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Lobiondo v. Dep't of Community Affairs


March 30, 2009


On appeal from a Final Agency Decision of the Bureau of Homeowner Protection, Claim No. CL-07-0479-3.

Per curiam.


Submitted January 27, 2009

Before Judges Wefing and Parker.

Frank and Justina LoBiondo appeal from a decision of the Department of Community Affairs dismissing their claim under the New Home Warranty and Builders' Registration Act, N.J.S.A. 46:3B-1 to -20. After reviewing the record in light of the contentions advanced on appeal, we reverse.

The LoBiondos purchased a new home in Ventnor that had been constructed by Moraj, LP. In accordance with the statute the LoBiondos received a ten-year warranty from Moraj that commenced on August 11, 2005. Under the regulations enacted pursuant to the statute, the LoBiondos' home was warranted for the first year against defects arising from faulty workmanship and defective materials. It was warranted for two years against defects caused by faulty installation of plumbing, electrical, and heating and cooling systems. N.J.A.C. 5:25-3.2.

The regulations set out the procedure to be followed by a homeowner who experiences defects in a new home. A homeowner who experiences a covered defect within the warranty period must provide written notice to the builder within seven days of the expiration of the applicable warranty coverage. N.J.A.C. 5:25-3.3(d). Upon receipt of such notice, the builder has thirty days within which to conduct an inspection and provide the homeowner a written statement explaining when and how the builder will resolve the problem. If the builder does not respond within thirty days, the homeowner may file a notice of claim and demand formal dispute resolution with the Bureau of Homeowner Protection (the "Bureau"), located structurally within the Department of Community Affairs. N.J.A.C. 5:25-5.5(b)(3). A homeowner must file this notice of claim within fourteen days of the expiration of the thirty-day period afforded to the builder to respond to the homeowner. Ibid.

If the homeowner does file such a claim, the Bureau initiates a conciliation/arbitration hearing. N.J.A.C. 5:25-5.5(c)(3). If that is unsuccessful, the Bureau will decide the claim. If either party is dissatisfied with the Bureau's decision, an appeal can be filed with the Office of Administrative Law. Ibid. If the homeowner prevails, and the builder fails to correct the defect, the homeowner may file for compensation from the New Home Warranty Security Fund. N.J.A.C. 5:25-5.5(e).

The LoBiondos experienced a number of problems during their first year of ownership and notified Moraj as the first-year warranty period was coming to a close. The Bureau inspected the property and issued a decision which the LoBiondos appealed to the Office of Administrative Law. While that appeal was pending, the LoBiondos and Moraj entered settlement discussions. While those discussions were in progress, the LoBiondos encountered additional problems at the home that would, if sustained, be covered under the second-year warranty. They notified Moraj of these problems by letter dated August 10, 2007.

Under the procedural framework set down by the regulations, Moraj had thirty days to respond in writing and the LoBiondos had fourteen days from the expiration of that thirty-day period to file a claim with the Bureau. Thus if the LoBiondos were going to assert a claim with the Bureau with respect to these additional items, they had until September 23, 2007, to do so. While the settlement discussions continued, the LoBiondos filed a claim with the Bureau with respect to these additional problems on October 12, 2007. Their attorney, in filing this claim, noted the following:

In the month of August 2007, shortly after my clients' Year 2 notice of defects was issued to the builder, the parties began extensive negotiations to resolve the Year 1 Claims and Year 2 Claims amicably rather than continue with the OAL proceedings.

The terms of the settlement, which are in the process of being finalized in written form, provide a mechanism for addressing the Year 2 Claims that my clients, in the context of the overall settlement, have accepted as a satisfactory response. Accordingly, there may be no need for your office to adjudicate a formal Claim for Year 2 defects. However, the pending settlement agreement provides for the filing of a Year 2 Claim as a protective measure for my clients. Accordingly, while it is premature at this point to request your office to schedule an inspection, we are forwarding our clients' Year 2 Claim for filing to effectuate the portion of the pending settlement agreement that deals with Year 2 matters.

The attorney for Moraj received a copy of this filing and made no objection.

