Another Attempt At Alleging Consumer Fraud In A Condominium Purchase is Dismissed
In Burke v. 401 N. Wabash Venture, LLC (N.D. Ill, Doc No. 08 C 5330) a prospective purchaser of a condominium at the new Trump Tower brought an action against the LLC selling the units when they kept his earnest money deposit after he failed to close on the unit.
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Reading the opinion, its apparent that the alleged reason for failing to close on the unit, with a purchase price of over $2 Million, was that an additional floor of parking was added after the initial earnest money deposit was tendered. The plaintiff’s argument was that the addition of parking made the price he had paid for his parking spot unfair given that the additional parking reduced the value of the spots. He also alleged that the additional floor of parking increased the maintenance fees for the association.
The plaintiff brought a class action lawsuit against the LLC alleging that a liquidated damages provision in the sale agreement violated the Illinois Consumer Fraud and Deceptive Trade Practices Act (815 ILCS 505) because it gave the LLC the choice between liquidated damages or actual damages.
The provision at issue read:
“In the event of a default or breach of this Purchase Agreement by Purchaser, Seller shall notify Purchaser of such breach or default and of the opportunity, which shall be given the Purchaser, to remedy such breach or default within twenty (20) days after the date such notice was received. If Purchaser fails to remedy such breach or default within twenty (20) days after receipt of Seller's notice, then, subject to the limitations set forth below, Seller may terminate this Purchase Agreement and, as its sole and exclusive remedy upon termination, retain as liquidated damages from Purchaser an amount equal to the sum of (i) the amount set forth in Paragraph 1(b) hereof required to be paid as an Earnest Money deposit and (ii) all amounts paid or to be paid by Purchaser to Seller for any other services or work performed or to be performed by Seller. In collecting such liquidated damages, subject to the limitations set forth below, Seller shall be entitled to retain all monies paid by Purchaser to Seller hereunder; to keep, retain, or take any security or other instrument either evidencing Purchaser's obligation to pay any sums hereunder Or given by Purchaser to Seller to secure payment of such sums; and· to pursue any other appropriate lawful process. In accordance with Section 1703(d) of the Interstate Land Sales Full Disclosure Act, if Seller is otherwise entitled to the liquidated damages described above, Seller shall return to Purchaser amounts paid to Seller (excluding interest paid under the Purchase Agreement) in excess of: (x) 15% of the Purchase Price (excluding any interest owed under the Purchase Agreement) or (y) the amount of Seller's actual damages, whichever is greater.”
The court’s opinion is instructive to anyone faced with contractual situations including multiple remedies that include liquidated and actual damages. Here, because the provision at issue included language that the Interstate Land Sales Full Disclosure Act authorizes and even encourages developers to include in the contracts, the express exceptions of the Consumer Fraud Act allowed the provision. Because the provision was allowed, the Court dismissed that count in the complaint with prejudice.
In recent years a large portion of suits brought on behalf of plaintiffs against developers and even others involved in the construction process have begun to include counts for Consumer Fraud. It is best to make sure your contracts comport with the act in order to eliminate the possibility that a class action could be brought by individuals for a simple error in contracting.
