New Jersey Attorney Law Review Blog

Thursday, May 23, 2013

Home Improvement Contracts: The Nuts and Bolts of New Jersey's Regulatory Requirements

New Jersey has strict rules when it comes to home improvement contracts in excess of $500, the overriding purpose of which is to protect consumers from unscrupulous contractors. The New Jersey Administrative Code § 13:45A-16.2(12)(i)-(vi) sets forth the requirements necessary in a home improvement contract. A violation of these written requirements is a violation of the statute.

N.J.A.C. 13:45A-16.2(12) states in pertinent part:

All home improvement contracts for a purchase price in excess of $500, and all changes in the terms and conditions thereof shall be in writing. Home improvement contracts which are required by this subsection to be in writing, and all changes in the terms and conditions thereof, shall be signed by all parties thereto, and shall clearly and accurately set forth in legible form and in understandable language all terms and conditions of the contract, including but not limited to, the following:

The legal name and business address of the seller, including the legal name and business address of the sales representative or agent who solicited or negotiated the contract for the seller;

A description of the work to be done and the principal products and materials to be used or installed in performance of the contract. The description shall include where applicable the name, make, size, capacity, model, and model year of principal products or fixtures to be installed, and the type, grade, quality, size or quantity of principal building or construction materials to be used;

The total price or other consideration to be paid by the buyer;The dates or time period on or within which the work is to begin and completed by the seller;

A description of any mortgage or security interest to be taken in connection with the financing or sale of the home improvement; and

A statement of any guaranty or warranty with respect to any products, materials, labor or services made by the seller.

A home improvement contractor who fails to comply with these regulations will be deemed to have committed a regulatory violation and could be liable for triple damages under the New Jersey Consumer Fraud Act.

In order to state a claim under the Consumer Fraud Act, a plaintiff must allege each of three (3) elements: (1) unlawful conduct by the defendants; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendants’ unlawful conduct and the plaintiff’s ascertainable loss. N.J. Citizen Action v. Schering Plough Corp., 367 N.J. Super. 8, 12-13 (App. Div. 2003), cert. denied 178 N.J. 249 (2003).

N.J.S.A. 56:8-2 defines an unlawful practice as:

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation or the knowing, concealments, suppression or omission of nay material fact with intent that others rely upon such concealment, suppression or omission in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby is declared to be an unlawful practice. . . .

There are three categories of “unlawful practices” found in the New Jersey Consumer Fraud Act; namely, (1) affirmative acts, (2) knowing omissions, and (3) regulation violations. Cox v. Sears Roebuck & Co., 138 N.J. 2, 17 (2004).

This article is for informational purposes only. New Jersey Attorneys.

Labels: Consumer Fraud Act NJ, home improvement contract regulations, NJ home improvement contracts

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Tuesday, May 21, 2013

New Jersey Appeals Court Spares Eviction of 89-Year Old Blind Man

In an unpublished decision issued on May 21, 2013, a New Jersey appeals court held that a landlord was not entitled to evict his residential tenant, an 89-year old blind man with diabetes, because of the tenant's refusal to sign a new lease. Ochieng v. Bloss, Superior Court of New Jersey, Appellate Division, Docket No. A-0703-12T2.

This decision reversed the trial court's ruling which was in favor of the landlord. The appeals court concluded that the landlord failed to follow the required notice procedures under the New Jersey Anti-Eviction Act, and that therefore the trial court lacked jurisdiction to hear the case. The appellate reversal is a bittersweet victory for the tenant though, because the landlord can re-file a new complaint once he has issued the proper pre-lawsuit notices.

Walter Bloss, the tenant in this case, is a disabled veteran suffering from diabetes and heart problems. He is also legally blind, and was 89-years old at the time his landlord filed to evict him. Bloss had resided in the premises (a rent controlled apartment in West Orange) for more than 40 years. The landlord Ochieng purchased the building in 2006.

Because of Bloss's disabilities, his grandson Steven Van Deysen has occasionally lived with him since the 1980s. In the past 6 years the grandson lived with Bloss on a regular basis based on the advice and recommendation of Bloss's doctor so that someone could help Bloss monitor his diabetes.

