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Bracken v. Princeton Estates

April 19, 2002


On appeal from New Jersey Department of Community Affairs, CAF 2398-97.

Before Judges Baime, Newman and Fall.

The opinion of the court was delivered by: Baime, P.J.A.D.


Argued March 27, 2002

Suzanne and Thomas Bracken appeal from a decision of the Commissioner of the Department of Community Affairs denying their claim for a defective roof under the New Home Warranty Security Program. This is the second time this case has come before us. In our earlier unreported opinion, we remanded the matter to the Commissioner for clarification of the grounds upon which she denied the Brackens' claim and for further development and exploration of the issues presented. In her final decision on remand, the Commissioner concluded: (1) the Brackens' claim was made prior to settlement and receipt of the certificate of occupancy from the builder and was thus not cognizable under the New Home Warranty Security Program, and (2) the Brackens' claim was submitted to an arbitrator and was therefore barred by the statutory election of remedies provision. We affirm the Commissioner's decision.


On March 25, 1993, the Brackens entered into a contract with Princeton Estates, Inc. for construction of a new home in Montgomery Township. Pursuant to the agreement, the Brackens paid Princeton an initial deposit which was followed by a series of progress payments upon the completion of various portions of the project. By fall of 1994, the Brackens had paid all but approximately $20,000 of the purchase price.

In March 1994, while construction was still in progress, a snowstorm alerted the Brackens that the recently installed roof leaked significantly. As a result, on July 11, 1994, the Brackens wrote a letter to Princeton informing it of the defect as well as other construction-related issues. Upon completion of the construction, Princeton obtained a certificate of occupancy from the municipality, but refused to provide the Brackens with a copy, because the Brackens failed to attend the scheduled settlement and declined to make the final payment. Notwithstanding Princeton's alleged failure to correct the defects, the Brackens obtained a copy of the certificate of occupancy from the municipality and moved into the house on August 26, 1994.

On September 26, 1994, the Brackens placed $20,000, representing the unpaid balance due on the contract, into an escrow account to be administered by their attorney "as payment for items needed to be done to complete our new home." Thereafter, the Brackens notified Princeton, by letter dated October 9, 1994, that they intended to file a new home warranty claim with the Bureau of Homeowner Protection if the reported defects were not corrected immediately. When Princeton failed to respond to their letter, the Brackens, on October 22, 1994, filed a notice of claim under the New Home Warranty Program, specifically alleging roof defects and warping exterior doors.

On October 26, 1994, the Bureau wrote to Princeton regarding the Brackens' complaints and requested a written explanation. Princeton responded on November 2, 1994. In its letter, Princeton informed the Bureau that, after it had substantially completed the house and had obtained a certificate of occupancy, the Brackens refused to attend the settlement. Princeton also noted that it had applied for arbitration with the American Arbitration Association (AAA) to resolve the areas of disagreement with the Brackens. Princeton contended that the warranty was not in effect until the dispute was resolved, and the original certificate of occupancy was given to the Brackens.

On November 10, 1994, the Bureau wrote to the Brackens informing them that "[u]ntil the dispute is resolved regarding settlement of the home, [it] [could not] proceed with [their] [notice of claim]." The Bureau followed this letter with correspondence dated December 19, 1994, which explicated on its reasons for concluding that the Brackens' claim was not ripe for resolution. In its December 19 letter, the Bureau explained:

It is apparent from both your letters and the builder's letter that the contract that you entered into is not settled. The New Home Warranty Program is not authorized by law to adjudicate contractual disputes. For the purposes of determining when a builder incurs the obligation to provide a warranty, we look to the point in time when he delivers a Certificate of Occupancy. Both you and the builder confirm that the builder did not deliver a Certificate of Occupancy, but that nevertheless you took up residency.

I note that your contractual dispute is the subject of a pending arbitration hearing pursuant to the terms of your contract. I trust that the matter will be resolved through this process. At that time we will evaluate whether there continues to be an obligation on the part of the builder to supply a warranty.

Thereafter, the Brackens submitted a counterclaim in the arbitration proceedings with Princeton. They asserted in pertinent part:

[Princeton] has been paid over 95% of our contracted amount to build our home. We placed in escrow $20,000 on 9/26/94 to cover the balance due on our contract which is $19,654. [Princeton] has not completed all contract work and has not corrected many construction defects and deficiencies. Several are of major significance as evidenced by a defective roof (in need of replacement due to major leakage problems); ineffective windows which do not close (our Marvin warranty has been voided) and defective doors. In addition to the three mentioned above, there is a sizable list of other work needing to be completed and corrected. [Princeton] has blocked our access to the Homeowner's Warranty Program as a course of action and this has left us in a precarious and dangerous position with bad weather approaching. [Princeton] has taken no action to correct the list of defects and unfinished items for several months and has threatened subcontractors, who worked on our house, and, therefore, blocked them from doing any work. All of these subcontractors should have been paid in full unless [Princeton] has violated our contract. I say this because the balance due under our contract, that is held in escrow, is [Princeton's] profit, by [its] own admission.

In the early part of 1993, [Princeton] begged us to give [it] our home to build as [it] wanted to "get back on [its] feet." Unfortunately we believed [its] promises and assurances which ...

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