The Illinois Supreme Court affirmed that an action brought by a condominium association against the developers and others, alleging breach of a Chicago ordinance prohibiting misrepresentation in the course of marketing and selling real estate, among other claims, should not have been dismissed. In Henderson Square Condo. Ass’n v. LAB Townhomes, LLC, No. 118139 (Jan. 28, 2016). The suit related to a condominium development that was completed in 1996 but was later discovered to be plagued by problems due to faulty workmanship. The association alleged that statements in the developer’s brochure such as the property reflected new architectural energies and solid construction skills; that the developer was committed to quality construction and detail; that it consistently delivered quality buildings and successful developments all constituted false statements within the meaning of section 13-72-030 of the Chicago Municipal Code. It states that [n]o person shall with the intent that a prospective purchaser rely on such act or omission, advertise, sell or offer for sale any condominium unit by (a) employing any statement or pictorial representation which is false or (b) omitting any material statement or pictorial representation. The trial court dismissed the case and the dismissal was reversed on appeal. Before the Supreme Court, the developers argued that the protections under the ordinance should be construed as if it were a fraud claim and should bar recovery for statements that do not concern preexisting facts but are instead simply promises that turn out to be false. Defendants also argued that the phrase any statement in the ordinance should be limited to the specific statements a developer is required to disclose to a prospective purchaser in its property report which only requires disclosure of certain information, not the statements of quality that the association based its case. The Supreme Court found the ordinance creates a private right of action and unambiguously provides that any false statement made in connection with the advertising or sale of a condominium unit with the intent that the prospective purchaser rely upon it is actionable. If the statements are made with the intent that the prospective purchaser rely on them, which, in the developer’s view, will hopefully lead to that prospective purchaser actually buying a unit, then they are actionable. The Court also rejected the contention that the any statement language in section 13-72-030 should be construed to refer to the limited information required by section 13-72-020 to be included in the property report. It would be inconsistent with the plain language of the ordinance and would defeat the city council’s intent to address the problem of deceit in the marketing and sale of condominium projects. The dissent pointed out that the majority’s logic that the statements prohibited under the ordinance are not limited to the kind of statement required to maintain a common-law fraud claim means that even puffing statements by a builder that it does quality work are prohibited under the ordinance. And not only is puffing prohibited, but damages that were not caused by the puffing are recoverable. Under the majority’s opinion, if the association can show merely that defendants intended for the statements in the brochure to be relied on in some way, plaintiffs can recover the total cost of remediation of the deficiencies and damage to the common elements and residential units plus reasonable attorney fees. This, according to the dissent, is an absurd result.
Author
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Solomon has nearly two decades of experience representing financial institutions, real estate investors and privately owned business entities. Solomon concentrates his practice in the areas of banking, consumer financial services, real estate, business law and related litigation and appellate practice.