The landlord accused the grandson of engaging in inappropriate behavior at or near the apartment building. In an effort to remove the grandson from the apartment, in February 2011 the landlord presented Bloss with a renewal lease that would allow the landlord the right to approve the caretaker. The new lease was offered at the same time the landlord issued Bloss a notice to quit, which demanded that he surrender possession of the premises. Bloss refused to sign the new lease, claiming he needed his grandson to care for him.

About 17 months later, in May 2012, the landlord again presented Bloss with a renewal lease and another written notice demanding surrender of the apartment; this renewal lease was essentially the same as the one he previously provided to Bloss back in February 2011. Again, Bloss refused to sign it. About 2 months later, on July 20, 2012, the landlord filed the eviction action.

Neither party hired a lawyer, and a trial commenced on August 27, 2012. The following day, the trial judge ruled in favor of the landlord by finding that the terms of the renewal lease were reasonable, that the landlord acted reasonably by refusing to approve the grandson as the caretaker. Bloss then filed retained a lawyer, filed an emergent appeal and successfully obtained a stay of the eviction pending the outcome of the appeal.

In reversing the lower court's decision, the Appellate Division found that the landlord failed to provide Bloss with the proper pre-lawsuit notice in violation of New Jersey's Anti-Eviction Act, N.J.S.A. 2A:18-61.1 to -61.12. Specifically, the appeals court noted that a cause of action to evict a tenant for refusal to sign a renewal lease does not accrue (or begin) until the tenant actually refuses to sign the lease. From that point, the landlord must provide the tenant with a minimum 30-day notice citing the refusal to sign a new lease as grounds for the eviction.

The appeals court concluded that the landlord in this case failed to serve the 30-day notice to his tenant. The court found that the May 12, 2012 notice was not a "notice to quit" or demand for possession, but rather constituted an offer to sign a new lease. Consequently, the case was prematurely filed and the trial court should have dismissed it.

The victory for this 89-year old tenant is a temporary one though, as the appeals court remarked that the landlord would be well within his rights to file a new eviction case if he serves the proper 30-day notice to quit based on the tenant's refusal to sign the May 2012 proposed lease, and the 30-day period has expired.

Labels: eviction residential tenancy NJ, failure to sign renewal lease NJ eviction, landlord tenant lawyers NJ

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Thursday, May 16, 2013

What is Wrong With Our Judicial System?

I couldn't find a better example to illustrate the problem with our judicial system. In a recently unpublished decision of the New Jersey Appellate Division, Hernandez v. North Jersey Neurosurgical Associates,

Superior Court of New Jersey, Docket No. A-0890-12T2, the appeals court reversed a Hudson County trial judge's decision to enter default against a medical doctor whose attorney was unavailable to appear for the trial call because he was scheduled to be on trial in another case in Monmouth County, NJ .

Demonstrating a rigid approach to justice, the trial court refused to postpone a trial date in this medical malpractice case due to the unavailability of one of the defendant doctor's attorneys, preferring instead to punish the doctor by entering default against him and essentially leaving the doctor in no-man's land. In this case, the attorney had designated himself as the doctor's trial attorney in accordance with NJ Court Rule 4:25-4, meaning that if he were unavailable to try the case then the court is required to adjourn the trial. According to several NJ Supreme Court directives, the trial court is given discretion to waive R. 4:25-4 if the case is more than 3 years old and delayed by the unavailability of designated trial counsel. Such were the facts in this particular case.

Without belaboring the point, there were multiple adjournments of the trial date for a variety of different reasons, which caused the case to become more than 3 years old on the court's calendar. The appellate decision reflects that counsel were all cooperating with one another regarding the various adjournment requests, including the last adjournment request that the trial court rejected. In other words, all parties and their counsel were in agreement to adjourn the trial because of the doctor's attorney's unavailability yet the presiding judge refused to grant any further adjournments.

At the trial call another attorney from the law firm appeared and informed the trial judge that she was a family law practitioner, did not have the expertise to handle a medical malpractice defense, and was not authorized to try the case or pick a jury; she requested the case be marked "ready hold" until her boss - the designated trial counsel - completed his other trial. In the meantime, a judge in Monmouth County - apparently trying to help the cause for the doctor in Hudson County - entered an order refusing to release the designated trial attorney to appear in the Hudson County case.

