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Department of Community Affairs v. Atrium Palace Syndicate

Decided: October 20, 1992.

DEPARTMENT OF COMMUNITY AFFAIRS, DIVISION OF HOUSING AND URBAN DEVELOPMENT, COMPLAINANT-RESPONDENT,
v.
THE ATRIUM PALACE SYNDICATE, RESPONDENT-APPELLANT



On appeal from the Department of Community Affairs.

Pressler, R.s. Cohen and Muir, Jr. The opinion of the court was delivered by Cohen, R.s., J.A.D.

Cohen

[259 NJSuper Page 579] The history of the Atrium Palace residential condominium development, the intervenors' contracts, the failure of Atrium Palace Syndicate to complete many of the units it sold, and the enforcement efforts of the buyers and the Department of Community Affairs are all described in our prior opinions. 244 N.J. Super. 329, 582 A.2d 821 (App.Div.1990), certif. denied, 126 N.J. 317, 598 A.2d 878 (1991); 247 N.J. Super. 511, 589 A.2d 1046 (App.Div.), certif. denied, 126 N.J. 338, 598 A.2d 895 (1991). We will not repeat that history here. These appeals are from two Department of Community Affairs decisions.

One of them held Atrium Palace Syndicate (APS) liable for penalties of $100,000. The other ruled that proceedings in the Department were not appropriate to assess APS double damages and attorneys' fees in favor of the intervenor buyers, but that only a court could order those remedies. We consolidate the three appeals for the purpose of decision. We reverse the penalty imposition, and we affirm the Department's denial of jurisdiction to assess double damages and attorneys' fees.

The penalty proceedings offer a cornucopia of procedural and substantive issues. We find it unnecessary to deal with all of them, but we do not imply that they are insignificant.

The two violations charged in the Department's decision were:

(a) APS violated N.J.A.C. 5:26-6.5(a)2 by failing to secure temporary certificates of occupancy for the condominium units it scheduled for closing for March 30, 1989;

(b) APS violated N.J.A.C. 5:23-2.23(a) by scheduling closings on units that could not be occupied.

The charges in the Department's initial notices of violation were three in number, and were different from the charges ultimately upheld by the Commissioner. We pass the procedural issues presented by this metamorphosis.

Neither of the violations ultimately found will support the penalties imposed by the Department. N.J.A.C. 5:26-6.5(a)2 is a regulation adopted pursuant to the Planned Real Estate Development Full Disclosure Act (PREDFDA). N.J.S.A. 45:22A-21 to -42. The cited regulation proscribes a list of contractual terms, and does not deal with sponsors' post-contract nonperformance. It proscribes contracts requiring a closing before issuance of a temporary certificate of occupancy for the unit. APS's contracts plainly did not violate the proscription. What APS did was secure documents that were entitled temporary certificates of occupancy but which barred occupancy until vital kitchen installations were completed. We held that such certificates did not evidence completion of the units

and thus obligate the buyers to close, but we certainly did not say that they created defects in the contracts.*fn1 244 N.J. Super. at 331-33, 582 A.2d 821.

N.J.A.C. 5:23-2.23 bars use or occupancy without certificates of occupancy. It is part of the Uniform Construction Code and thus not a proper basis for penalty proceedings under N.J.S.A. 45:22A-38. Such proceedings are expressly confined to violation of "any provision of this act [PREDFDA] or of a rule adopted under it." The proceedings did not meet procedural standards under the Uniform Construction Code. See N.J.A.C. 5:23-2.30, et seq. In addition, since no unlawful use ...


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