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Coastal Group v. Planned Real Estate Development Section

Decided: August 5, 1993.


On appeal from a Final Decision of the Commissioner of the Department of Community Affairs.

Petrella, Long and D'Annunzio. The opinion of the court was delivered by Long, J.A.D.


On this appeal, appellant, The Coastal Group, challenges, among other things, the authority of respondent, Planned Real Estate Development Section, Department of Community Affairs (DCA), to order rescission of contracts which violate The Planned Real Estate Development Full Disclosure Act, N.J.S.A. 45:22A-21 to -42, and the regulations promulgated thereunder. We hold that, pursuant to N.J.S.A. 45:22A-37, DCA has the power to order rescission.


This case centers around a condominium project known as Riva Pointe located along the waterfront in Weehawken, New Jersey. The project is being constructed in three phases. The Coastal Group is a partnership which applied for registration as the

developer of Phase 1. As part of its application for registration, Coastal submitted a proposed Public Offering Statement and form Purchase Agreement for DCA's approval. Because DCA was satisfied that the documents complied with the applicable regulations, they were approved for use effective April 12, 1989.

As approved, the Purchase Agreement provided the purchaser with an "estimated" date of closing and gave Coastal the option to give ten days written notice of a more exact date:

The Seller may notify the Purchaser in writing of the date of the closing. The Seller shall give the Purchaser at least ten (10) days written notice of the closing date and time. The estimated date of closing is ___ ("Closing Date"). Nothing contained herein shall prevent the Seller and the Purchaser from agreeing on a closing date without the necessity of written notice, provided that no default may be declared unless written notice is supplied as aforesaid.

While the Purchase Agreement refers to an estimated closing date, the Public Offering Statement makes clear that the date is, in fact, intended to be the controlling date for purposes of the purchaser's contractual obligation to close.

"Closing Date" means the date of closing pursuant to the Public Offering Statement unless another date is set forth in the Purchase Agreement covering a Unit.

In anticipation of any unforeseeable delays in the construction of the units, paragraph 9 of the Purchase Agreement afforded Coastal a "grace period" of 120 days after the estimated closing date to proceed with closing:

Seller shall not be liable for any loss or damage due to any delay in closing of title as a result of circumstances involving weather, war, strikes, lock-outs or other labor disputes involving the Seller or suppliers, delays in issuing of permits, or Certificates of Occupancy, inspections or any other similar reasons. If the closing of title is delayed for a period of 120 days or more following the estimated date of closing set forth in this Purchase Agreement, Purchaser may terminate the within Agreement without penalty and Seller shall refund all money paid on account by Purchaser without interest, in addition to a reimbursement of the reasonable costs of title search and surveys actually incurred by Purchaser, and both parties shall thereupon be discharged of all liability under this Purchase Agreement.

If the estimated closing date was not honored by Coastal and the purchaser had not elected to terminate the Agreement at the expiration of the grace period, paragraph 5 afforded Coastal the option to schedule a closing date after the estimated closing date

so long as it provided the purchaser with ten days written notice of a new "time of the essence" closing date:

If the date of the closing passes without title having been conveyed Seller may declare that "time is of the essence" by providing Purchaser with notice thereof and a closing date such date to be no earlier than ten (10) days from the date of the notice declaring time of essence. If the closing does not take place on the Closing Date as extended by said notice declaring time of the essence, to Purchaser and failure to close is not caused by any acts or omissions of Seller, then and in that event Purchaser shall be in default of this Agreement and Seller shall be entitled to its remedies as provided in this Agreement.

However, paragraph 5.7 of the Purchase Agreement made clear that the purchaser could not be required to close, nor could any notice of closing issue, until the unit was actually ready for occupancy:

The Purchaser understands that he will be under no obligation to close title unless the Seller provides a Temporary or Permanent Certificate of Occupancy for the Unit issued by the Township of Weehawken, at or before the time of closing, such Certificate of Occupancy being conclusive evidence that the Residential Unit is substantially complete according to the plans and specifications and is ready for the closing of Title.

Beginning in April, 1989, based upon the representations made by Coastal in the Purchase Agreement, the purchasers involved in this matter signed Purchase Agreements to buy units in Riva Pointe. Each purchaser gave a deposit of approximately 10% of the selling price. Coastal then set estimated closing dates that were generally one year later. Coastal was unable to complete the units in a timely fashion. After the expiration of the grace period, and no Certificates of Occupancy having been issued, the purchasers gave Coastal notice that they were terminating the Purchase Agreement and demanded the return of their deposits. Coastal refused to return the deposits, prompting the purchasers to file complaints with DCA.

After an investigation of three complaints (Parker, Rohl & Harth), DCA requested that Coastal explain why it failed to close as required by certain of the agreements. This action was taken by DCA pursuant to its statutory authorization to conduct "private investigations" in order to determine whether the Act ...

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