BARRISTER'S BRIEFING: ‘I See Dead People All the Time:’ Stigmatized Properties and the Duty to Disclose

For those of you that don’t recognize the quote, it’s from The Sixth Sense. It’s a great movie and truly worth rewatching, especially now. Because we’re approaching Halloween, I thought I would revisit the concept of stigmatized properties and what are an agent’s duties to disclose.

Stigmatized properties come in many forms. The ones we most often hear of are homes in which someone was murdered, committed suicide, or there is a claim ghosts are present. However, there are many types. So, let’s look at those:

Stigmas

Murder or Suicide Stigma—Obviously, this stigma exists when someone is murdered or commits suicide within the home. Many buyers fear that trauma can linger in a home, and in fact, a survey conducted revealed that 45% of American believe that ghosts and spirits can reside in certain places.

Public Intrigue Stigma—People are curious. Public intrigue in a property can become a real nuisance to a homeowner. For instance, Walter White’s home in the series Breaking Bad is overrun with gawkers. The site of a sensational crime can also draw fans. The Amityville Horror home is just such a place. Tourists, fans, and “lookie-loos” walking, driving, taking pictures, trespassing, etc. can severely disrupt a homeowner’s life.

Paranormal Activity Stigma—We’re all familiar with this one. Ghosts in the attic, monsters in the basement, or other supernatural or paranormal activity. Realtor.com conducted a survey and learned that 49% of homebuyers would not consider moving into a haunted house.

Criminal Stigma—Some buyers care if a home was used during or for the commission of a crime. Did they sell drugs from the home? Did they make drugs in the home?

Debt Stigma—If the prior homeowner had lots of debt, the new homeowner may receive tons of unnecessary mail, solicitations, or be hounded by debt collectors trying to contact the previous homeowner.

Minimal Stigma—Something that bothers a small portion of the public is called a minimal stigma. Some people have an irrational fear of terminal illnesses, even if it’s not communicable. Another example is a buyer purchasing a home where a known sex offender resides or is living nearby.

Disclosure Duties

In general, New York applies the “caveat emptor” rule, meaning “let the buyer beware” and the buyer has a duty to discover all the material defects that affect the physical attributes of the property and its value. New York Real Property Law §443-a, requires that a Realtor disclose any material defects to the property that the agent is aware of. This does not mean that a Realtor must be versed in all areas, such as mold, structural engineering, asbestos, water damage, etc., however, it does mean that if a homeowner or an expert has informed a Realtor of a material defect, they must disclose it.

Is Death, Murder, Felony, or Disease a Material Defect?

New York Real Property Law §443-a (1) specifically states that the following, whether suspected or actual, are NOT material defects to a property:

• location of a homicide, suicide or other death by natural causes;

• location of any crime punishable as a felony;

• where the prior owner or occupant carries a human immunodeficiency virus or acquired immune deficiency syndrome, or any other disease determined by medical evidence to be highly unlikely to be transmitted through occupancy of a dwelling place.

Due to this provision, a Realtor has no duty to disclose most of the above stigmas, with a few exceptions. Those exceptions vary. For instance, as many of you know with the Ghostbusters case from Nyack, a homeowner and his/her Realtor must disclose that ghosts reside in a property if they are affirmatively identifying the property as having ghosts (the homeowner sold stories based upon the ghostly encounter in the home). Another exemption would be if the home itself was the cause of a tragedy. The condition of the property, if unresolved, should be revealed (for example, carbon monoxide poisoning, or a methamphetamine lab on the premises), as the condition may cause future health risks; however, the death or criminal activity does not need to be disclosed. However, generally, you do not need to disclose murders, suicides, drug dens, infamous places, whether a sex offender lives there or nearby, or if the debt collector is pounding on the door. You do not have to disclose that someone had cancer, AIDS, or any other disease that is highly unlikely to be transmitted through occupancy (COVID?), and you certainly do not have to disclose that there are things that go bump in the night.

If such information is important to the buyer, then the buyer may inquire by submitting a written inquiry for this information. If this request is presented to the homeowner, then the homeowner must decide whether or not to respond. As for the agent, they must follow the legal instructions of their client. If the client does not want to disclose that information, then the agent must follow that instruction. However, all Realtors must be aware that they must not misrepresent and say that such a condition does not exist. That would be a material misrepresentation and subject the agent to liability, possible loss of license, and a Code of Ethics violation.

A perfect example of this is if the prospective buyer asks if there is a sex offender living nearby. If an agent is asked if they have any such knowledge, they do not have to disclose it. But the agent cannot say that there are no sexual predators nearby if that is not true, as the agent would be making a false statement. So, the agent has three options: 1. Decline to answer; 2. Respond that registration of sex offenders is public record; or 3. Answer truthfully if authorized by his/her client homeowner.

Conclusion

The duty to disclose is specific and required. You must disclose any known material defects, meaning something physical that affects the value of the home. Ghosts, murder, suicide, and felony locations do not have to be disclosed. Same goes for debt collections, AIDS, or places that draw attention from the public. However, even though there is no duty to disclose, one question stands out—if a buyer or buyer’s agent finds out about the stigmatized property after they purchase it and they were unaware of its reputation, what will they do? The courthouses and Realtor professional standards hearing calendars are filled with cases where something was not disclosed. So, have that conversation with your client and decide if it’s better to disclose than not disclose. Sometimes, full disclosure is a good thing. You never know, some people will “kill” for the chance to live in a haunted house.

Happy Halloween!