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Appeals Court Finds State Licensing Does Not Override Local Zoning Banner Image

Appeals Court Finds State Licensing Does Not Override Local Zoning

Month: December 2025

Appeals Court Finds State Licensing Does Not Override Local Zoning

Posted on by Jessica Haspel

What You Need to Know

This decision reinforces a key principle in New Jersey land use law:

  • State licensing does not override municipal zoning. A facility licensed by the Department of Community Affairs (DCA) must still comply with all applicable local zoning ordinances.
  • Property owners should seek zoning approvals or variances before operating any regulated residential or business facility in a restricted zone.
  • The Municipal Land Use Law (MLUL) continues to provide municipalities broad authority to determine land use within their boundaries, even where overlapping state regulations exist.

Introduction

In State v. Ruhnke, No. A-1549-23 (Super. Ct. App. Div. June 18, 2025), the Appellate Division, in a per curiam opinion, affirmed the conviction of a property owner for unlawfully operating a cooperative sober living residence (“CSLR”) in a residential zone in violation of a local zoning ordinance. The decision makes clear that a state-issued license does not exempt property owners from complying with local zoning laws.

The Background

The case arose from the defendant’s operation of a CSLR on property located in West Caldwell, New Jersey. The property consisted of two detached single-family dwellings. One was occupied by the defendant and his wife as their primary residence and the other was used as a CSLR for individuals recovering from drug or alcohol addiction. CSLRs are residential settings serving only as a home for individuals recovering from drug or alcohol addiction.

Under West Caldwell Ordinance § 20-4, land in the residential district may be used only for purposes permitted in that zone. The township’s zoning official issued a notice of violation, finding that the CSLR constituted a non-permitted use.

While the defendant appealed that violation, he also applied to the DCA for a Class F license to operate the CSLR under N.J.A.C. 5:27-1, which governs rooming and boarding houses. The DCA approved the license, but the township issued a second notice of violation, maintaining that the CSLR use was still impermissible under local zoning laws.

The DCA informed the defendant that its licensing approval did not supersede local zoning requirements, noting that applicants are expected to ensure zoning compliance independently. The township subsequently filed a complaint, and both the municipal court and the Law Division found the defendant guilty of violating the zoning ordinance.

The Appeal

On appeal, the defendant argued that N.J.A.C. 5:27-2.1, which governs the licensing of rooming and boarding houses, granted the DCA exclusive authority over the regulation of CSLRs and that municipal zoning approval was therefore unnecessary. The Appellate Division disagreed.

Applying the two-court rule, the appellate panel noted it would not disturb concurrent factual findings by the lower courts absent a clear showing of error. The court reviewed the legal issues de novo, however, affirming that the Municipal Land Use Law (MLUL) authorizes municipalities to regulate the use of land through zoning ordinances.

N.J.S.A. 40:52-1 provides municipalities with authority to license and regulate certain businesses (including boarding and rooming houses), but such municipal licensing authority is distinct from, and does not substitute for, zoning approval under the MLUL. The court emphasized that the MLUL and N.J.S.A. 40:52-1 operate in separate spheres of municipal authority: one governing land use, the other regulating business activity.

Even if the defendant was initially unaware of the zoning requirements, the court noted that the DCA’s correspondence explicitly stated that compliance with local zoning laws remained the property owner’s responsibility.

Takeaways

The Appellate Division’s decision in State v. Ruhnke serves as a reminder that state and municipal regulatory frameworks operate independently. Municipalities retain the power to control land use through zoning, while the DCA’s licensing authority ensures proper operation of certain facilities.

Pending legislation would explicitly subject DCA‑regulated rooming and boarding houses to municipal land use regulation and require proof of certain local approvals before issuance of a Class F CSLR license. As of December 18, 2025, Assembly Bill A3981 passed the Assembly and was received in the Senate on May 29, 2025 (referred to Senate State Government, Wagering, Tourism & Historic Preservation); it has not been enacted with a link to the official status page A3981 status and the Assembly Appropriations statement A3981 committee statement.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Keshav Agiwal at kagiwal@riker.com.

Georgia Federal Court Determines Physical Defects on a Property Fall Outside Title Insurance Coverage

Posted on by Jessica Haspel

What You Need to Know

  • Title Marketability vs. Economic Marketability: Title insurance covers defects affecting title (legal rights and incidents of ownership), not defects affecting the physical condition or use of property (economic marketability).
  • Physical Defects Are Not Title Defects: Without purchasing additional specific endorsements to a title policy, issues like lack of sewer line access, inability to obtain building permits, or other physical property conditions do not constitute unmarketability of title, even if they significantly impact the property's value or intended use.
  • Policy Language Matters: The court interpreted "unmarketable title" narrowly based on the policy's specific definition, focusing on matters that would release a buyer from their contractual obligation when there is a condition requiring marketable title, not just any defect that might make a buyer unwilling to purchase.
  • Transferability Test: The determining factor in determining whether title is unmarketable is whether the defect would prevent the owner from transferring title to another purchaser. Physical defects that do not affect the ability to convey legal ownership don't render title unmarketable.

