or certified by the State of New Jersey, including, but not limited to, an appraiser, engineer, architect, home inspector, plumber or electrical contractor, of a particular physical condition pertaining to the real estate derived from inspection of the real estate by that person;+>>

<<+ii. Provided in a report or upon a representation by any governmental official or employee, if the particular information of a physical condition is likely to be within the knowledge of that governmental official or employee; or+>>

<<+iii. Obtained from the seller in a property condition disclosure statement as set forth in (d) below, so long as the buyer is informed by the real estate licensee that the seller is the source of the information, and that prior to advising the buyer that the seller is the source of information, the real estate licensee visually inspected the property with reasonable diligence to ascertain the accuracy of the information disclosed by the seller.+>>

<<+(d) The property condition disclosure statement shall be in the following form and contain, at a minimum, the following information. Additional information may be requested if, in the opinion of the real estate licensee, and under the facts and circumstances of a particular real estate transaction, it would be appropriate to do so.+>>

SELLER'S PROPERTY CONDITION

DISCLOSURE STATEMENT

Property Address: ___________________________________

_________________________________________________

Seller: ____________________________________________

The purpose of this Disclosure Statement is to disclose, to the best of Seller's knowledge, the condition of the Property, as of the date set forth below. The Seller is aware that he or she is under an obligation to disclose any known material defects in the Property even if not addressed in this printed form. Seller alone is the source of all information contained in this form. All prospective buyers of the Property are cautioned to carefully inspect the Property and to carefully inspect the surrounding area for any off-site conditions that may adversely affect the Property. Moreover, this Disclosure Statement is not intended to be a substitute for prospective buyer's hiring of qualified experts to inspect the Property.

RADON GAS

Instructions to Owners

By law (N.J.S.A. 26:2D-73), a property owner who has had their property tested or treated for radon gas may require that information about such testing and treatment be kept confidential until the time that the owner and a buyer enter into a contract of sale, at which time a copy of the test results and evidence of any subsequent mitigation or treatment shall be provided to the buyer. The law also provides that owners may waive, in writing, this right of confidentiality. As the owner(s) of this property, do you wish to waive this right?

ACKNOWLEDGEMENT OF SELLER

The undersigned Seller affirms that the information set forth in this Disclosure Statement is accurate and complete to the best of Seller's knowledge, but is not a warranty as to the condition of the Property. Seller hereby authorizes the real estate brokerage firm representing or assisting the seller to provide this Disclosure Statement to all prospective buyers of the Property, and to other real estate agents. Seller alone is the source of all information contained in this statement.

SELLER: _______

DATE: _______

SELLER: _______

DATE: _______

EXECUTOR, ADMINISTRATOR, TRUSTEE

(If applicable)

The undersigned has never occupied the property and lacks the personal knowledge necessary to complete this Disclosure Statement.

___________________________________

___________________________________

DATE: _________________

RECEIPT AND ACKNOWLEDGEMENT BY PROSPECTIVE BUYER

The undersigned Prospective Buyer acknowledges receipt of this Disclosure Statement prior to signing a Contract of Sale pertaining to this Property. Prospective Buyer acknowledges that this Disclosure Statement is not a warranty by Seller and that it is Prospective Buyer's responsibility to satisfy himself or herself as to the condition of the Property. Prospective Buyer acknowledges that the Property may be inspected by three qualified professionals, at Prospective Buyer's expense, to determine the actual condition of the Property. Prospective Buyer further acknowledges that this form is intended to provide information relating to the condition of the land, structures, major systems and amenities, if any, included in the sale. This form does not address local conditions which may affect a purchaser's use and enjoyment of the property such as noise, odors, traffic volume, etc. Prospective Buyer acknowledges that they may independently investigate such local conditions before entering into a binding contract to purchase the property.

PROSPECTIVE BUYER: ___________________________________

DATE: ______________

PROSPECTIVE BUYER: ___________________________________

DATE: ______________

ACKNOWLEGEMENT OF REAL ESTATE BROKER/BROKER-SALESPERSON/SALESPERSON

The undersigned Real Estate Broker/broker-salesperson/salesperson acknowledges receipt of the Property Disclosure Statement form and that the information contained in the form was provided by the Seller.

The real estate broker/broker-salesperson/salesperson also confirms that he or she visually inspected the property with reasonable diligence to ascertain the accuracy of the information disclosed by the seller, prior to providing a copy of the property disclosure statement to the buyer.

REAL ESTATE BROKER: _________________________________

BROKER-SALESPERSON: _______________________________

SALESPERSON: ____________________________

DATE: ______________