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Department of Community Affairs v. Hovsons Inc.

Decided: January 31, 1977.

DEPARTMENT OF COMMUNITY AFFAIRS, PLAINTIFF-RESPONDENT,
v.
HOVSONS, INC., A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT-APPELLANT



Matthews, Seidman and Horn.

Per Curiam

Defendant Hovsons, Inc. is a developer of the retirement community known as Holiday City at Berkeley, Ocean County. Defendant has registered with the Division of Housing and Urban Renewal, Department of Community Affairs, under the Retirement Community Full Disclosure Act (N.J.S.A. 45:22A-1 et seq.), by filing a statement of record which in part includes forms of contracts or agreements of sale that may be used by it. A complaint was issued by the Director of the Division of Housing and Urban Renewal alleging that defendant violated the provisions of the act because, contrary to the form of agreement of sale it had filed, it held escrow closings prior to the issuance of a certificate of occupancy. Defendant's form of agreement of sale provides that closing will take place after the certificate of occupancy is issued for the particular property being sold.

At the hearing held on the complaint, five purchasers of defendant's homes testified that in their cases an escrow closing took place prior to the issuance of a certificate of occupancy. In most of the cases the purchasers suffered no real harm, nor did defendant reap any financial benefit in holding the closings prior to the issuance of a certificate of occupancy. (The money was held in escrow by defendant's attorney until the certificate of occupancy was issued.) In several cases defendant paid for motel accommodations until the certificate of occupancy was issued. In addition, the certificate was usually issued shortly after closing.

The hearing examiner found that defendant wilfully omitted from its form of agreement of sale filed with the agency that escrow closings could take place prior to the

issuance of a certificate of occupancy. He recommended that a cease and desist order pursuant to N.J.S.A. 45:22A-13 be issued to halt this practice and that a penalty of $1,250 (reduced to $500) be imposed pursuant to N.J.S.A. 45:22A-15.

The Director adopted the hearing examiner's findings but he modified the order, reinstating the $1,250 penalty.

Defendant was assessed a penalty of $1,250 by the Director under N.J.S.A. 45:22A-15:

45:22A-15. Penalties for violations

Any person who willfully violates any provision of this act or of a rule adopted under it or any person who willfully, in a statement of record filed for registration makes any untrue statement of a material fact or omits to state a material fact shall be fined not less than $250.00 or double the amount of gain from the transaction, whichever is the larger but not not more than $50,000.00; or he may be imprisoned for not more than 1 year; or both. [Emphasis supplied]

Although defendant has not raised the issue, we question whether the Director had the authority to assess a penalty under the statute. The Division of Housing and Urban Renewal, State Department of Community Affairs, has been charged with administering the Retirement Community Full Disclosure Act. N.J.S.A. 45:22A-3. Certain remedies were made available to both the agency and private individuals injured as a result of violations of the act. Thus, N.J.S.A. 45:22A-11 provides for an injunctive remedy. N.J.S.A. 45:22A-13 provides that the agency may issue a cease and desist order and take such affirmative action as will carry out the purposes of the act. N.J.S.A. 45:22A-16 provides remedies for the injured purchaser. All of these remedies are civil in nature. N.J.S.A. 45:22A-15, while also a remedy, differs from the others in that it constitutes wilful violation of the act as at least quasi -criminal in that it provides for a fine or imprisonment for such violation.

We do not deem it necessary to determine whether N.J.S.A. 45:22A-15 is quasi -criminal or ...


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