Developers Beware: Consumer Protection Procedures Act Strikes Again in D.C.

A recent court decision emphasizes the need for real estate developers to proceed with caution when making representations to potential home buyers in the District of Columbia, as well as in other jurisdictions with similar consumer protection laws. In Wetzel v. Capital City Real Estate, LLC, the District of Columbia Court of Appeals reaffirmed that the District of Columbia Consumer Protection Procedures Act (CPPA) is a potent statute that allows litigants to proceed against real estate developers, even when there is no contractual privity, merely by alleging that a material fact misled the consumer.

In Wetzel, the plaintiffs were condominium unit purchasers who sued not the seller of the units, but a condominium developer involved in the project based on allegations that their unit was extensively damaged by flooding. Although the trial court dismissed all of the unit owners’ claims, the Court of Appeals reversed in part, holding that the purchasers’ claims of fraud, strict liability, and violations of the CPPA were not subject to summary dismissal. The complaint alleged that the developer made no fewer than 98 misrepresentations in violation of five distinct provisions of the CPPA, many of which were contained in marketing materials on the developer’s website.

The Court of Appeals reasoned that although the developer did not sell the property and was not a party to the Purchase Agreement, the developer allegedly misrepresented a material fact, was actively involved in both renovating the property and marketing the property for sale, and, as a professional developer, was aware of the alleged defects. As such, the court found that the complaint stated a legally viable claim under the CPPA that the trial court should have allowed to proceed.

Although a determination of the validity of the purchasers’claims will not be decided until remand to the trial court, the Court of Appeals decision in Wetzel may make it easier for unit owners to pursue claims directly against residential developers, even when there is no direct contractual relationship between the unit owner and the developer. Developers will need to be very careful in making representations about residential homes and condominiums, including on developer websites and in other advertising, Public Offering Statements, sales contracts, and other materials provided to consumers.

Topics:  Consumer Protection Act, Land Developers, Privity of Contract, Real Estate Market

Published In: Business Torts Updates, Construction Updates, Consumer Protection Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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