On October 19, 2007, the Bureau responded that the LoBiondos had entered the third year of their warranty period and that the matters set forth in the letter of October 12, 2007, were no longer covered by warranty. The Bureau explained that only major structural defects are covered under the new home warranty program once the third year commences.

The attorney for the LoBiondos responded by letter dated October 31, 2007, and provided the following contextual explanation.

The builder was timely notified of the defects by correspondence dated August 10, 2007, a copy of which was submitted with our clients' claim. At that time, settlement negotiations had already been underway concerning the Year 1 claims. The Year 2 claims were incorporated into the ongoing discussions, and the builder provided our clients with a satisfactory response on those claims. The parties agreed to document their agreement as to Year 2 claims, as well as a resolution to the very complex Year 1 claims, in a written settlement agreement. Due to the scope of the issues, the settlement agreement has taken some time to finalize.

In the interim we filed the Year 2 claim on behalf of our clients simply as a protective measure in the event that the builder's agreement to address those items is not completed as contemplated under the pending settlement agreement.

He also cited a previous matter the Bureau processed that appeared to be a facially untimely warranty claim, Lloyd v. Bureau of Homeowner's Protection, Department of Community Affairs, 95 N.J.A.R.2d (CAF) 71 (OAL 1995), and requested that the same analysis be applied to his clients' claim.

The LoBiondos and Moraj executed a written settlement agreement on November 10, 2007. The terms of that agreement called for Moraj to pay $22,500, the LoBiondos to withdraw their pending appeal to the OAL and for the parties to fully release each other with the following pertinent exception.

The parties acknowledge that by letter dated August 10, 2007, Moraj was placed on notice of certain claims relating to the electrical, plumbing and HVAC systems. Moraj agrees that LoBiondos have reserved their rights to pursue a Homeowners Warranty Claim ("HOW") for satisfaction of these claims by suppliers and subcontractors. LoBiondos will not seek any additional recovery from Moraj related to years 1 and 2 claims. Moraj hereby permits the filing of this HOW claim and agrees to cooperate fully in the administrative process. Such cooperation includes immediate notification in the form attached as Exhibit "A" to subcontractors and suppliers of the contents of the August 10, 2007 letter and attachments. LoBiondos shall not be responsible to pay any subcontractor to remedy any work performed for Moraj but shall be responsible to contact and schedule the work directly with the subcontractors.

Furthermore, it is hereby agreed and understood that LoBiondos reserve any claims against subcontractors and suppliers and this release in no way shall affect any of those potential direct claims.

The Bureau responded to the letter of October 31, 2007, by letter dated November 14, 2007, simply noting its view that the Lloyd matter was distinguishable and that it considered the claim file closed. This appeal followed.*fn1

Having considered the chronology under which this matter unfolded, we have concluded that the Bureau acted prematurely in not considering the claim of the LoBiondos for defects that were covered under their two-year warranty. We reach this conclusion for several reasons.

Nothing within the statute or the regulations would lead to a determination that the filing deadline contained within the regulations is jurisdictional. Rather, in our view, it is intended to satisfy two purposes: to assure the prompt presentation of claims, when they can be more easily inspected and assessed, and to protect both the builder and the fund from the presentation of stale claims.

Here, the builder made no complaint that the claim was not presented in a timely manner. Indeed, under the parties' settlement agreement, the builder expressly agreed to this procedure. Further, under the approach utilized in the parties' settlement agreement, we do not consider that the fiscal integrity of the fund would be jeopardized by permitting the presentation of this claim.

In Lloyd, supra, the case upon which the LoBiondos relied, the homeowner did not file a claim within the strict time frame of the regulations because the builder had indicated he would resolve the problems. When he did not complete the promised repairs, the homeowner filed his claim. Part of the rationale expressed for permitting presentation of that claim was the view that the homeowner should not be punished for attempting to achieve a private resolution of his disputes with the builder. In our judgment, a similar rationale is applicable to the present situation.

We express no views on the question whether the LoBiondos are entitled to any substantive relief as a result of the filing of this claim. We hold only that they are entitled to have their claim considered.

Reversed and remanded for further proceedings.

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