At the trial call, quite fortuitously, the plaintiff's counsel implored the trial judge to grant the adjournment request, "stating that he and his clients would much prefer a short adjournment of the trial rather than a long and costly appellate process on the issue of whether an adjournment could be denied under these circumstances." As their luck would have it, that's exactly what they got - a long and costly appellate process. The trial judge declined the "ready hold" request and entered default against the doctor. The doctor then appealed.

Fortunately, the Appellate Division reversed the trial court's nonsensical decision declaring it to be an abuse of discretion. The parties no doubt wasted significant legal fees - likely in excess of $10,000 - arguing about whether the trial court should have adjourned the case. Even with all counsel consenting to the adjournment the trial judge stubbornly refused. The appeals court went to great lengths to spare criticism of the trial court for having "tunnel vision."

To me, this case represents form over substance. The trial court did not have to act in this manner. Had the trial judge truly listened to the plea by plaintiff's counsel to avoid "a long and costly appellate process" arguing about a simple trial adjournment, the parties and our judicial system would have been better served. An abuse of discretion indeed!

Labels: Adjournments of Trials, Designation of Trial Counsel NJ, NJ Trial Court Abuse of Discretion, Rule 4:25-4

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Wednesday, February 13, 2013

When is a Case Really Settled?

It is not too difficult to Imagine the following scenario. There is bitter litigation between 2 or more parties that has dragged on for several years. Each side is represented by legal counsel, and each has spent thousands of dollars in legal fees trying to posture the case in their favor. A trial is approaching shortly. The parties are each growing weary of the case; it has become too time consuming and expensive, and the law of diminishing returns has set in for all involved. This is why the overwhelming majority of civil disputes ultimately settle before trial. Lawyers know it, and so to the clients and judges.

In fact, our court system is designed to encourage and foster settlements. In the Superior Court of New Jersey, Law Division,, all contract and business law disputes are generally subject to mandatory mediation with a court-appointed mediator who agrees to volunteer up to 2 hours of his/her time trying to foster settlement of the cases they are assigned to. The mediation is usually scheduled at the initial stages of the case, and the litigants' attendance is required. While the mediator has no power to force the parties to settle, an early intervention with all parties present face-to-face can sometimes lead to a settlement before the parties engage in substantial pretrial discovery proceedings.

In Chancery Court matters, the judge will usually schedule a status conference at the early stage of the case at which time the judge may ask the lawyers to explore various settlement options.

At some point during the case, assume the various parties reach a settlement while appearing either at a court hearing, mediation hearing or status conference. The lawyers take a few moments to jot down the key or principal terms of the settlement, and ask to see the judge so that they can place the settlement terms on the record in open court thus creating a binding contract or agreement to settle the case. Each litigant assures their lawyer that they are on board with the settlement terms, but because a few of them have other commitments they tell their lawyer to proceed without them and to fill them in on the details afterwards. The judge then comes out, the lawyers enter their respective appearances for their clients, and usually one of the lawyers lay out the specific terms of the settlement in the presence of a court reporter or while the proceeding is being taped in the courtroom. The judge asks each lawyer to confirm his or her understanding of the settlement, to confirm that each client is on board, etc. The judge then thanks everyone for working together to reach a consensual resolution, tells the lawyers that they can memorialize the settlement terms in a stipulation to be filed later on, and leaves the bench.

In the next week or two a draft of a stipulation of settlement is prepared and circulated to everyone by email. Suddenly, one of the litigant's objects to the settlement claiming he/she never agreed to that term and refuses to allow his/her lawyer to sign the stipulation. Unfortunately, this happens quite frequently in litigation with one of the parties either suffering from buyer's remorse, realizing they made a mistake, or simply misunderstanding a key component of the settlement.

IS THE CASE SETTLED OR NOT? WHEN DO THE ACTIONS OF AN ATTORNEY ENGAGED IN HIS OR HER CAPACITY BIND THE CLIENT TO THE SETTLEMENT?

It is fundamental principle that the settlement of litigation ranks high in the public policy of New Jersey. Ziegelheim v. Apollo, 128 N.J. 250, 263 (1992); Nolan v. Lee Ho, 120 N.J. 465, 472 (1990); Judson v. Peoples Bank & Trust Co., 25 N.J. 17, 35 (1957). As such, settlements should be encouraged. Ziegelheim v. Apollo, 128 N.J. at 263.

