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Port Liberte Homeowners Association, Inc. v. Sordoni Construction Company

393 N.J. Super. 492, 924 A.2d 592 (App. Div. 2007)

CONDOMINIUMS; ASSOCIATIONS; CONSUMER FRAUD ACT — Even though a condominium association may not have been formed at the time the project’s builders or suppliers acted in a way so as violate the New Jersey Consumer Fraud Act, the association will still have standing to bring an action against the builder or supplier because those parties were clearly on notice that the association would be the end-user and was the intended beneficiary for work to be performed.

A homeowner’s association and a condominium association brought a fraud action against a manufacturer of an allegedly defective exterior moisture barrier system used in the construction of their complex’s common elements.

The lower court granted the manufacturer’s motion for summary judgment. The issue before the court was whether the two associations had standing to bring statutory and common law fraud actions against a manufacturer for alleged misrepresentations concerning its product when neither association was in existence at the time of the alleged misrepresentations. The court concluded that there was no proof establishing that the manufacturer intended that anyone other than the project’s developer to rely upon its representations regarding the product, or that the injured parties reasonably relied upon those representations or sustained damages as a result of such reliance.

On appeal, the Appellate Division reversed and remanded, finding that the associations had standing to bring an action under the New Jersey Consumer Fraud Act (CFA) and under a common law fraud theory against third-party contractors and materialmen for defects in the construction of the common elements, regardless of whether the associations formally existed when the common elements were built. The Court held that the associations could sue third parties for damages to the common elements, collect the funds when successful, and apply the proceeds to repair the property. As such, it found that the associations, having been charged with the obligation to maintain and repair the common areas, could pursue statutory and common law fraud claims even though the misrepresentations or omissions relied upon by the developer arose prior to their formation. The Court also noted that the CFA does not require a claimant to have a direct contractual relationship with the seller of a product or service.

In the instant matter, the Court found that standing existed because the barrier’s manufacturer was on notice that the associations would be the end-users and were to be the intended beneficiaries of the barrier system and that the associations would ultimately govern the common elements upon completion of the construction. Additionally, the Court held that where false representations are made to one person with the intent that they be communicated to others for the purpose of inducing others to rely upon them, a claimant need not hear a misrepresentation directly for there to be actionable common law fraud.

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