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Blatterfein v. Larken Assoc.

323 N.J. Super. 167, 732 A.2d 555 (App. Div. 1999)

CONSUMER FRAUD ACT; ARCHITECTS—Where an architect permits its services to be held out as part of real estate being sold or are provided as a way of influencing buyers to purchase a building, the architect becomes subject to the Consumer Fraud Act.

Five families who purchased homes in a development discovered serious structural, functional, and aesthetic defects in their homes. After repeated requests to correct the problems were not answered, they sued a number of parties, including the architect. A settlement was reached with all of the parties except the architect. The lower court held that the architect was liable and was also amenable to a consumer fraud claim under the Consumer Fraud Act. The architect, on appeal, argued that the Act did not apply to architects in the rendition of their professional services. He based this position upon this dictum in Neveroski v. Blair, 141 N.J. Super. 365: “[c]ertainly no one would argue that a member of any of the learned professions is subject to the provisions of the Consumer Fraud Act despite the fact that he renders ‘services’ to the public. And although the literal language may be construed to include professional services, it would be ludicrous to construe the legislation with that broad a sweep in view of the fact that the nature of the services does not fall into the category of consumerism.” The Appellate Division pointed out that at the time of the Neveroski case, real estate sales and real estate brokers were not covered under the Act because the Legislature had deleted “real estate” and “securities” from the definition of merchandise under the Act. However, the Act was subsequently amended to apply to the use of any tactic prohibited in the Act “in connection with the sale or advertisement of ... real estate.” Based on this distinction, the Court held that had the architectural services been retained by any of the homeowners directly, there might be some merit to the architect’s argument. However, in a 1997 New Jersey Supreme Court case, the Consumer Fraud Act was held to apply to the lending and insurance industries, even though they were highly regulated industries. There, the Supreme Court drew a distinction between regulated conduct of those entities, in particular, the sale of insurance in conjunction with lending. According to the Court, viewed broadly, the amendment to the Act adding real estate sales to the coverage of the Act negated the notion in Neveroski that a service provider whose activity is “something beyond the ordinary commercial seller of goods or services” is exempt from the Act when engaged in real estate sales activities. In the present case, the homeowners claimed that the architect made false representations of a rather commonplace variety about the building materials to be used thereby prompting them to buy the homes. The Court found that those claims, if valid, meant that the architect’s conduct bore directly upon the sale of the covered product (real estate) rather than constituting the rendition of a professional service. If true, those activities of the architect would fall squarely within the prohibitions of the Act. In sum, “[w]here the question is solely one concerning the quality of those professional services, there may be no adequate basis for asserting liability under the Consumer Fraud Act. But where the architect has involved himself either as a principal or a retained professional in a real estate marketing venture wherein he permits his services to be held out as part of what is being sold, or provided by way of influencing purchasers to enter into contracts, or to maintain contractual relationships, he becomes subject to the Consumer Fraud Act… .”


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