Kentucky Court Affirms Consumer Act Claim Does Not Apply to Real Estate Transactions

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Kentucky Court Affirms Consumer Act Claim Does Not Apply to Real Estate TransactionsIn Kennedy v. Parks, the Kentucky Court of Appeals affirmed that the Kentucky Consumer Protection Act (CPA) does not apply to real estate transactions.

In Kennedy, the plaintiffs entered into a contract with a builder for construction of a new home. Upon completion, the plaintiffs alleged that the builder and realtor agreed to purchase their existing properties. Prior to completion, however, the builder filed for bankruptcy. The Kennedys sued the realtor and asserted a claim for violation of the Kentucky CPA for the realtor’s failure to purchase the properties as promised. The trial court dismissed the CPA claim at the motion to dismiss stage.

On appeal, the court affirmed the dismissal. Actions under the CPA are limited to situations in which a person “purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by another persona of a method, act or practice declared unlawful by KRS 367.170.” The plaintiffs argued that the realtor’s promise to purchase the properties related to consumer service activity and not to a real estate transaction, such that the CPA applied. Relying on Craig v. Keene, the court rejected that argument:

Craig’s holding is not ambiguous, and it evinces this Court’s conclusion that the KCPA is not applicable to individual real estate transactions. We also find persuasive the circuit court’s reasoning that the Kennedys’ characterization of the purported promise as a consumer service rather than a real estate contract does not make it so.

Kennedy is the latest in a long, unbroken line of Kentucky cases applying Craig and finding that the CPA does not apply to real estate transactions. And it provides further support that borrowers do not have viable CPA claims (arising from mortgages or foreclosures) so long as the subject matter relates to real estate.