Comparing DTPA, Fraud, and Negligent Misrepresentation in Texas
When misrepresentation occurs in a Texas real estate transaction, several legal remedies may be available. The three most common causes of action are:
- Deceptive Trade Practices Act (DTPA) claims
- Common law fraud (intentional misrepresentation)
- Negligent misrepresentation
Each cause of action has its own legal standards, defenses, and remedies. In many cases, plaintiffs will plead multiple claims to give themselves the greatest chance of recovery. But knowing when to use each—and how they differ—is crucial for any party involved in real estate litigation.
Overview of Key Differences
| Claim Type | Intent Required | Reliance Required | Damages Available | Attorney’s Fees | Typical Defendant |
|---|---|---|---|---|---|
| DTPA | No | Yes (reasonable reliance) | Economic + up to treble (if intent proven) | Yes (if consumer prevails) | Sellers, agents, brokers, businesses |
| Fraud | Yes (knowledge or recklessness) | Yes (justifiable reliance) | Actual + punitive damages | Sometimes (if linked to other claims) | Sellers, agents, third-party deceivers |
| Negligent Misrepresentation | No (requires failure to use care) | Yes (justifiable reliance) | Pecuniary loss only | No | Professionals, brokers, agents |
When to Use a DTPA Claim
The DTPA is especially powerful in residential property transactions because it offers:
- A lower burden of proof (no intent required)
- The ability to recover attorney’s fees
- Treble damages if the conduct was knowing or intentional
Buyers often use the DTPA to hold agents, brokers, and sellers accountable for:
- Failing to disclose known defects
- Making false statements about the property’s condition
- Providing misleading advertising or descriptions
DTPA claims are best used when the buyer is a consumer (as defined under the statute) and the conduct fits into one of the listed deceptive trade practices.
When to Use a Fraud Claim
Fraud is appropriate when the plaintiff can prove:
- A material misstatement of fact
- Made knowingly or with reckless disregard for the truth
- With intent to induce reliance
- That the plaintiff relied on it and suffered harm
Fraud claims are especially effective when there is evidence of active concealment or a pattern of deceit. They are also useful when “as-is” clauses are present, because a showing of fraud can invalidate such clauses under Texas law.
However, fraud claims require a higher evidentiary burden and are more susceptible to dismissal without solid documentation or testimony.
When to Use a Negligent Misrepresentation Claim
Negligent misrepresentation does not require intent, but it does require that:
- The defendant provided false information in a business context
- They failed to exercise reasonable care in checking its accuracy
- The plaintiff justifiably relied on the information
- The plaintiff suffered financial loss
These claims are often used against brokers or agents who pass along incorrect information without verifying its truth—such as property size, boundary lines, or zoning—but who may not have intended to deceive.
Pleading Multiple Claims
Many lawsuits involving real estate misrepresentation include multiple overlapping claims. It is common to see plaintiffs plead all three causes of action:
- DTPA (for its statutory benefits and fee shifting)
- Fraud (for the possibility of punitive damages)
- Negligent misrepresentation (as a fallback claim)
This strategy provides flexibility, particularly in early motion practice and settlement negotiations. Even if one claim is dismissed, others may survive.
Strategic Considerations
Factors to consider when choosing which claim to emphasize include:
- Type of property: Residential vs. commercial
- Relationship between parties: Fiduciary duties may enhance liability
- Available documentation: Emails, disclosures, and reports may support one theory better than another
- The presence of “as-is” clauses: Which may impact fraud or DTPA viability
Counsel should also consider statutory notice requirements, limitations periods, and potential for counterclaims or contribution actions.
Summary
DTPA, fraud, and negligent misrepresentation are powerful but distinct tools in Texas real estate litigation. Understanding the differences between them can help plaintiffs frame their claims effectively—and allow defendants to identify the best lines of defense. Each path offers different advantages, burdens, and remedies. Choosing wisely is key.
In the next article, we’ll look at the most effective defenses to misrepresentation claims—what sellers, brokers, and agents can argue when accused of misleading buyers.
Next: Defenses to Misrepresentation Claims in Real Estate