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Lerner v. DMB Realty, LLC - 11/27/2012

Arizona Court of Appeals Division One Holds That Notwithstanding a Statute Protecting Sellers of Real Estate Who Live Near Sex Offenders (and a Sales Contract That Informs the Buyer that the Seller Need Not Disclose Nearby Sex Offenders), a Buyer May Bring a Fraud Claim a Seller Related to Misrepresentations Nearby Sex Offenders In Certain Circumstances.


A couple bought a home next to a registered sex offender.  The buyers sued the sellers and the real estate broker that represented both sides of the transaction.  The Superior Court dismissed the buyers’ claims under Rule 12(b)(6).  The Court of Appeals affirmed the dismissal of two of the three claims at issue on appeal.

The Court held that the buyers’ negligent misrepresentation claim was barred by A.R.S. § 32-2156(A)(3), which prohibits actions against a seller or real estate broker for failure to disclose that a home is “in the vicinity of a sex offender.”  It rejected the buyers’ argument that the statute violated the anti-abrogation clause of the Arizona Constitution, reasoning that a buyer at the time of the drafting of the Constitution could not have sued the seller on these grounds.

The Court also held that the buyers’ breach of fiduciary duty claim against the broker was barred by the broker agreement, which specifically stated that the broker had no obligation to disclose whether a property is in the vicinity of a sex offender.

The Court, however, reversed and remanded as to the buyers’ fraud claim, which was premised upon the sellers’ alleged fraudulent misrepresentation for the reason they had decided to sell their home.  The sellers allegedly fraudulently misrepresented their true reason for wanting to move by telling the buyers that they wanted to live closer to friends, when they actually wanted to move away from the sex offender who lived next door.  The Court held that questions of materiality and reasonable reliance are generally for the jury to decide.

Judge Johnsen authored the opinion; Judge Kessler concurred.  Judge Thompson concurred in part and dissented as to the fraud claim.

Posted by: Eric Fraser

Posted On: 11/30/2012