The court is called upon to decide the following issues:
(1) Where there is an offer to sell an apartment unit to an existing tenant as part of a process of converting an apartment house into a condominium, does this offer to sell constitute sufficient basis to bring into play existing New Jersey warranty law and does it further justify extensive use of pretrial discovery by the prospective tenant-purchaser by reason of the relationship created by the offer to sell, perhaps coupled with the existing landlord-tenant relationship?
(2) Is a proposed conversion of an apartment house which is owned by a partnership into a condominium a subdivision requiring approval as such by the appropriate local government agency?
(3) Does the conversion as described constitute a sale of securities within the meaning of N.J.S.A. 49:3-27 and/or 49:3-49?
There are other points raised, none of which the court regards as presently critical, e.g. , a question involving the rule against perpetuities, which defendant represents it will avoid by changing the offering slightly. That portion of the complaint which seeks the appointment of a rent receiver is sufficiently controverted so that summary relief is not appropriate.
The case arises out of a simple factual situation. Defendant is a partnership that owns an apartment house and proposes to convert the apartment dwelling into a condominium, offering each tenant an option to purchase his own apartment prior to a general offering to the public. Plaintiff is an association, in corporate form, of tenants formed primarily to raise the issues considered in this case.
Plaintiff's first point is, on its face, remarkably simple. It states that since a sale of an apartment unit is contemplated and since that sale would be accompanied by various warranties, the breach of which would give rise to a cause of action, it is entirely appropriate to have pre-sale discovery as to any defects in the item warranted, either expressly or impliedly.
Defendant's response is equally simple. It says, first, that it makes no warranty, that the apartments are being offered as is; and, second, that plaintiffs are merely prospective purchasers and are not clothed with the standing requisite to test the warranties, and, in any event, it has made representations as to the condition of the premises sufficient to allow purchasers to make an intelligent decision. Defendant further points to a local ordinance requiring an inspection of each apartment by the local housing inspector for defects upon a change in occupancy of multiple-dwelling apartment units, and a requirement that it cure any defects that may be found.
Both parties admit that the wealth of New Jersey law dealing with warranties, expressed or implied, and the standing to take advantage of them do not quite reach the present factual situation, Marini v. Ireland , 56 N.J. 130 (1970); Reste Realty Corp. v. Cooper , 53 N.J. 444 (1969); Berzito v. Gambino , 114 N.J. Super. 124 (Cty. D. Ct. 1971); Academy Spires, Inc. v. Brown , 111 N.J. Super. 477 (Cty. D. Ct. 1970), nor do the cases along the line of Henningsen v. Bloomfield Motors, Inc. , 32 N.J. 358 (1960).
Plaintiff describes itself as more than merely a group of prospective purchasers, but rather purchasers coupled with an interest, i.e. , an existing leasehold and an option to purchase. The question is whether, under these circumstances, a court should make warranty concepts contained in our law prospective in operation. There are policy arguments against it. An offer is made to a prospective purchaser, who proceeds ...