The relationship between an attorney and client is that of principal and agent. An agency relationship is created “when one person (a principal) manifests assent to another person (an agent) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.” Lawyers' Fund for Client Prot. v. Stewart Title Guar. Co., 203 N.J. 208, 220 (2010).

Generally, an agent may only bind his principal for such acts that “are within his actual or apparent authority.” Carlson v. Hannah, 6 N.J. 202, 212 (1951). Actual authority is the authority that a principal expressly or implicitly gives an agent. United States v. Martinez, 613 F.2d 473, 481 (3d Cir. 1980); Reynolds Offset Co. v. Summer, 58 N.J. Super. 542 (App. Div. 1959). Actual authority may be either express or implied. Id. at 557.

The focus on an analysis of whether the attorney had actual authority is on the client’s manifestations to the attorney regarding settlement and the attorney’s reasonable interpretation of those manifestations. Newark Branch, N.A.A.C.P. v. Township of West Orange, 786 F.Supp. 408, 424 (D.N.J. 1992)(New Jersey law). The general rule is that unless an attorney is specifically authorized by the client to settle a case, the consent of the client is necessary. City of Jersey City v. Roosevelt Stadium Marina, Inc., 210 N.J. Super. 315, 327 (App. Div. 1986). “Negotiations of an attorney are not binding on the client unless the client has expressly authorized the settlement or the client's voluntary act has placed the attorney in a situation wherein a person of ordinary prudence would be justified in presuming that the attorney had authority to enter into a settlement, not just negotiations, on behalf of the client.” Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 475 (App Div. 1997)(citing United States Plywood Corp. v. Neidlinger,41 N.J. 66, 74 (1963)(emphasis added)(other internal citation omitted). “Thus, in private litigation, where the client by words or conduct communicated to the adverse attorney, engenders a reasonable belief that the attorney possesses authority to conclude a settlement, the settlement may be enforced.

However, the attorney's words or acts alone are insufficient to cloak the attorney with apparent authority.” Amatuzzo v. Kozmiuk, 305 N.J. Super. at 475-476. "It is well settled that 'stipulations . . . made by attorneys when acting within the scope of their authority are enforceable against their clients.'" Jennings v. Reed, 381 N.J. Super. 217, 230 (App. Div. 2005)(quoting Carlsen v. Carlsen, 49 N.J. 130, 137, (App. Div. 1958). "Consequently, an attorney is presumed to possess authority to act on behalf of the client, and the party asserting the lack of authority must sustain 'a heavy burden to establish that [her] attorney acted without any kind of authority in agreeing to the entry of judgment in the trial court.'" Jennings v. Reed, 381 N.J. Super. at 231.

In the particular scenario that I've outlined here, the objecting party who allowed his/her attorney to confirm/accept the settlement terms as recounted in the presence of the Court and all other attorneys bears a 'heavy burden' to persuade the judge that his/her attorney was not cloaked with actual authority to settle the case on those terms, or that there was not a meeting of the minds as to the principal terms.

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Sunday, January 13, 2013

Appeals Court Shuts Classroom Door on Teacher Who Posted Derogatory Facebook Comments About Her First Grade Students

In an unpublished decision issued on January 11, 2013, a NJ appeals court upheld the firing of a first-grade teacher in the Paterson school district who called her students "future criminals" in a Facebook post. In the Matter of the Tenure Hearing of Jennifer O'Brien, Superior Court of New Jersey, Appellate Division, Docket No. A-2452-11T4. This case represents another example of the consequences of misusing popular social media sites.

In this case a two-judge appeals panel ruled that the teacher's derogatory Facebook posting was not protected speech under the First Amendment of the U.S. Constitution, and that her "right to express those comments was outweighed by the district's interest in the efficient operation of its schools."

The teacher, Jennifer O'Brien, employed as a Paterson teacher since 1998, was assigned to teach a first grade class of 23 students. Almost all of her first graders were 6 years old , and either were Latinos or African-Americans.

On March 28, 2011, O'Brien posted the following two comments on her Facebook page.

"I'm not a teacher - I'm a warden for future criminals!"

"They had a scared straight program in school - why couldn't [I] bring [first ] graders?"

Paterson school officials discovered these Facebook postings the following day, and news quickly spread throughout the school district and drew national media attention. Parents expressed outrage over the postings at a school council meeting, and one parent threatened to remove her child from the school. The school district suspended O'Brien without pay pending a further investigation.

