Personal Liability for Real Estate Developers Under the Consumer Fraud Act

Representing contractors and real estate developers in New Jersey has always been challenging. It may have become even more challenging after the Supreme Court’s decision in Allen v. V and A Bros., Inc., 2011 WL 2637270 (N.J. July 7, 2011). There, the Court confirmed that personal liability under the Consumer Fraud Act (CFA) for the principals and certain employees of contractors can be awarded based on regulatory violations. The risk of personal liability for such regulatory violations could also be extended to real estate developers who previously were generally only concerned about personal liability under the New Jersey Planned Real Estate Development Full Disclosure Act (PREDFDA), the Real Estate Sales Full Disclosure Act (RESFDA) and certain environmental laws.

The Allen decision did not itself create a new cause of action under the CFA against individuals, but rather confirmed that contractors can be personally liable if they violate statutory protections for consumers, such as the Home Improvement Practices (HIP) regulations. While the Supreme Court in Allen specifically addressed violations under the HIP regulations pursuant to N.J.A.C. 13:45A-16.2, et. seq. , the Court may also have increased the threat of personal liability to individuals who develop a residential planned real estate development in New Jersey.