A key legal decision involving disclosure of so-called ‘stigmatized’ real estate has just been overturned by the BC Appeals Court.
A year ago we published a story about sellers and agents’ obligations to disclose stigmas on properties such as homes where suicides or murders once took place or ghosts are said to haunt the premises.
We referred to a BC Supreme Court case brought by a Vancouver house buyer who attempted to recover a large payment on a $6.1 million purchase in 2009, after learning that an alleged gangster had lived in the house before being gunned down at the front gate.
The buyer testified that when she asked the seller why she was selling, she was told that she was moving because the daughter was changing schools. The buyer argued that the non-disclosure of the murder at the home amounted to lying by omission. The Supreme Court decided in favour of the buyer on the basis that the seller did have an obligation to reveal that it was the violent history at the property which was motivating her to sell.
But the seller appealed the earlier court decision in front of the BC Court of Appeal and has been successful in a ruling last week (April 23).
The Appeals court ruled that the seller was not necessarily lying, because in reality the daughter had to change schools because the private school she had attended didn’t want the publicity associated with her father’s murder.
Presumably if the buyer had asked the seller specifically if there had ever been a shooting on the property, she would have had to disclose the reason, or not answer the question. A seller may decline to answer such a question, but must not lie about it. However, the buyer’s claim that the seller lied by omission did not stand up in this instance.
Of course there is a legal obligation to disclose material latent defects. However, even though a murder or suicide can affect the perceived property value, there is no obligation for the seller to disclose that which is considered a stigma, not a defect.
So, what does this decision mean for disclosure of stigmatized listings, if anything?
It suggests that it’s very important to know what matters to your clients. If it’s important to your buyer, you need to learn about it and keep them informed.
It also demonstrates that it may be prudent to search an address of a listing you are presenting to buyers to help rule out anything that would affect your client’s interest in it.
As lawyer Jennifer Clee pointed out in a Legally Speaking article, “Failing to disclose a stigma may expose the seller to an expensive and time consuming lawsuit if the buyer subsequently learns of the stigma; disclosing a stigma will avoid that risk.”
Read more about the Court of Appeals decision in the Times Colonist newspaper article History of murder no reason to bail on home purchase. To read our original article about property stigmas, check last year’s story here.