Thereafter, the deputy superintendent of schools filed an administrative complaint against O'Brien charging her with conduct unbecoming of a teacher. The district superintendent determined that probable cause existed to support the charges, and if established were sufficient to warrant O'Brien's dismissal. Thus, the district continued O'Brien's suspension without pay. Thereafter, formal charges were filed with the Commissioner of Education, and the matter was referred to the Office of Administrative Law for a hearing before an administrative law judge.

During her administrative law hearing O'Brien testified that she had about 300 friends linked to her Facebook account, including several friends from her school and the school district. O'Brien claimed that she posted the statement that her students were "future criminals" because of their behavior, not because of their race or ethnicity. She stated that 6 or 7 of her students had behavioral, which had negatively affected the classroom environment.

At the administrative law hearing O'Brien also testified that one of her students had struck her just a week before she made the Facebook postings, that other students had stolen items from her, and that some students had hit each other. She stated she referred the disciplinary matters to school officials but thought they hadn't adequately addressed the problems.

O'Brien explained that the school started a "Scared Straight" program on the same day she posted the comments on Facebook, that she was just speaking out of frustration for her student's behavior that day, and that she didn't think all her students were "future criminals." Instead, she maintained that she merely intended to point out that children who misbehaved in her classes should face the consequences.

In her defense, O'Brien argued that her Facebook comments constituted protected free speech under the First Amendment of the U.S. Constitution, and that her otherwise unblemished record did not support her dismissal because of a momentary lapse of judgment. The administrative law judge disagreed with both contentions, and concluded that O'Brien's relationship with with the Paterson school district was irreparably damaged and that her testimony was lacking in remorse.

On appeal, the New Jersey Appellate Division explained the law governing a public employee's claim of free speech.

To determine whether a public employee's statements are protected by the First Amendment, we balance the employee's interest as a citizen, in commenting upon matters of public concern and the interests of the State, as an employer, in " 'promoting the efficiency of the public services it performs for its employees.' " Karins v. City of Atlantic City, 152 N.J. 532, 549 (1998)(quoting Pickering v. Bd. of Ed., 391 U.S. 563, 568, 88 S.Ct. 1731, 1734-1735, 20 L.Ed.2d 811, 817 (1968).

At the administrative hearings, O'Brien claimed her Facebook postings addressed a matter of public concern, specifically student behavior in the classroom. The administrative law judge disagreed, concluding that O'Brien's statements were personal and reflected her dissatisfaction with her job and conduct of several of her students. The administrative law judge also concluded that even if O'Brien's Facebook postings were considered to address a matter of public concern, her right to make those statements was outweighed by the school district's interest in the efficient operation of its schools.

The appeals court affirmed in all respects, concluding that the seriousness of O'Brien's conduct justified her dismissal from her tenured teacher's position.

Labels: facebook case New Jersey teacher, first amendment public employee social media, NJ teacher's facebook dismissal, Paterson teacher Facebook appeal

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Thursday, December 20, 2012

Construction Materials Suppliers Beware: Ability to Enforce Construction Lien Against Property Owner Requires Inquiry as to Source of Customer's Payments, Says NJ Appeals Court

When a construction supplier sells materials on credit to a contractor with multiple open accounts, receives only partial payments without instructions from the contractor as to whose jobs/accounts the payments should be applied to, and later seeks to enforce a construction lien claim against a single property owner for the unpaid balance, the supplier must make inquiry as to the source of the funds obtained by the contractor to pay the supplier. The suppliers duty in this regard extends to circumstances where a reasonable supplier should suspect the contractor has not used an owner's funds to pay for materials supplied for that owner. The purpose in requiring a supplier to ascertain the source of its customer's funds is to ensure that the supplier has properly allocated its customer's payments to the correct jobs/accounts. A supplier that fails to fulfill this duty sacrifices its rights under the Construction Lien Law, a NJ appeals court concluded in L&W Supply Corporation v. DeSilva Contractors, et al., Docket No. A-2960-12-10T2 (December 19, 2012).

