SENATE, No. 1483

STATE OF NEW JERSEY

214th LEGISLATURE

 

INTRODUCED FEBRUARY 22, 2010

 


 

Sponsored by:

Senator  RONALD L. RICE

District 28 (Essex)

Senator  FRED H. MADDEN, JR.

District 4 (Camden and Gloucester)

 

 

 

 

SYNOPSIS

     The “New Homebuyers’ Bill of Rights Act.”

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act establishing a “New Homebuyers’ Bill of Rights” and supplementing P.L.1977, c.467 (C.46:3B-1 et seq.).

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.  This act shall be known and may be cited as the "New Homebuyers' Bill of Rights Act."

 

     2.  This act is remedial legislation necessary for the protection of the new homebuyers of this State against inequitable practices and contractual provisions and shall be liberally construed to effectuate its purposes and intent.

 

     3.  The Legislature, noting the salutary effect of “The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.), finds it to be in the public interest that the principles of fairness underlying that act be applied to other aspects of the relationship between the builders and buyers of new homes, that the rights of both parties be clearly stated and adequately protected, and that the volume of litigation arising out of this relationship be reduced through utilization of alternate means of dispute resolution.

 

     4.  As used in this act, "new homebuyer" means a person who enters into a contract with a builder either to purchase a new home built or to be built on land owned or controlled by the builder or to have a new home built by the builder on land already owned by the homebuyer.  Terms used in P.L.    , c.    (C.    ) (pending before the Legislature as this bill) act that are defined in section 2 of P.L.1977, c.467 (C.46:3B-2) shall have the meanings set forth in that section.

 

     5.  The Legislature declares the following to be among the rights of new homebuyers:

a.  A builder shall not be permitted to increase the sales price of a new home during the term of an executed contract unless:

(1)  changes are to be made to the new home at the request of the new homebuyer; or

(2)  the increase is based upon a contingency involving increased cost to the builder that was expressly agreed to in the contract.

b.  A new homebuyer shall have the right to have a contract include a mortgage contingency provision with a specified minimum mortgage loan amount, maximum interest rate, minimum term, maximum amount of points and other lender fees, and reasonable amount of time in which to obtain a mortgage loan.  A new homebuyer shall also be allowed to make application to any mortgage lender licensed to do business in New Jersey.

c.  A new homebuyer shall be entitled to have funds held in escrow at closing for any incomplete items, and any incomplete item noted at closing for which no escrow fund is held shall be deemed to be a defect, which the builder shall be required to correct pursuant to “The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.).  The escrowing of funds shall not impair the right of a new homebuyer to file a request for warranty performance for defects in other areas of the home.

d.  All new homebuyer deposit moneys shall be held in escrow to ensure the return of deposit moneys in the event of builder default.

e.  A new homebuyer shall have the right to cancel a new home contract if the builder fails to complete and deliver the new home in accordance with the provisions set forth in this subsection.

(1)  Every new home contract shall set forth a closing date by which construction of the new home is anticipated to be substantially completed.

(a)  Substantial completion of the construction of a new home shall be evidenced by the issuance of a certificate of occupancy.

(b)  A new home contract may provide that issuance of a temporary certificate of occupancy shall evidence substantial completion of the construction of a new home as long as:

(i)  the incomplete work does not affect the habitability of the new home;

(ii)  the contract requires the execution of an agreement setting forth an outside date for the completion of construction and the issuance of a certificate of occupancy; and

(iii)  the contract provides for the establishment of an escrow fund at closing sufficient to ensure performance under the contract or, in case of default, afford the new homebuyer sufficient resources to complete construction.

(c)  The parties may negotiate either an acceleration or a postponement of the closing date, which shall be set forth in writing and signed by the builder and the new homebuyer.

(2)  In the event substantial completion of construction and closing is delayed due to causes beyond the control of the builder, including delays attributable to the issuance of a permit, the completion of an inspection, inclement weather, emergency, or the unavailability of workmen or materials, the closing date may be extended for the period of time lost by the builder by reason of any or all of the foregoing causes; however, the extension period shall not exceed 90 days.

(3)  (a)  If the builder is unable to close on the closing date set forth in the original contract, a date changed by agreement pursuant to paragraph (1) of this subsection, or a delayed date permitted by paragraph (2) of this subsection, the new homebuyer may make time of the essence by providing written notice to the builder that, unless closing occurs on a date specified in the notice, the builder shall be in default of the contract.

(b)  A time of the essence notice shall afford the builder reasonable time to prepare for the closing.  Absent extraordinary circumstances, 14 days’ notice shall be considered a reasonable notice period.

(c)  If construction of the new home is not substantially complete and the builder does not close on the date specified in the notice, the builder shall be in default of the contract.  The contract shall be deemed breached by reason of the default, forfeiting the builder’s rights under the contract, and subjecting the builder to responsibility for all loses and damages sustained or incurred by the new homebuyer as a result of the failure to close, including but not limited to forfeiture of all moneys paid by the new homebuyer to the builder.

f.  A new homebuyer shall have the option to have any dispute with a builder resolved through an alternate dispute resolution procedure authorized by the commissioner by rule.  In the event that the dispute is resolved in favor of a new homebuyer, the builder shall comply with that determination.  A new home contract shall not require a new homebuyer to give up the right to pursue redress through a warranty or through litigation with regard to the contract or defects of any type.

g.  A new homebuyer shall have the right to make progress inspections during construction and during the pre-closing period or to have inspections made by an engineer or home inspection company designated by the new homebuyer.

h.  A new homebuyer shall be entitled to receive, without cost, a copy of the plans and specifications for the new home.  Such plans and specifications shall be a part of the contract and shall not be subject to change without the written agreement of both the new homebuyer and the builder.

i.  The enumeration in this section of certain rights shall not be construed to limit or disparage any other legal or equitable rights of new homebuyers.

