Selling a house “as is” in New Jersey saves money, time, and energy spent on repairs – with potential disadvantages of lower price and less interested buyers. Although you can sell a house “as is”, the law sets forth requirements for what has to be disclosed. Formal seller disclosure statements are not required but can make disclosure easier.
This blog explains New Jersey seller disclosure law, what “as is” means with example clauses, seller property condition disclosure statements, certificates of occupancy, and lead-based paint and radon disclosure. Call us at 201-389-8275 or visit the Contact Us page for assistance with real estate purchase and sales.
Seller Disclosure Law
Sellers of real estate in New Jersey must disclose defects known to them and unknown and not readily observable to the buyer. Deliberate concealment of a “latent defective condition material to the transaction” constitutes sufficient grounds to rescind a contract or award monetary damages to a buyer. Correa v. Maggiore, 196 N.J. Super. 273, 281 (Super. Ct. App. Div. 1984). Sellers may be liable not only for affirmative misrepresentations, but for silence as well.
Latent. Sellers only must disclose latent defects. Latent can be defined as “a quality or condition that is not reasonably apparent by inspection alone. Latency is a quality of anything that is hidden from reasonable observation or inspection, either known only to someone especially familiar with the thing or known to no one at all.” Bouvier Law Dictionary. See Ariston Airline & Catering Supply Co. v. Forbes, 211 N.J. Super. 472, 480 (Super. Ct. 1986) (defining latent as: “hidden, concealed; present or existing, but not manifest, exhibited or developed.”)
Material. Non-disclosure of a defect must be material, not trivial, to support a claim against a seller. Weintraub v. Krobatsch, 64 N.J. 445, 455 (1974) (“Minor conditions which ordinary sellers and purchasers would reasonably disregard as of little or no materiality in the transaction would clearly not call for judicial intervention.”) A fact is material when “it is important to the particular buyer’s decision or when it would be important to a decision made by a reasonable buyer.” Coburn v. J.C.C. Constr. Corp., No. A-0149-07T1, at *7 (Super. Ct. App. Div. Nov. 19, 2008).
Knowledge. Disclosure obligations apply to defects that are actually known or constructively known. Wilson v. McCann, No. A-0520-13T1 (Super. Ct. App. Div. Oct. 21, 2014). Courts have defined “actual knowledge” to include direct or implied information, and constructive knowledge as an inference that a person “by the exercise of reasonable care could have discovered the dangerous condition.” Black v. Pub. Serv. Elec. & Gas Co., 237 A.2d 495, 499 (Super. Ct. App. Div. 1968); Bozza v. Vornado, Inc., 200 A.2d 777, 780 (1964).
“As Is” Clause and Disclaimers. Sellers cannot eliminate their disclosure obligations with an “as is” contract clause or a general contract disclaimer. See Dalmazio v. Rosa, No. A-3635-12T1 (Super. Ct. App. Div. Feb. 20, 2015) (“In the context of a real estate sale, a sufficient misrepresentation occurs if the seller fails to disclose on-site defective conditions if those conditions were known to them and unknown and not readily observable by the buyer. A contract that purports to sell real property ‘as is’ or in its ‘present condition,’ is nevertheless subject to rescission or monetary damages where the seller fails to disclose or conceals material defects in the property which are actually known or constructively known to the seller, but not readily apparent to the buyer.”); ABDM Props., Ltd. Liab. Co. v. Meusz, No. A-4556-15T4 (Super. Ct. App. Div. Aug. 23, 2017) (“Courts have also refused to enforce ‘as is’ or ‘no warranties’ clauses to defeat concealment of latent defects claims.”)
Proving Fraud. Non-disclosure liability is often based on assertions of common law fraud. The aggrieved buyer must prove: (1) material misrepresentation of a presently existing or past fact [in the real estate context includes non-disclosure]; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages. Gennari v. Weichert Co. Realtors, 148 N.J. 582 (N.J. 1997).
Common Examples. Examples of latent material defects can include: roof leak and damages, plumbing leaks, defective drywall, termites and other wood destroying inspections, foundation instability or cracks, air-conditioning and heating systems, mold, basement water seepage, underground storage tanks, radon, asbestos, faulty electrical wiring.
General Considerations. Disclosure laws protect both buyers and sellers. A full and honest disclosure of defects reduces the risk of liability for failure to make the buyer aware of latent material defects. Benefits to the buyer including being aware of actual condition at the property, which decreases the chance of a buyer canceling the sale (wasting the parties time and costs) when discovering defects in the future.
Courts have established what has to be disclosed when selling a house in New Jersey. The law making seller disclosure mandatory in New Jersey for known, latent, and material defects also apply to condos, co-ops, multi-family, mixed-use, and commercial property.