In issuing this ruling, the appeals court relied on precedent established by the New Jersey Supreme Court in Craft v. Stevenson Lumber Yard, Inc., 179 N.J. 56, 63 (2004). In Craft, the Court held that a materials supplier that seeks to file a construction lien has a duty to apply payments correctly against several open accounts of a materials purchaser, such as a subcontractor, if the supplier has reason to know that the payment funds came from a particular building project. We now consider the obligation of the materials supplier "to ascertain the source of . . . payments and to apply them accordingly." Id. at 76.

SUMMARY OF NEW JERSEY CONSTRUCTION LIEN LAW

Like many other states, New Jersey offers protection to subcontractors, laborers and materials suppliers who do not receive payment for work or materials provided for the benefit of a property owner or general contractor by providing the right to record and enforce a construction lien against the property. The Construction Lien Law found at N.J.S.A. 2A:44A-1 to N.J.S.A. 2A:44A-38, allows a contractor or supplier who is owed payment for its work or materials to file a lien against the real property on which the improvements are constructed. N.J.S.A. 2A:44A-3a. The primary purpose of the Construction Lien Law to secure payment of monies due to contractors and suppliers of a construction project. Thomas Grp., Inc. v. Wharton Senior Citizen Hous., Inc., 163 N.J.507, 517 (2000).

A secondary purpose of the Construction Lie Law is to "protect owners" against paying more than once for the same work or materials. Labov Mech., Inc. v. E. Coast Power, L.L.C., 377 N.J. Super. 240, 245 (App. Div. 2005). To effect the second purpose, the statute limits the lien to the amount available in the "lien fund," which "shall not exceed the unpaid portion of the contract price of the claimant's contract for the work, services, material or equipment provided." N.J.S.A. 2A:44A-9a.

In the case of a supplier, the lien fund is defined as the lesser of (1) the amount of the prime contract price earned minus amounts already paid by the owner to the prime contractor, or (2) the amount the subcontractor has earned on the subcontract price minus amounts already paid by the prime contractor to the subcontractor. N.J.S.A. 2A:44A-9b(2).

When a lien claim is filed, the owner or prime contractor may pay the amount of a valid claim directly to the claimant and credit that payment against the subcontract price. N.J.S.A. 2A:44A-12. Alternatively, the owner or prime contractor may post a surety bond for 110% of the lien amount and release the owner's property from the claim. N.J.S.A. 2A:44A-31a, -32.

In L&W Supply Corporation, the contractor's principal Joel DeSilva owned and operated several business entities from which he purchased supplies from L&W on credit. Thus, L&W maintained multiple credit accounts for the DeSilva entities. For the disputed project in this case (called the Meridian), L&W filed a construction lien alleging that the DeSilva entity known as Detail Construction ("Detail") owed in excess of $100,000 on the Meridian job. During the same time period where Detail was purchasing supplies from L&W on the Meridian job, DeSilva's other entities had purchased supplies from L&W for other projects.

The trial court granting summary judgment in favor of L&W. But on appeal, the Appellate Division reversed, finding that L&W failed to make inquiry as to the source of the funds from which its customer was making payments.

Viewing the summary judgment record most favorably to defendants, that is, crediting the certification and accounting of Patock's bookkeeper and viewing reasonable inferences against the L&W witnesses, Detail paid L & W $113,040.55 that was applied to non-Meridian projects. No specific evidence in the record indicates whether DeSilva directed that amount to be allocated to his other projects, and whether L & W had or did not have reason to suspect that DeSilva and his business entities may be misapplying payments to past-due accounts. The conclusory certifications of L & W's witnesses do not resolve the factual dispute as to whether L & W "ascertain[ed] the source" of the funds from which Detail and DeSilva were making payments. Defendants should have the opportunity to prove at a trial that L & W failed to make any inquiry about the source of the funds, or that it had reason to suspect that the DeSilva entities were not properly allocating their payments.

SOME SUGGESTIONS

The holding in L&W Supply Corporation places an extra burden on construction suppliers to pay attention to their bookkeeping practices when it comes to selling to repeat customers on credit. Some practical suggestions for suppliers include maintaining separate credit accounts for each project, requiring the customer to write down the name of the property owner or job site on each purchase order, and repeating the property owner's name or job site reference on the memo portion of each customer check. Accepting customer checks designated as "payment on account" should be avoided.

Labels: New Jersey construction lien attorney, NJ construction lien law, NJ construction lien lawyer

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Friday, December 14, 2012

Can One Co-Owner Of Real Estate Owned As Tenants in Common Force The Other Co-Tenant To Sell His/Her Share?

