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Vagias v. Woodmont Properties, L.L.C.

384 N.J. Super. 129, 894 A.2d 68 (App. Div. 2006)

BROKERS; CONSUMER FRAUD—A broker making an affirmative misrepresentation affirming a builder’s statement that a house was located in a particular neighborhood may be in violation of the Consumer Fraud Act.

Prospective home buyers told their real estate broker they only wanted to buy a home in a particular section of a municipality, believing that this section had higher property values, a better school system, and was more prestigious than other sections of the municipality. At a meeting with the broker and the builder of a newly constructed home, the builder stated the house was located in that section, and the broker echoed this sentiment. After moving in, the buyers learned that the house was not in the desired section of town. They sued under the Consumer Fraud Act (CFA), contending the builder intentionally misled them, and alleging either the broker was mistaken or misled them. The lower court dismissed the complaint against the builder in favor of binding arbitration. The lower court also held that the broker’s conduct was an omission and not an affirmative misstatement, and further held that the broker’s statement was more akin to “puffery” and less like fraud. The buyers appealed.

The Appellate Division held that the CFA prohibits both affirmative acts and omissions, including affirmative acts of deception, fraud, the making of false pretenses, and misrepresentations. The CFA further prohibits omissions concerning acts of concealment, suppression or omission of any material fact. In the case of affirmative acts, proof of intent to mislead is not required. However, under the CFA, acts of omission must be done knowingly and with intent to induce reliance thereon. The Appellate Division agreed that the broker made an affirmative misrepresentation by echoing the builder’s sentiment that the house was in the appropriate section of the municipality. Therefore, her intent was not an issue. However, the Appellate Division held that not all erroneous statements give rise to a remedy, but rather only those that are material to the transaction. As a result, the Appellate Division reversed and remanded for consideration of whether the realtor knew her misrepresentation was a critical issue for the buyers in their decision to purchase the house.

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