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New Jersey Association of Realtors v. New Jersey Department of Environmental Protection

February 25, 2004


On appeal from the adoption of N.J.A.C. 7:26E-8.2(g)(5) by the Department of Environmental Protection.

Before Judges A. A. Rodriguez, Lefelt and Payne.

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


Argued: February 10, 2004

Pursuant to R. 2:2-3(a)(2), the New Jersey Association of Realtors® (NJAR)*fn1, challenges the validity of N.J.A.C. 7:26E-8.2(g)(5), a regulation adopted by the Department of Environmental Protection (DEP) effective February 3, 2003.*fn2 We conclude that N.J.A.C. 7:26E-8.2(g)(5) is void ab initio because it is in conflict with the New Residential Construction Off-Site Conditions Disclosure Act, set out at N.J.S.A. 46:3C-1 to -12 (Disclosure Act).

The operative facts are undisputed. The DEP adopted a series of regulations called the Technical Requirements for Site Remediation (Tech Rules). The Tech Rules establish the minor technical requirements to investigate and remediate environmentally contaminated sites. N.J.A.C. 7:26E-1.1. The Tech Rules were implemented by the DEP to effectuate several legislative enactments.*fn3 A person responsible for conducting site remediation must record with the County Register a Declaration of Environmental Restriction, commonly known as a"deed notice," in order to provide notice of any conditions or restrictions on real property due to site contamination. N.J.A.C. 7:26E-8.2(a). The Deed Notice Rule, codified at N.J.A.C. 7:26E-8.2(g), requires that the person responsible for conducting any remediation send copies of the recorded deed notice to certain entities. In 2003, the Deed Notice Rule was amended so that additional entities would receive deed notices. According to the DEP,

[Its] objective in identifying this broader distribution of copies of deed notices concerning contaminated properties is to inform a larger segment of society that residual contamination exists on these properties and that a closer look may be necessary prior to certain actions and decisions.

The subsection of the Tech Rules challenged in this appeal, 8.2(g)(5), requires that the"New Jersey Realtors Association" be one of the entities that must be notified. N.J.A.C. 7:26E-8.2(g)(5). There is no"New Jersey Realtors Association." However, the DEP concedes that the regulation was intended to apply to NJAR. Regarding the inclusion of the"New Jersey Realtors Association" in the Deed Notice Rule, the DEP's position is that:

The [DEP] included the New Jersey Realtors Association as one of the groups to receive copies of deed notices because, under New Jersey law, realtors have a legal obligation to inform prospective purchasers of the presence of certain properties that may pose risk to human health and safety. See [Disclosure Act], N.J.S.A. 46:3C-1 et seq.

Before the adoption of the 2003 Tech Rules Amendment, in May 2000, the DEP sent a "Notice of Opportunity for Interested Party Comments on Technical Requirements for Site Remediation." 32 N.J.R. 1694(a). In January 2002, the DEP published a Rule Proposal setting forth the DEP's intent to readopt with amendments the Tech Rules. 34 N.J.R. 170(a). During the rulemaking and re-adoption process, the DEP gave public notice in the New Jersey Register, State House Press Room, on the agency website and in the Trenton Times and the Asbury Park Press. Over 600 public comments were received on the rule proposal in general. A public hearing was held at which twelve persons testified and fifty-eight persons made comments.

Nonetheless, it is undisputed that NJAR did not receive an individual notice. NJAR did not participate in the hearings, nor did NJAR submit written comments. At oral argument, NJAR's counsel indicated that the organization was unaware of the amendment until it received a copy of a deed notice. Indeed, up to the present at least eleven deed notices have been sent to NJAR in compliance with N.J.A.C. 7:26E-8.2(g)(5).

NJAR filed a complaint for declaratory judgment and an order to show cause against the DEP in the Law Division. The DEP opposed the application arguing that the Appellate Division had exclusive jurisdiction pursuant to R. 2:2-3(a)(2). The parties agreed that the Law Division action would be dismissed without prejudice and the matter would proceed in the Appellate Division. Since the filing of this action, the DEP has decided to repeal N.J.A.C. 7:26E-8.2(g)(5) because it has determined that the regulation is "imperfect, and that it, perhaps, has unintended impacts."

On this direct appeal, NJAR contends that N.J.A.C. 7:26E-8.2(g)(5) is void because it contravenes the Disclosure Act in two ways. First, the regulation imposes a duty on NJAR and its members to provide purchasers with notice of off-site conditions disclosed in deed notices received by NJAR. Second, it imposes a duty to compile lists of off-site conditions in order to provide such notice. The effect of the regulation is to impose a duty on NJAR members and other real estate licensees that is contrary to the Disclosure Act. We agree.

The Disclosure Act requires a seller or builder engaged in the sale of newly constructed residential real estate to provide a purchaser with notice of the availability of lists of off-site conditions maintained by municipal clerks, including the municipality within which the real estate is located, as well as municipalities within one-half mile of the real estate. N.J.S.A. 46:3C-8. "Off-site conditions" are defined, in part, as "those conditions which may materially affect the value of the residential real estate property." N.J.S.A. 46:3C-3. The term"seller" as used in the Disclosure Act includes ...

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