Introduction

In Luster v. Investors Title Insurance Company, No. 1:25-cv-00791, 2025 U.S. Dist. LEXIS 188119 (N.D. Ga. Sept. 12, 2025), the United States District Court for the Northern District of Georgia considered whether defects in the physical condition of real property affect marketability of title under Georgia law. The court ultimately found that they did not and granted the title company’s motion to dismiss a claim for coverage.

Background

In January 2024, plaintiff Reginald Luster (“Luster”) purchased a title insurance policy (the “Policy”) from Investors Title Insurance Company (“Investors”) in connection with his purchase of real property in Fulton County, Georgia (the “Property”). In relevant part, the Policy stated that it insured against “loss or damage . . . sustained or incurred by the Insured by reason of” unmarketable title. Unmarketable title was defined in the Policy as “[t]itle affected by an alleged or apparent matter that would permit a prospective purchaser or lessee of the Title or lender on the Title to be released from the obligation to purchase, lease, or lend if there is a contractual condition requiring the delivery of marketable title.”

In February 2024, Luster applied for a septic tank permit for the Property. That application was denied because, unbeknownst to Luster at the time he purchased the Property, the subdivision in which the Property was located had access to sewer lines across the street, but the developer of the subdivision had not connected them. Luster was therefore unable to subsequently obtain a residential building permit. As a result, Luster submitted a claim for coverage to Investors. Investors denied coverage.

Luster filed a complaint against Investors seeking coverage under the policy. The instant case came before the court as a result of Investors’ motion to dismiss the complaint for failure to state a claim and Luster’s motion for summary judgment.

Decision

In support of his claim, Luster argued that title would be unmarketable because, had he known that he would be unable to obtain a residential building permit, he would have demanded to be released from the obligation to purchase the Property. However, the court rejected this argument and found that the policy definition of “unmarketable title” did not cover every matter that would release an objective, prospective purchaser from their obligation to purchase; rather, it covered only matters that would release a prospective purchaser if there was a contractual condition requiring the delivery of marketable title.

In reviewing prior case law, the court found that Georgia courts had distinguished between title and property, and that defects in the physical condition of a property do not constitute unmarketability of title. Said another way, there is a legal distinction between economic unmarketability — which affects physical conditions affecting the use of real property — and title marketability — which affects legal rights and incidents of ownership.

As to Luster’s claims, neither the defect in the Property’s sewer line access nor his inability to use the Property for a particular use would prevent Luster from transferring title to another purchaser. They would also not release a would-be buyer from the contractual obligation to purchase the Property. For these reasons, the court granted Investors’ motion, denied Luster’s motion, and found that Luster had not suffered a covered loss under the Policy.

Takeaway

This case reinforces the distinction between physical defects to real property and defects to an owner’s title. In a typical title insurance policy, only the latter would require coverage. Additional coverage can be obtained by purchasing specific endorsements that cover zoning (ALTA endorsements 3-06 to 3.4-06), utility access (ALTA endorsement 17.2-06), easements and encroachments (ALTA endorsements 28-06 to 28.3-06), and identified risks (ALTA endorsement 34-06), among other issues.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Associate Matthews A. Florez at mflorez@riker.com.

NJ Supreme Court Clarifies Personal Guaranty Requirements for Corporate Officers

Posted on by Jessica Haspel

What You Need to Know

  • No Two-Signature Requirement – New Jersey does not impose a bright-line rule requiring separate signatures for corporate and individual obligations.
  • Intent Controls – Courts enforce personal guaranties only when the individual clearly manifests an intent to be personally bound.
  • Drafting Guidance – To impose personal liability on corporate officers, drafters should either:
    • Prepare a separate personal guaranty agreement;
    • Include dual signature lines in the same document; or
    • Clearly articulate in the agreement that a single signature binds the officer individually in addition to the corporation.

Introduction

In Extech Building Materials, Inc. v. E&N Construction, Inc., 260 N.J. 63 (2025), the New Jersey Supreme Court considered whether a corporate officer can be personally liable for a company’s debt through a single signature on a corporate agreement. The Court held that a valid personal guaranty requires an unambiguous manifestation of intent, and confirmed that a single signature on a corporate contract does not automatically suffice to impose personal liability.

