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Bozine v. D’Orazio

A-2258-07T3 (N.J. Super. App. Div. 2009) (Unpublished)

CONSUMER FRAUD ACT; BROKERS — Real estate brokers and agents are subject to the provisions of the New Jersey Consumer Fraud Act and a broker, acting as agent for a seller, owes the buyer a duty to exercise reasonable care in communicating facts material to the condition of property which may affect the buyer’s decision to purchase the property.

After an individual contracted with a builder to construct a single-family residence, he lost his job. He contacted a broker to sell the uncompleted home. It was listed as a “brand-new, one of a kind custom built home.” During several inspections of the home, a prospective buyer noticed that there was water in the basement. The contract of sale between the prospective buyer and the homeowner contained an addendum requiring the dwelling to be constructed in accordance with certain specifications. The builder reviewed the addendum and issued a memorandum to the broker stating that the home was not constructed exactly as the specifications indicated. The broker did not advise the buyer of the memo and permitted the buyer to sign the contract with the inaccurate language contained in the addendum included in the contract. Prior to closing, the buyer hired an inspector to inspect the premises. The inspector found several problems with the home. The buyer sent a letter to the seller requesting that it repair numerous items. At the closing, the parties agreed to escrow $5,000 pending the completion of certain punch-list items to be taken care of within thirty days after the closing. After the closing, water continued to seep into the basement. A structural engineer concluded the home had not been constructed in accordance with the specifications required in the contract addendum. The buyer sued the builder, seller, and broker.

The lower court dismissed the complaint against the broker. The seller and the buyer settled. A default judgment was entered against the builder. The buyer appealed the lower court’s ruling seeking to reinstate its claims for fraud, violations of the New Jersey Consumer Fraud Act (CFA), and negligent misrepresentation against the broker.

The Appellate Division reversed, holding that real estate brokers and agents are subject to the provisions of the CFA. Then, it held that the multiple listing agreement’s description of the property as “one of a kind” that was “in average + condition” represented unactionable opinion rather than factual misrepresentations. The Court held that the broker, as agent for the seller, owed the buyers a duty to exercise reasonable care in communicating facts material to the condition of the home, which affected the buyers’ decision to purchase the property. It noted that, if made without a determination of their accuracy, the broker’s varied explanations for the cause of the wet basement and its affirmations regarding correction of noted problems, could serve as a basis of breach of that duty. Further, it ruled that the broker failed to disclose material facts relating to deviations from the architect’s plan and other non-conformities when it knew the contract contained specific representations contrary to these facts. Contrary to the lower court’s finding, the Appellate Division found a deviation from the stated plans would not have been revealed by buyer’s home inspections. Thus, the Court opined that the broker’s silence on some issues and misrepresentations as to others, constituted triable issues of fact which must be presented to a jury. The matter was remanded to the lower court for trial.


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