What’s a stigmatized home?
Basically, it’s a property which has a bad reputation based on a tragic event or circumstance which occurred in the home or the neighborhood. It could be a suicide or a mass shooting. Maybe a gang member or pedophile was a previous owner or neighbor. The house could be (allegedly) haunted or subject to other paranormal phenomena.
Does an owner have to disclose that the property is a stigmatized home?
In our previous blog “How to avoid buying a Stigmatized House” we discussed the recent BC Supreme Court case of Wang v Shao (BCSC 2018-377), in which the seller failed to disclose that her husband was the victim of a targeted murder likely by a criminal organization at the entry gates of the property.
[Related Reading: How to avoid buying a Stigmatized House]
At trial, the judge found that the seller’s partial answer as to why she was selling (her daughter was being transferred to another school to improve her English) amounted to a fraudulent misrepresentation by omission as this partial answer was a half-truth that “concealed” the real reason for the move.
It was our impression that the case could have certainly gone the other way, as the majority of previous court decisions supported the proposition that an owner does not have to disclose such an event.
The seller appealed the decision.
The BC Court of Appeal allowed the appeal ruling that the seller was not obliged to further disclose the murder, which was two years prior, as the seller had no reason to know that the murder would be material to the buyer.
Madam Justice Newbury explained that by putting a positive duty on sellers to disclose all the reasons why they are selling when asked, would lead the duty to disclose down the proverbial rabbit hole:
“…Imagine, for example, the following situations:
- An owner wishes to sell and when asked why, replies that she is getting a divorce. Is she also required to disclose that her husband often assaulted her in their bedroom? Or why he assaulted her? Or that she has been committing adultery with another man?
- An owner wishes to sell and when asked why, replies that she is moving to a different city. Is she required to explain that she is moving to a different city because she has been fired from her job? Must she say she was fired for defalcation of funds? Or that she stole in order to pay gambling debts? Or that her children have been bullied by teenagers next door?
- An owner wishes to sell his house for a long list of reasons, including as #10 on the list that he dislikes his neighbours (who are always wanting to borrow his tools) and as #15 on the list, that his late wife died there five years before. When asked why he is moving, he replies that “It’s time for a change.”
If a positive duty is placed on sellers to disclose all their personal reasons for selling the property this would open the door to numerous claims. Unhappy buyers or buyers looking for a reason to collapse the contract could claim that information was concealed despite the information being completely irrelevant to the value and desirability of the property.
What is material to a buyer is assessed objectively. Sellers have no way of knowing if a buyer is either individually or culturally sensitive to a stigmatizing event unless the buyer or the selling agent advises the seller of such. Sellers are not mind readers. Maybe the buyer doesn’t care if someone died in the house. Maybe the Buyer likes ghosts!
The Moral of the Story
In keeping with legal tradition, the moral of the story is CAVEAT EMPTOR! (Buyer beware).
Buyers need to ask appropriate questions if they are averse to purchasing a property in which a stigmatizing event occurred. Realtors should ask their clients if they are sensitive to stigmatizing events and if so, include a seller’s warranty or representation in the offer that no such occurrence took place!
You could also conduct a GOOGLE search of the property and the neighborhood which will often turn up such events, as they were likely reported in the media.
Speaking to neighbors can also be of use, as they may disclose such things even in casual conversation.
There are also data bases of stigmatized properties which can be searched prior to making an offer to buy.
As we have said many times before, surprises in real estate transactions are rarely good ones, so it pays to carry out your due diligence when buying.
A good real estate agent, mortgage broker and real estate lawyer can reduce the surprises to an absolute minimum.
©Pazder Law Corporation (2019)
Questions? Call Kenneth Pazder or Melissa Valana (604-682-1509)