Arizona’s Consumer Fraud Act: Critical Implications for Real Estate

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  2. Arizona’s Consumer Fraud Act: Critical Implications for Real Estate
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Arizona’s Consumer Fraud Act bars “unlawful practices” in all types of consumer transactions, including those involving real estate. A.R.S. § 44-1522(A) defines “unlawful practices” as occurring when anyone uses any of the following in connection with the sale or advertisement of any merchandise:

  • Deception
  • Unfair act or practice
  • Fraud
  • False pretense or promise
  • Misrepresentation
  • Concealment, suppression, or omission of any material fact with the intent that others rely on such concealment, suppression, or omission

Unlawful practices may occur regardless of whether the actions have led to anyone being misled, deceived, or damaged by them. Furthermore, A.R.S. § 44-1521 defines “merchandise” to specifically include real estate and “sale” to include real estate transactions.

Private Causes of Action Under the Consumer Fraud Act

The Consumer Fraud Act creates a private cause of action for injured consumers against those who have violated the Act in a real estate transaction. This interpretation of the statute means that a private citizen can file a lawsuit to enforce the Consumer Fraud Act against persons or companies who have violated it, rather than just relying on the Arizona Attorney General to prosecute violations of the Act. This private cause of action is a powerful tool, as it generally is much easier for injured parties to prove consumer fraud under the Act than to prove common law fraud.

Proving Violations of the Consumer Fraud Act

The injured party must prove the following elements to successfully maintain a private cause of action under the Consumer Fraud Act concerning a real estate transaction:

  • The responsible party used deception, an unfair act or practice, fraud, false pretense or promise, misrepresentation, or concealment, suppression, or omission of any material fact in connection with the sale or advertisement of real estate,
  • The responsible party intended for others to rely on its unlawful practice, and
  • The injured party suffered damages as a result of relying on the unlawful practice, which may include both actual and punitive damages, depending on the circumstances

Parties bringing a private cause of action under the Consumer Fraud Act must prove these elements by a preponderance of the evidence or that more than 50% of the evidence is in their favor. This is a more lenient standard of proof than in common law consumer fraud actions, which requires proof of different elements by clear and convincing evidence, which requires a high probability that the claims are true.

Injured parties generally have one year from the date the cause of action accrues within which to file their claims for violations of the Consumer Fraud Act under A.R.S. § 12-541(5). A cause of action accrues either when the injured party discovers the fraud occurred or reasonably should have discovered that the fraud occurred.

Violations of the Consumer Fraud Act that May Arise in Real Estate Transactions

Arizona’s Consumer Fraud Act outlaws the use of misrepresentations, deception, false pretenses, and concealment of material facts during a real estate transaction. As a result, if real estate professionals misrepresent a property they seek to sell, whether verbally, in writing, or through advertising materials, they must be cautious not to run afoul of the Act. Otherwise, they risk being liable for damages if the seller relies on their misrepresentations and then suffers damages due to their reliance on those misrepresentations.

However, real estate professionals may make statements of opinion about a property or other statements intended to help sell the property. As a result, there can be a very fine line between boasting about the attributes of a property and making misrepresentations about the property.

Suppose a real estate professional makes a statement about a property to a prospective seller or includes a statement in advertising materials. In that case, it is reasonable to expect that the professional intended the prospective buyer to rely on that statement. Generally, if the least sophisticated buyer would have reasonably relied on the statement in purchasing the real estate, then the real estate professional could be liable for the damages that the buyer suffers from that reliance.

Call Us Today at Provident Law

Our law firm is here to provide you with legal representation tailored to your individual needs in real estate law and beyond. Don’t hesitate to contact our offices today at (480) 388-3343 and see how we can help. We will be at your side to answer your questions and calm your concerns throughout every step of the legal process.

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