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De Pompe v. Weichert Realtors

A-4912-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

CONSUMER FRAUD; BROKERS — New Jersey’s Consumer Fraud Act applies to professional brokers and agents who, regardless of whether their clients are professional sellers, are acting in a professional capacity.

The owner of a single-family home entered into a listing agreement with a licensed broker. The homeowner provided the broker with a statement saying that the property wasn’t in a flood zone; a disclosure wherein she stated that she was not aware of any flooding problems affecting the property; and a flood hazard determination prepared by third-party contractor which indicated the property was not in a flood hazard area. Based on these representations and disclosures, the broker posted the listing to a listing system, representing that the property was not in a flood zone.

A buyer contracted to purchase the property and acquired a flood hazard determination confirming that the property was not in a flood hazard area. Two years after purchasing the property, while in the process of refinancing his mortgage, the buyer obtained an updated flood hazard determination. The updated report showed the property to be located in a flood hazard area. This was the first time the buyer was aware that the property was in a flood zone. The predecessor to the company who conducted the prior, erroneous determination then confirmed that the property was in a flood hazard area. By letter, an administrator for that flood search company admitted that, after rechecking the flood hazard status of the property, the company concluded the prior determination was incorrect and the lot was, in fact, in a special flood hazard area.

The buyer sued for rescission; sued the broker, the brokerage agency, and the homeowner for common law fraud; sued the broker for violation of the Consumer Fraud Act (CFA); and sued the original flood hazard company and its successor for negligence. The lower court dismissed the CFA count for failure to state a cause of action, explaining that the services rendered by the broker fell under the “learned professions” exception to the CFA and that real estate salespersons were exempt from the CFA. The buyer moved for reconsideration, arguing that the lower court relied on precedent that pre-dated the inclusion of “real estate” in the definition of “merchandise” under the CFA. The lower court denied the motion, stating that the motion was untimely and that the court decided the issue based on whether the learned profession exemption applied. The buyer appealed the dismissal of the denial of reconsideration.

The Appellate Division agreed with the buyer that the lower court erred in determining that the real estate broker and the brokerage agency were exempt from liability under the “learned professions” exception of the CFA. It noted that the CFA applies to professional brokers and agents who, regardless of whether their clients are professional sellers, are acting in a professional capacity. The Court reversed and held that, by relying upon inapplicable case law, the lower court improperly ruled that the “learned professions” exception extended to real estate brokers or that they were entitled to summary judgment as a matter of law.


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