Gennari v. Weichert Co. Realtors

148 N.J. 582, 691 A.2d 350 (1997)
  • Opinion Date: April 15, 1997

BROKERS; CONSUMER FRAUD; DAMAGES — A real estate broker acting as sales agent for a new home developer can be found liable under the Consumer Fraud Act for affirmative misrepresentations to home buyers.

Plaintiffs are a group of purchasers who bought new homes in part of a 35-house development to be constructed by a developer. Defendant, a real estate broker, acted as selling agent for the developer, actively marketing the houses, maintaining a trailer office on-site, and handling all sales. The buyers encountered numerous delays in the completion of their homes and the scheduling of closing dates, and even had to move in with friends or make other temporary housing arrangements. Since the developer actively discouraged purchasers from visiting their properties during construction, most buyers first saw the houses on their respective closing days and found many unsatisfactory items. Due to their living situation and substantial deposits, buyers proceeded with the closing upon assurances from the developer that the defects would be cured. Once they moved in, buyers found other problems including poor heating, inadequate sewer systems, flooded basements, and improperly laid floors. Experts confirmed a lack of skill in construction exacerbated by the use of materials of inferior quality. Buyers sued the developer and the real estate broker for fraud and consumer fraud. They also sued the developer’s shareholders, a husband and wife. The wife was the listing broker within the defendant’s office. The buyers alleged violation of the Consumer Fraud Act by the real estate broker for making affirmative misrepresentations about the developer’s skill and experience and sought treble damages.

The primary question addressed by the Supreme Court was whether a sales agent of a real estate developer is liable under the Consumer Fraud Act for affirmative misrepresentations to purchasers of new homes. The Act covers unlawful practices in the sale or advertisement of real estate. The Court noted that a seller may be liable for an affirmative misrepresentation even in the absence of knowledge of the falsity of the statement. Accordingly, the buyers were not required to show that the developer knew the statements were false or even that it intended to deceive the buyers. Furthermore, the broker’s statements were not merely “puffery” because the misrepresentations of fact were material to the transaction and made to induce purchase of the homes. The Court even stated that liability under the Act does not require proof of reliance. Liability for the individual shareholders was based on common law fraud and upheld by the Supreme Court since they knew they were making material misrepresentations of fact with the intent that purchasers rely on them. The Court ruled that this conduct also constituted the willful, reckless or malicious conduct required to meet the standard for punitive damages.