Selling As Is In New Jersey
Selling real estate “as is” in New Jersey means the owner transfers the property in its current condition with existing defects, and will not make repairs, improvements, or price concessions. Even in “as is” sales, buyers may be allowed to inspect the premises and cancel the transaction afterwards.
Definition. When used in connection with the sale of real property, ‘as is’ generally means the purchaser is acquiring real property in its present state or condition. The term implies real property is taken with whatever faults it may possess, and that the grantor is released of any obligation to reimburse purchaser for losses or damages resulting from the condition of the property conveyed. K. Woodmere Assocs., L.P. v. Menk Corp., 316 N.J. Super. 306, 317 (Super. Ct. App. Div. 1998).
Legality. Selling a house “as is” is legal in New Jersey. Although you can sell a house in “as is” condition, the law concerning seller disclosures, affirmative representations, contractual obligations, and local, state and federal regulations still apply. “As is” is not freedom to disregard the property condition.
Sample Clause. The “as is” clause in the Realtor ® residential contract states in Section 16(D): “Buyer acknowledges that the Property is being sold in an ‘as is’ condition and that this Contract is entered into based upon the knowledge of Buyer as to the value of the land and whatever buildings are upon the Property, and not on any representation made by Seller, Brokers or their agents as to character or quality of the Property. Therefore, Buyer, at Buyer’s sole cost and expense, is granted the right to have the dwelling and all other aspects of the Property, inspected and evaluated by ‘qualified inspectors’ for the purpose of determining the existence of any physical defects or environmental conditions.”
Selling a house “as is” in New Jersey sets clear expectations to the buyer and saves time and money on repairs. Disadvantages include possible lower sale price, losing money on the sale, canceled transactions, and less offers.
Property Condition Disclosure Statements
Seller property condition disclosure statements identify information that could impact a buyer’s decision and outline flaws that may negatively affect property value. These statements can direct inspectors to areas of concern, and reduce the chance of cancellation given the buyer knew of the defect. Seller disclosure statements are not required in New Jersey.
The New Jersey Realtor® “Seller’s Property Condition Disclosure Statement” requires that seller to “affirm the information is accurate and complete to the best of their knowledge” but the disclosure “is not a warranty as to the condition.” This Realtor® disclosure statement addresses the following categories:
- Occupancy. Age of property, current occupants, year purchased, possession of deed.
- Roof. Age of roof, repairs/replacements, leaks.
- Attic, Basements, and Crawl Spaces. Sump pumps, water and moisture issues, mold, defects in basement floor or foundation walls, ventilation, attic usage.
- Termites/Wood Destroying Insects, Dry Rot, Pests. Presence, damage, repairs or treatment relating to termites, wood destroying insects, dry rot, and pests.
- Structural Items. Shifting, movement, or other defects with walls, floors, foundations, driveways, walkways, patios, sinkholes, retaining walls, as well as damage by fire, smoke, wind or flood.
- Additions/Remodels. Additions, structural changes, or alterations, and if property building permits and approvals were obtained.
- Plumbing, Water, and Sewage. Source of water, sewage system (public/septic/cesspool), discharge of wastewaster, purification systems, water heater, defects relating to plumbing and related fixtures, abandoned or shut off systems.
- Heating and Air Conditioning. Type and age of air conditioning and heating systems, and existing problems.
- Woodburning Stove or Fireplace. Presence of woodburning stove or fireplace, last servicing, and existing problems.
- Electrical System. Wiring, amp service, additions to original service, permits and approvals, required repairs.
- Land (Soils, Drainage, and Boundaries). Fill or expansive soil, mining, wetlands, drainage or flooding, encroachments, easements, boundary disputes, water basins, tidal water, shared or common areas.
- Environmental Hazards. Notifications from agencies, conditions which affect quality of air/soil/water/physical structures, underground storage tanks, toxic substances.
- Deed Restrictions, Special Designations, Homeowners Association/Condominiums, and Co-Ops. Existence of deed restrictions, history district, protected areas, zoning ordinances, condominium or common interest restrictions or covenants, homeowner associations, dues and assessments, damage to common areas, changes to rules and by-laws.
- Miscellaneous. Threatened legal actions, violations of laws, zoning violations, encroachments on neighboring properties, non-conforming use, unpaid assessments relating to public improvement or condominium assessments, ownership and title problems, mortgages and liens, on-going fees.
- Radon Gas. Testing and treatment of radon.
- Major Appliances and Other Items. Smoke detectors, garage door openers, pools, appliances included in the sale, and working condition of these items.
Buyers commonly purchase real estate without a seller property condition disclosure statement. Hiring qualified inspectors helps understand property condition and make an informed decision.
Selling Without a Certificate of Occupancy
A certificate of occupancy in New Jersey is issued by local government agency or building department certifying safety and compliance with city code. Buildings, including houses and commercial property, are normally sold in New Jersey with certificates of occupancy and/or smoke and carbon monoxide certificates after a municipal inspection. Sellers typically file for the certificate prior to closing, pay application costs, and the certificate is good for months.
