Location, Location, Location…Double Check Your Facts to Avoid Consumer Fraud Act Violations

Realtor Mistake on Property Location Leads to Consumer Fraud Violation

In a recent Consumer Fraud case, the Appellate decision began with this statement “the real estate profession’s well known sales pitch.” This was because, in essence, the realtor’s pitch formed the basis for the court’s conclusion that a realtor’s misrepresentation of a property location can constitute a violation of the Consumer Fraud Act.

The Township of Montville, Morris County, has three distinct sections, Montville, Towaco, and Pine Brook. Theodore and Frances Vagias wanted to buy a house in the Montville section of the Township.  They perceived that it was more prestigious than the other sections, had higher property values, and had a particularly good elementary school for their son. They told their real estate agent that they wanted to purchase a house in the Montville section, as opposed to either of the other two sections of the Township. Sound familiar?

After seeing an advertisement for newly built homes in a development called “Woodmont Court at Montville” plaintiffs and their realtor met with the builder and looked at a house in the Woodmont development. During their conversation with the builder, he assured plaintiffs that the house was in the Montville section of the Township. The realtor, who was present at the time, also said the house was in “Montville”. Plaintiffs agreed to purchase the home based on the statements by the builder and realtor that the house was located in Montville. The HUD Uniform Settlement Statement also recited that the house was in “Montville”.

Shortly after they moved in, however, the Vagias’ learned that the house was not in the Montville section but rather the Towaco section of the Township. They produced an expert report attesting that the resale value of the house was lower because it was located in Towaco rather than Montville. Further, because the house was located in Towaco, they were unable to send their son to the highly-rated elementary school in Montville. Additionally, their expectations were disappointed, in that they had wanted to live in what they perceived as a more prestigious area and had been willing to pay a premium price for that opportunity.

Plaintiffs sued the realtor under the Consumer Fraud Act, although they did not contend that the realtor intentionally misled them. They asserted that she was either mistaken or misled by the builder when she told them the house was in “Montville”. In her deposition, Ms. Vagias testified that, like plaintiffs, the realtor “was under the assumption that [the house is] in Montville with a Montville address. So we were all fooled.” Plaintiffs contended that the realtor’s conduct nonetheless violated the Consumer Fraud Act because she made an affirmative false statement which concerned a matter of considerable consequence in the transaction and on which they relied to their detriment.

A lower court granted the realtor’s Motion for Summary Judgment, concluding that the realtor’s conduct did not violate the Consumer Fraud Act because it constituted an “omission” rather than an affirmative misstatement in that she correctly stated that the house was in “Montville” but she omitted the word “Township”. Further, the trial judge reasoned that the realtor’s statement was more akin to “puffery” than fraud, and was therefore not the kind of egregious conduct that the Act was intended to prevent.

The Appellate Division disagreed. Finding a distinction between “affirmative acts of deception” and “acts of omission”, both of which the Consumer Fraud Act prohibits, the court concluded that the realtor’s statements were not “idle comments or mere puffery.” She knew that location in the Montville section of the Township was very important to the plaintiffs. She had been working with them for months to help them find a house to buy, and she was trying to convince them that they had finally found the right house and that they should buy it because of its Montville location.

The court also disagreed with the trial judge’s viewpoint of the seriousness of the matter, noting that “for most people, the purchase of a house will be the most important investment of a lifetime,” and the reality of the housing market is that purchasers routinely pay a premium for houses in locations they consider desirable because of the quality of schools or other reasons. The court remarked that is not unusual in this state for buyers to pay astronomical prices for houses in areas considered to have a particular cachet and, further, that real estate professionals typically market property based on their locations. The court concluded that buyers are entitled to expect that the realtors who are assisting them in their housing search will know where the houses are actually located, and, determined that a realtor’s misrepresentation – regardless of intent – on that critical issue is a “serious matter” and violates the Consumer Fraud Act.

Dan Posternock, Managing Shareholder, adds “As you may know, proven violations of the Consumer Fraud Act beget treble (triple) damages and reimbursement to the successful litigant of all related attorneys fees and costs. So next time you hear the phrase “Location, Location, Location” you may wish to also think about Theodore and Frances Vagias and Montville, NJ.”

REMEMBER:  FAILURE OF COMMUNICATION + LACK OF ORGANIZATION = INCREASED RISK OF LITIGATION!

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