February 14, 2022
by Bob Incollingo
The original purpose of the New Jersey Seller’s Property Condition Disclosure Statement was to give real estate agents a “safe harbor” from lawsuits for consumer fraud. Passed in 1999 and amended in 2004, the shielding statute (N.J.S.A. 56:8-19.1) continues to evolve and has just been amended again to provide additional protections for real estate professionals and consumers alike, especially with respect to water-related problems. A. 2685 (2022).
Among other troublesome property condition issues, the current form of disclosure statement questions the existence of water leakage and mold:
|[ ]||[ ]||9)||Are you aware of any water leakage, accumulation or dampness within the basement or crawl spaces or any other areas within any of the structures on the property?|
|[ ]||[ ]||9A)||Are you aware of the presence of any mold or similar natural substance within the basement or crawl spaces or any other areas within any of the structures on the property?|
As revised, N.J.S.A. 56:8-19.1 newly requires that if a filled-in property condition disclosure statement indicates the seller’s awareness of water leakage, accumulation or dampness, the presence of mold or other similar natural substance, or repairs or other attempts to control any water or dampness problem on the real property, the involved real estate broker, broker-salesperson, or salesperson is required to provide the buyer with a physical copy of the Department of Health’s "Mold Guidelines for New Jersey Residents" pamphlet.
Also, N.J.S.A. 56:8-19.1 now instructs that the property condition disclosure statement must include a question specifically concerning the presence of lead plumbing, including but not limited to any service line, piping
materials, fixtures, and solder, in the residence being sold. Presumably, administrative regulations updating the official form will follow, and new disclosure provisions will be added.
By way of background, New Jersey consumer fraud law bans the "concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any … real estate." N.J.S.A. 56:8-2. To drive the point home, the administrative rules of the Real Estate Commission provide that real estate licensees must disclose all information “material to the physical condition of any property which they know or which a reasonable effort to ascertain such information would have revealed to their client or principal and when appropriate to any other party to a transaction.” N.J.A.C. 11:5-6.4. The concern raised by this requirement is that a real estate broker or agent might be called on to answer to a defrauded buyer for passing along bad information originating with the seller.
The remedies for consumer fraud are severe, and in addition to any other appropriate legal or equitable relief, the court must award three times the damages sustained along with reasonable attorneys’ fees, filing fees and costs of suit. To temper this expanded liability, which might unfairly land on an otherwise innocent real estate professional who relies on his client’s superior knowledge of the property being sold, N.J.S.A. 56:8-19.1 provides a conditional exemption in certain circumstances. While there is no duty on the part of a real estate salesperson to obtain a disclosure statement, if delivered and signed according to law, the statement should give the real estate licensee immunity from consumer fraud liability resulting for unknowingly deceptive statements passed along to a buyer. Using the following recently revised three-part test, the statute takes away the right of recovery for consumer fraud against licensees for the communication of any false, misleading or deceptive information provided to them, by or on behalf of the seller of real estate located in New Jersey:
56:8-19.1 Exemption from consumer fraud law, certain real estate licensees, circumstances.
“Notwithstanding any provision of P.L.1960, c.39 (C.56:8-1 et seq.) to the contrary, there shall be no right of recovery against a real estate broker, broker-salesperson, or salesperson licensed under R.S.45:15-1 et seq. for the communication of any false, misleading, or deceptive information provided to the real estate broker, broker-salesperson, or salesperson, regarding real estate located in New Jersey, if the real estate broker, broker-salesperson, or salesperson demonstrates that they:
“a. Had no actual knowledge of the false, misleading or deceptive character of the information;
“b. Made a reasonable and diligent inquiry to ascertain whether the information is of a false, misleading or deceptive character. For purposes of this section, communications by a real estate broker, broker-salesperson or salesperson which shall be deemed to satisfy the requirements of a "reasonable and diligent inquiry" include, but shall not be limited to, communications which disclose information:
“(1) 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, home inspector, plumber or electrical contractor, or an unlicensed home inspector until December 30, 2005, of a particular physical condition pertaining to the real estate derived from inspection of the real estate by that person;
“(2) 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
“(3) that the real estate broker, broker-salesperson or salesperson obtained from the seller in a property condition disclosure statement, which form shall comply with regulations promulgated by the director in consultation with the New Jersey Real Estate Commission, provided that the real estate broker, broker-salesperson or salesperson informed the buyer that the seller is the source of the information and that, prior to making that communication to the buyer, the real estate broker, broker-salesperson or salesperson visually inspected the property with reasonable diligence to ascertain the accuracy of the information disclosed by the seller. In addition to any other question as the director shall deem necessary, the property condition disclosure statement shall include a question specifically concerning the presence of lead plumbing, including but not limited to any service line, piping materials, fixtures, and solder, in the residential property; and
“c. If a property condition disclosure statement contained information indicating the seller’s awareness of water leakage, accumulation or dampness, the presence of mold or other similar natural substance, or repairs or other attempts to control any water or dampness problem on the real property, the real estate broker, broker-salesperson, or salesperson referred the buyer of the real property to the “Mold Guidelines for New Jersey Residents” pamphlet on the Department of Health Internet website, or other pamphlet or guidelines deemed appropriate by the director and, if requested by the buyer, provided the buyer with a physical copy of the pamphlet.
“Nothing in this section shall be interpreted to affect the obligations of a real estate broker, broker-salesperson, or salesperson pursuant to the "New Residential Construction Off-Site Conditions Disclosure Act," P.L.1995, c.253 (C.46:3C-1 et seq.), or any other law or regulation.
“(cf: P.L.2021, c.268)
“2. This act shall take effect on the first day of the third month next following enactment.
The statute quoted above is amplified in the associated administrative regulation on the subject (N.J.A.C. 13:45A-29.1(c)), by which the Division of Consumer Affairs (and not the Real Estate Commission) directs the exact format for the Seller’s Property Condition Disclosure Statement. While the Seller’s Property Condition Disclosure Statement is most often encountered as NJ Realtors® Form-140, the instrument is not proprietary to the Association, nor to any non-Realtor brokerage. Its text comes straight from the language of the regulation. N.J.A.C. 13:45A-29.1(d). As will soon be the case after the recent revisions to N.J.S.A. 56:8-19.1 take effect, the regulation changes from time, and there is no guarantee that a disclosure statement offered to a buyer mirrors the up to date requirements unless somebody checks.
Every once in a while, a seller’s broker or agent may use an outdated form, or change or even cut away categories for disclosure from the current form. Since N.J.A.C. 13:45A-29.1 clearly mandates that the Seller’s Property Condition Disclosure Statement be in the form set out in the text of subsection (d), even the innocent use of an outdated form will wipe away the exemption if the disclosure would have been made on the current form. In the considered opinion of the author, a Frankenstein cut-and-paste or whited-out disclosure form is worthless, to be treated as a legal nullity in court, and at the very least disqualify any claim of safe harbor from consumer fraud liability. Knowingly offering a tampered disclosure form to a buyer presents a clear example of duplicity and sharp practice, and consumer fraud in and of itself. If you believe that has happened to you, drop me a line.
South Jersey lawyer Bob Incollingo litigates construction, business, and real estate cases across New Jersey from his office in Cherry Hill. More articles like this appear on RJILAW.com.