Background

Plaintiff Extech Building Materials, Inc. (“Extech”) entered into an agreement with Defendant E&N Construction, Inc. (“E&N”) to facilitate the sale and delivery of building materials. The agreement contained 6 provisions, the sixth of which noted, “IN CONSIDERATION OF EXTECH BUILDING MATERIALS, ITS SUBSIDIARIES OR AFFILIATES EXTENDING CREDIT, WE JOINTLY AND SEVERALLY DO PERSONALLY GUARANTEE UNCONDITIONALLY, AT ALL TIMES, TO EXTECH, ITS SUBSIDIARIES OR AFFILIATES, THE PAYMENT OF INDEBTEDNESS OR BALANCE OF INDEBTEDNESS OF THE WITHIN NAME[D] FIRM. THIS GUARANTEE SHALL CONTINUE UNTIL 10 FULL BUSINESS DAYS AFTER GUARANTOR SENDS A WRITTEN REVOCATION OF THE GUARANTEE TO EXTECH.”

Two E&N representatives signed the document, one of whom was Joaquim G. Ferreira, the purported president of E&N. Under each of the signature lines in agreement were the pre-printed words, “No Title,” leaving unclear whether the representatives were signing the agreement on behalf of E&N, personally, or both.

After signing, Extech supplied materials pursuant to the agreement, but E&N failed to remit payment. Extech therefore filed a lawsuit against E&N and both representative signatories, claiming that the representatives were personally liable.

During discovery, Extech moved for summary judgment against both representatives. Ferreira cross-moved for dismissal of the claims against him, and the other representative joined in Ferreira’s cross-motion.

As to Ferreira’s cross-motion, the trial court emphasized that there was no evidence to impose personal liability since there was no separate and distinct obligation making clear that the representatives were responsible as guarantors for the debt. Accordingly, the trial court granted summary judgment in favor of Ferreira and dismissed the complaint against the other representative.

The Appellate Division reversed, holding that factual disputes regarding intent precluded summary judgment and reinstated Extech’s claims. Only Ferreira appealed to the Supreme Court, which granted certification. The question before the Court was whether a corporate officer can be personally liable under a contract executed on behalf of a company with a single signature.

The Court’s Analysis

Ferreira argued that any ambiguous guaranty language must be construed strictly against Extech and that it was impossible for him to have signed both in his corporate and personal capacities simultaneously because the New Jersey Supreme Court, in previous cases, required a separate signature to impose personal liability. The Supreme Court rejected this interpretation explaining that neither Ligran, Inc. v. Medlawtel, Inc., 86 N.J. 583 (1981) nor Cruz-Mendez v. ISU/ Insurance Services of San Francisco, 156 N.J. 556 (1999), two cases upon which Ferreira relied, established a bright-line dual-signature rule.

In Ligran, the Court explained that the main issue did not concern whether the defendant needed to sign twice to be bound as a guarantor; rather the Court merely observed that an officer often signs twice, as corporate representative and as individual guarantor, but did not require a separate contract or dual signatures for personal liability.

Similarly, in Cruz-Mendez the Court explained the conceptual and legal distinction between surety and guaranty obligations but did not mandate dual signatures or a separate contract for guarantor-creditor agreements. Accordingly, no New Jersey case imposes a per se two-signature rule.

Extech argued that a single signature could suffice if the agreement, viewed in context, demonstrated the signer's intent to bind themselves personally, and that contract law provides sufficient guidance to resolve ambiguities without imposing a rigid two-signature requirement.

In reaching its decision, the Court noted that an officer does not become a guarantor of a corporation’s obligation simply by signing the contract by virtue of a corporate position. Instead, New Jersey law emphasizes the intent of the parties, the express terms of the contract, and surrounding circumstances of the agreement. The dispositive question remains whether the officer intended for the single signature to serve in a dual capacity. The Court reiterated that a personal guaranty must be stated in clear, explicit terms, especially when one is contracting with an individual on the credit of another. It also noted that the Statute of Frauds requires any personal guaranty to be in writing and signed, with no uncertainty about the guarantor’s intent to assume personal liability.

The Court emphasized that personal liability hinges on the unambiguous manifestation of intent. This clarity is required because a guaranty is a separate legal obligation binding an individual that would otherwise fall outside the scope of the underlying contract.

There are three recognized methods for a corporate officer to personally guarantee a corporate obligation:

  1. Separate Guaranty Agreement – Executing a distinct document establishing personal liability;
  2. Dual Signatures – Signing the contract once for the company and once individually; and
  3. Explicit Single Signature – Signing once, with contract language clearly stating the officer’s intent to assume personal liability.

The Court noted that the third method requires exceptionally clear language to avoid ambiguity. Language such as a clearly defined personal guaranty clause or specifying the capacities in which the signer acts may suffice.

Here, Ferreira did not execute a separate personal guaranty, did not sign the agreement twice, and did not sign a single document that explicitly stated his intention to bind himself personally. Accordingly, the Court concluded that Ferreira did not manifest intent to personally guarantee E&N’s debt. The Supreme Court reversed the Appellate Division, reinstating summary judgment in Ferreira’s favor.

Takeaways

This case underscores the strict standards for creating personal liability for corporate representatives and reinforces the principle that consent must be explicit when imposing obligations beyond those of the corporate entity.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Keshav Agiwal at kagiwal@riker.com.

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