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.

Ballard Spahr’s Mixed-Use Development and Condominiums Team includes experienced lawyers who counsel developers, lenders, contractors, and investors on all aspects of condominium and mixed-use development. When appropriate, we include provisions for alternative dispute resolution such as mediation and arbitration to provide a viable and effective alternative to protracted and expensive litigation. Among other services, we help clients anticipate disputes that can arise and take steps to minimize and resolve disputes.

With more than 35 attorneys who are well versed in this ever-changing area of law, we are uniquely qualified to anticipate our clients’ needs.

For more information, please contact Roger D. Winston at 301.664.6201 or winstonr@ballardspahr.com, Shelah F. Lynn at 301.664.6204 or lynns@ballardspahr.com, or Timothy P. Martin at 301.664.6203 or martint@ballardspahr.com.

Copyright © 2014 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

Related Practices

Real Estate
Real Estate Development and Complex Transactions
Mixed-Use Development and Condominiums