Chapter 16 §16.13 in East Newark provides an example of certificate of occupancy regulation: “No person shall occupy or use, or permit to be occupied or used, any building or portion thereof for residential, commercial, industrial or any other purpose after such building or portion thereof has been vacated or sold, or for which there has been a change in use or a change in occupancy, including, but not limited to, an addition or deletion of a residential occupant until the Construction Official of the Borough of East Newark shall have issued a Certificate of Continued Occupancy thereto.”
Certificates of occupancy are not required in New Jersey for all sales. A “temporary certificate of occupancy” may be granted for a set time period to accomplish necessary repairs. A “certificate of transfer title” is sometimes used to transfer ownership where a property fails the municipal inspection. These alternatives are utilized where buyers intend to make substantial repairs. Rules vary in each city.
Disclosure of Death
Sellers do not have to disclose a death in a house in New Jersey in all circumstances. The law requires disclosure of latent material defects that the buyer is not aware of, and this requirement is important if related to a death. Consult a licensed attorney to discuss your legal disclosure obligations.
Real estate agents must make a “reasonable effort to ascertain all material information concerning the physical condition of every property for which he or she accepts agency” and disclose this “to their client or principal and when appropriate to any other party to a transaction.” “Material information” does not include social conditions and psychological impairments [which “includes, but is not limited to, a murder or suicide which occurred on a property, or a property being haunted”]. N.J.A.C. 11:5-6.4. See Petrosino v. Ventrice, No. A-0020-13T1 (Super. Ct. App. Div. Aug. 27, 2015) (discussing disclosure requirements after death due to elevator malfunction).
Disclosure of Lead-Based Paint
Lead-based paint must be disclosed in New Jersey for most buildings built prior to 1978 under the Residential Lead-Based Paint Hazard Reduction Act of 1992. Sellers of “target housing” must do the following under 24 CFR 35.80:
- Disclose the presence of known lead-based paint;
- Provide available records and reports;
- Provide the lead hazard Environmental Protection Agency’s lead hazard information pamphlet;
- Allow a 10-day opportunity to conduct a risk assessment; and
- Attach specific disclosure and warning language to the contract before the purchaser is obligated under a contract.
“Target housing” is defined as “any housing constructed prior to 1978, except housing for the elderly or persons with disabilities (unless any child who is less than 6 years of age resides or is expected to reside in such housing) or any 0-bedroom dwelling.” 40 CFR 745.103. Target housing can include houses, condominiums, cooperatives, and apartment buildings.
Purchasers of property subject to federal lead-based paint law commonly waive the right for the 10-day a risk assessment. Sellers may satisfy their disclosure obligations using New Jersey Realtors® “Disclosure of Information and Acknowledgment About Lead-Based Paint and/or Lead-Based Paint Hazards” addendum. The form must be signed by seller, purchaser and agent.
In addition, Paragraph 13 of the New Jersey Realtors® “Standard Form of Real Estate Sales Contract” has a buyer acknowledgment of the EPA pamphlet, lead warning statement discussing the risks of lead-based paint, and a provisions outlining terms for conducting the inspection and/or risk assessment.
Disclosure of Radon
Sellers of buildings in New Jersey that performed radon testing and treatment must disclose a copy of tests and evidence of subsequent remediation under the Radon Protection Act. N.J. Stat. § 26:2D-73 (“In the case of a prospective sale of a building which has been tested for radon gas and radon progeny, the seller shall provide the buyer, at the time the contract of sale is entered into, with a copy of the results of that test and evidence of any subsequent mitigation or treatment, and any prospective buyer who contracts for the testing shall have the right to receive the results of that testing.”)
The New Jersey Realtors® “Seller’s Property Condition Disclosure Statement” helps satisfy radon disclosure requirements. This statement asks the seller: (1) if they are aware if the property was tested for radon gas and to attach a copy of the report, (2) if the property has been treated in an effort to mitigate radon and to attach evidence of mitigation or treatment, and (3) if radon remediation present in the property and if it is in good working order.
In addition, Paragraph 16(B) of the New Jersey Realtors® “Standard Form of Real Estate Sales Contract” states: “If the Property has been tested for radon prior to the date of this Contract, Seller agrees to provide to Buyer, at the time of the execution of this Contract, a copy of the result of the radon test(s) and evidence of any subsequent radon mitigation or treatment of the Property.”
Selling a house “as is” in New Jersey simplifies the sale. It is important to comply with state, federal, and local law as to what must be disclosed when selling a house in New Jersey. Call us at 201-389-8275 or visit the Contact Us page for assistance with any real estate purchase and sales.
Note: The information provided in this article is for informational purposes only and does not constitute legal advice. Readers should contact an attorney for advice on any particular legal matter.