 

     6.  The commissioner shall publish, make available for distribution, and post on the Internet a document entitled the “New Homebuyer Bill of Rights,” setting forth the new homebuyer rights expressed in section 5 of this act, and also including therein specifications based upon the following:

     a.  a statement explaining the statutory and regulatory responsibilities of new home builders under the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:27D-119 et seq.), "The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.), "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), and any and all other statutes and regulations applicable to transactions between builders and homebuyers;

     b.  a statement advising the new homebuyer of the right to attorney review of the contract;

     c.  a description of a new homebuyer’s right of access to local construction office files to obtain information concerning the new home and its builder;

     d.  a description of the contents of a typical complete new home construction file;

     e.  a brief and plain language explanation of the scope and purpose of the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:27D-119 et seq.), "The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.), "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), and other laws and regulations designed to protect new homebuyers which new home builders, inspectors, arbitrators, and warranty providers are charged with following and enforcing.

 

     7.  Every contract prepared by or on behalf of a builder shall have a copy of the “New Homebuyer Bill of Rights” produced pursuant to section 6 of this act appended thereto or included therein.

 

     8.  The commissioner shall, not later than 120 days following the closing date on a warranted new home, mail to the new homeowner a notice containing:

     a.  a description of new homebuyer rights and responsibilities in the warranty process,

     b.  an outline of the statutory periods of warranty coverage and an explanation of the types of defects covered under each warranty period,

     c.  an explicit description of the steps that new homebuyers should follow to protect their interests,

     d.  a warning to alert new homebuyers of the importance of adhering to warranty deadlines and advise ways to recognize “lulling” and other delaying tactics,

     e.  a description of a new homebuyer’s rights and responsibilities in arbitration and an explanation of how to proceed if the homebuyer believes that an arbitration award was biased or incompetent, and,

     f.  such additional information as the commissioner may deem to be appropriate and necessary in order to enable new homebuyers to better understand and protect their rights.

 

     9.  The commissioner shall promulgate rules as may be necessary to implement this act.


     10.  A violation of any provision of this act shall be deemed to be a violation of “The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.).

 

     11.  This act shall take effective immediately.

 

 

STATEMENT

 

     This bill would establish a Bill of Rights for buyers of new homes and would require every contract for the purchase of a new home to set forth these rights.  The bill combines several of the recommendations contained in the State Commission of Investigation’s March, 2005 report entitled “The Good, the Bad and the Ugly:  New Home Construction in New Jersey.”

     The Bill of Rights would protect new homebuyers by:

     -Prohibiting increases in the sales price of a new home without the agreement of the homebuyer;

     -Ensuring a fair and realistic opportunity to seek mortgage financing;

     -Allowing homebuyers to require the holding of escrows for items that are incomplete;

     -Making it clear that incomplete items noted at closing for which no escrow fund is held are defects that the builder is required to correct;

     -Requiring that deposit funds must be held in escrow;

     -Allowing buyers to cancel a new home contract if the builder fails to complete and deliver the new home in accordance with the bill’s requirements;

     -Affording new homebuyer’s the option to have disputes with builders submitted to alternate dispute resolution procedures;

     -Specifying a new homebuyer’s right to conduct progress inspections;

     -Allowing a homebuyer to receive, without charge, a copy of the plans and specifications for the new home;

     -Specifying that the plans and specifications can only be changed with the consent of both the homebuyer and the builder; and

     -Providing that the enumeration of these rights does not limit any other legal or equitable rights of new homebuyers.

     Additionally, the bill directs the Commissioner of Community Affairs to publish, make available for distribution, and post on the Internet a document entitled the “New Homebuyer Bill of Rights” setting forth those rights as well as additional rights, to be refined by the commissioner based upon the following:

     -A statement explaining the statutory and regulatory responsibilities of new home builders;

     -A statement advising the new homebuyer of the right to attorney review of the contract;

     -A description of a new homebuyer’s right of access to local construction office files;

     -A description of the contents of a typical complete new home construction file; and

     -A brief and plain language explanation of the laws and regulations designed to protect new homebuyers which new home builders, inspectors, arbitrators, and warranty providers are charged with following and enforcing.

     The bill would require the Commissioner of Community Affairs to mail a notice to a new homebuyer within 120 days following the closing date on a new warranted home.  The notice would contain:

     -A description of new homebuyer rights and responsibilities in the warranty process;

     -An outline of the statutory periods of warranty coverage and an explanation of the types of defects covered under each warranty period;

     -An explicit description of the steps that new homebuyers should follow to protect their interests;

     -A warning to alert new homebuyers of the importance of adhering to warranty deadlines and advise ways to recognize “lulling” and other delaying tactics;

     -A description of a new homebuyer’s rights and responsibilities in arbitration and an explanation of how to proceed if the homebuyer believes that an arbitration award was biased or incompetent; and

     -Other information the commissioner may deem necessary and appropriate to enable new homebuyers to protect their rights.

     Violations of this bill would be deemed to be a violation of "The New Home Warranty and Builders' Registration Act" and therefore subject the violator to the sanctions of revocation or suspension.