There are significant legal distinctions between owning property as tenants by the entirety versus owning property as tenants in common. Understanding these legal distinctions is important when it comes to purchasing residential real estate with friends, business partners, or relatives.

A joint tenancy is a form of property ownership where the co-owners own the property equally. If one joint tenant dies, the surviving joint tenant automatically inherits the entire property. By contrast, a tenancy in common is a form of co-ownership of property that does not include a right of survivorship. In a tenancy in common, each co-owner's portion can be passed to beneficiaries named in a will, which may or may not be someone who the surviving co-tenant ever envisioned owning the property with or living with. In New Jersey, two people, other than married couples, are presumed to own property as tenants in common unless they've otherwise specified in the deed.

So what happens if one child purchases a home with her parents as tenants in common, with each intending to occupy a portion of the home, and then the parents die leaving their co-tenancy interest to the other children and a dispute arises between all surviving children about whether the house should be sold? Can the surviving co-tenant who still lives there and wishes to continue living there compel the other siblings who inherited the parents' co-tenancy to sell the estate's co-tenancy interest? What if out of pure spite the other siblings insist that the house be sold on the open market instead of selling to the surviving co-tenant?

My law firm is presently litigating this exact issue before the Superior Court of New Jersey, Chancery Division, Bergen County, in a matter captioned Chedid vs. Estate of Helewa, Docket No.: C-25-12. Click here to download a copy of the brief that we filed on December 14, 2012. The matter is presently scheduled to be heard on January 11, 2013.

Partition is a legal action recognized in New Jersey that allows for dividing real estate owned by two or more people. If one or more of the co-owners of real estate is or are unwilling to sell the property and divide the proceeds of sale in accordance with all of the co-owners’ ownership interests, it is the only way that a person who owns a share of real estate as a tenant in common or joint tenant can separate his or her interest from the other co-owners.

As explained in our our brief, although it is recognized that partition among tenants in common may normally be had as of course, see Newman v. Chase, 70 N.J. 254, (1976), courts have held that the remedy of partition is not necessarily available as a matter of right in all cases:

It is an established principle that a court of equity, in decreeing partition does not act ministerially and in obedience to the call of those who have a right to partition, but founds itself on its general jurisdiction as a court of equity and administers its relief ex aequo et bono according to its own notions of general justice and equity between the parties.

Baker v. Drabik, 224 N.J. Super. 603, 609 (App. Div. 1988), citing Newman v. Chase, supra, 70 N.J. at 263 (quoting Woolston v. Pullen, 88 N.J. Eq. 35, 40 (Ch. 1917)).

Courts addressing similar situations, wherein one co-owner desires to stay in the property, have denied partition based upon equitable principles and required the co-owner in possession to compensate the other with an owelty. In Leonard v. Leonard, 124 N.J. Super. 439, 442 (App. Div. 1973), the court explained that an owelty is an amount of money that a cotenant will owe to the other cotenant, and which will equalize the partition, if one cotenant “receives property with a value greater than his proportionate share.” Ibid.

In fact, several New Jersey courts have liberally applied this concept to allow one co-tenant to purchase the property, with the other co-tenant receiving a credit for this proportionate share. See Baker v. Drabik, supra, 224 N.J. Super. 603(co-tenant allowed to remain as sole occupant of the premises, but required to pay non-occupying cotenant an appropriate amount in compensation for share as cotenant, with credit for her share of principal reduction portion of mortgage payments and capital improvements); see also Asante v. Abban, 237 N.J. Super. 495, 502 (Law Div. 1989)(co-tenant determined to have share of ownership in proportion to financial contribution to purchase price, and entitled to receive proportionate percentage of appraised value of property); and Reitmeier v. Kalinoski, 631 F.Supp. 565 (D.N.J. 1986)(single family property partitioned such that residing plaintiff retained entire property while reimbursing co-tenant with monetary compensation). In each of these cases, the courts allowed the co-owner desiring to remain in possession to purchase the co-tenant’s interest.

I will report further on this case after January 11, 2013.

Labels: compelling co-owner sale of property NJ, NJ real estate attorney, owning property as co-tenants in NJ, pendente lite sale of co-tenancy NJ

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