26A — May 31 - June 13, 2013 — Owners, Developers & Managers — Mid Atlantic Real Estate Journal
www.marejournal.com
C onstruction L aw
By Jason T. Shafron, Esq. Real estate developers in New Jersey: . . . continued from page 23A
any are familiar with the Americans with Disabilities By Maria Elliot, Barley Snyder New Standards for ADA - New Liabilities? M cil/American National Stan- dards Institute.
have known, of the existence of the facts by reason of which the liability is alleged to exist. N.J.S.A. 45:22A-37(c). Under the PREDFDA, a developer who makes a misleading statement or untrue state- ment of material fact, or omits a material fact from either the application for registration, any amendment thereto, or the public offering statement, with regard to the disposition of real estate, may be liable to the purchaser for double damages suffered, court costs and attorney’s fees. N.J.S.A. 45:22A-37(a). Pursuant to the PREDFDA, “every general partner, officer, or director of a developer” is jointly and severally liable with the de- veloper unless the individual “sustains the burden of proof that he did not know and in the existence of reasonable care could not have known of the existence of the facts by reason of which liability is alleged to exist.” N.J.S.A. 45:22A-37(c). This potential personal li- ability is limited to misrepre- sentations or omissions in the public offering statement or registration application and can be overcome if the pur- chaser knew of the untruth or omission, the purchaser did not rely on such informa- tion, or the developer did not know or, in the exercise of reasonable care, could not have known of the untruth or omission. Under the CFA, the purchaser is not required to show such reliance or decep- tion. Likewise, the RESFDA provides a host of remedies and penalties related to de- ceptive advertising and sales of real estate, including fines of up to $50,000 per violation and provides for personal liability limited to the same extent as contained in the PREDFDA. Real estate developers may now find that the limited areas of potential personal liability previously existing under the PREDFDA, the RESFDA and New Jersey’s environmental laws may be greatly expanded by applica- tion of the Supreme Court’s rationale in Allen for finding personal liability under the CFA for principals, officers and employees of contrac- tors violating administrative regulations. Jason T. Shafron, Esq. is a partner in Archer & Greiner, P.C.’s commercial litigation department. n
inspection certificate, N.J.A.C. 13:45A-16.2(a)(10)(ii), and
not owners, lessors, lessees, or operators of the public ac- commodations they design. However, other courts look beyond the plain language and hold them liable, reason-
3) substitut- ing products or material for those in the contract or otherwise represented without con- sent, N.J.A.C. 1 3 : 4 5 A -
Act of 1990 (“ADA”) for access ibi l - i t y p l ac e s o f p u b l i c a c c ommo - dation, but s ome may not be fa- miliar with
Since there is room for er- ror whenever new standards are instituted and there is a
Jason T. Shafron
The ADA regulations prohibit a private entity who owns, leases, or operates a public accommodation from discriminating against any individual from the equal enjoyment of goods, services, and facilities of places of public accommodation. Public accommoda- tions include hotels, restaurants, stadiums, theatres, museums, exercise facilities, and basically any facility open to the public, such as law and accounting offices.
16.2(a)(3)(iv). After review- ing the regulations and the definition of “seller,” the Court found a distinction between principals, who may be broadly liable, and employees, who in fairness cannot be held indi- vidually liable for an employ- er’s policies over which they had no input or control. Thus, for example, if the principals in a corporation adopt a course of conduct in which written contracts are never used, an employee who merely complies with that policy should not be personally liable. But, where an employee substitutes an inferior product specified in the contract without the knowl- edge of the homeowner, the employee may be found person- ally liable under the CFA. In addition to potential regulatory violations which may give rise to personal liability under the CFA for both contractors and devel- opers, real estate developers may now also experience an increased risk of potential personal liability for any claim under the CFA. For example, the CFA was made specifically attributable to condominium development in Cybul v. Atrium Palaces Syndicate, 272 N.J. Super. 330 (App. Div.), certif. den., 137 N.J. 311 (1994) where the Court found that the plaintiff could recover pursuant to the CFA even though other rem- edies were available pursu- ant to PREDFDA. Likewise, in Lemendello v. Beneficial Management, 289 N.J. Su- per. 489 (App. Div. 1996), the court held that violations of the Consumer LoanAct could be used as evidence of conduct prohibited by the CFA and that the CFA was a remedy cumulative to those provided under the Consumer Loan Act. Since its adoption in 1977, the PREDFDA also provides for personal liability of a partner, officer or director of a developer unless he or she did not know, and in the exercise of reasonable care, could not
Maria Elliot
the new 2010 standards that have been issued by the De- partment of Justice. As of March 15, 2012, any new construction or altera- tions of existing facilities must comply with these new standards. These new standards also address rec- reational facilities, such as swimming pools and golf courses, which in the past were not required to be de- signed or constructed with accessibility components. These new standards obvi- ously create new costs and re-raise issues of compliance and liability for owners, op- erators/tenants and design- ers. Revisiting the language of the ADA and case law provides valuable guidance in confronting these new standards. The ADA regulations pro- hibit a private entity who owns, leases, or operates a public accommodation from discriminating against any individual from the equal enjoyment of goods, services, and facilities of places of pub- lic accommodation. Public accommodations include ho- tels, restaurants, stadiums, theatres, museums, exercise facilities, and basically any facility open to the public, such as law and accounting offices. Courts have varied in de- termining whether architects and engineers would be liable under theADA. Some courts have followed the plain lan- guage of the statute and have determined that they are not liable under the ADA since they technically are
ing that if architects are not held liable, then conceivably no entity would be liable for construction of a new facil- ity that violates the ADA. To some extent, this inter- pretation makes sense since owners and operators rely on these professionals to design facilities in compliance with the ADA standards. The regulations also point out that landlords and ten- ants of public accommoda- tions cannot discriminate but the responsibility for compliance can be deter- mined by contract between the parties. This allocation of responsibility is important depending on which party is doing the fit-out for the premises. Besides ADA standards, there are also construction codes from individual States that address accessibility, which adds another layer of complexity to construction. Some States adopt the 2010 ADA Standards but others adopt either all or portions of the “Accessible and Usable Buildings and Facilities” standard of the International Code of Coun-
question as to which party could be liable under the ADA, the prudent thing is to spell out the responsibilities and liabilities in an agree- ment, whether it be a design or construction contract or a lease agreement. For example, if the tenant is completing the fit-out, the landlord should include a clause that clearly states that the tenant is fully re- sponsible for compliance with the ADA standards, as well as including an indem- nification clause to protect the landlord by having the tenant pay for any ADA lawsuits filed against the landlord. In turn, that ten- ant would include similar clauses in its agreement with its architect and/or engineer. These steps help to protect against potential liability in the event the public accom- modation is determined not to be in compliance with the ADA standards. Maria Elliott is a part- ner with Barley Snyder, a Pennsylvania regional law firm. Maria focuses her practice in the Real Estate and Construction industries. n
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