Peacock Tales • Fall 2013

To Disclose or Not to Disclose...That is the Question

By Andrew Chumney

After countless hours searching online, checking local listings, and visiting open houses you find “your dream home.” It has four bedrooms, three and a half baths, finished game room, spacious yard, and all for a bargain price. You secure financing, the closing goes smoothly and you move in to begin your new life. Everything is perfect until you invite your new neighbors over for a housewarming party and they politely decline because they would feel uncomfortable being in the house such a short time after “the incident.” You inquire further and learn that the house, specifically your daughter’s new bedroom, has a well-known history of experiencing unexplained phenomena and ghost sightings.

You call your realtor in a panic and explain what you have just heard. He is unaware of anything, but agrees to check with the listing agent. Suddenly you remember the Seller’s Disclosure Statement you read and signed when you submitted your offer. Surely something as important as ghost sightings or hauntings in the house would have had to have been disclosed. You read it again and find nothing. Your realtor then calls back and confirms your worst fear, that the listing agent acknowledged the main reason for the sellers moving was due to several instances of unexplained phenomena and horrifying encounters with the supernatural.

Properties like the one above are known as “stigmatized property.” Other examples include cult activity, murder, suicide, murder-suicide, drug activity, or other prior criminal activities which could affect the value of the property. So, if you are the unfortunate purchaser of property you later find out to be “stigmatized,” what are your options? Unfortunately, in Pennsylvania they may be severely limited.

In the recent case of Milliken v. Jacono, the Pennsylvania Superior Court held that psychological damage to property from a prior owner’s murder-suicide, was not a “material defect” in property, as defined under Real Estate Seller Disclosure Law (RESDL), and, thus did not require mandatory disclosure by the seller to the buyer, since the RESDL’s list of mandatory disclosures included structural matters, legal impairments, and hazardous materials, but did not include occurrences that affected reputation of property. Because murder-suicide was not a “material defect,” but merely a psychological defect, it did not require disclosure. Therefore, the fact that the seller failed to inform the prospective purchasers of the murder-suicide was not an actionable cause of action for which the buyer could recover.

The issue of stigmatized property is extremely controversial. Some states have imposed a duty of disclosure on the seller and upheld the right of the buyer to recover where the undisclosed fact materially affects the value or desirability of the property. Other states have enacted non-disclosure statutes stating that sellers of real estate are not liable for failing to disclose stigmatizing events, such as the fact that a homicide, suicide, felony or death by AIDS occurred in the residence.

If you feel that you may have unknowingly purchased stigmatized property, you should still consult an attorney. While Pennsylvania’s disclosure statute may not currently apply, it could change or your factual situation may sufficiently differ from that of the purchasers in Milliken v. Jacono to allow you to recover damages against the seller. As one of my law school professors always used to say, “you will win more cases with facts than you will with law.”

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