What if a Property Has a Horror Story?

Maybe watching the original “Poltergeist” movie when I was a kid left its mark on me, or maybe not. Either way, everytime I read something about the legalities of “stigmatized properties” it fascinates me. It’s not the sort of thing I’ve had to deal with much, if at all in my career as a Realtor, but it sure is neat to read about.

I found the following article in this month’s “Report from Council” which is sent out to Realtors every month by the Real Estate Council of British Columbia.

Ryan Coffey

“Stigmatized” Properties

Sometimes when dealing in real estate the onus will be on you, the client, to ask
questions regarding issues of specific importance to you and your family, rather than
relying on a real estate licensee to try to anticipate all of your needs.

Concerns Not Physical, Structural, or Obvious
When selecting a property to buy, most often the physical appearance of a property and
the location will be obvious. If, as a potential buyer, you are concerned about the less
obvious structural and mechanical aspects of a property, you can have a property
inspection done. However, consumers may have other areas of concern that would
cause them to avoid a property. Certain events may cause a property to be described as
a “stigmatized property”, or a “psychologically impacted property”. These terms are
sometimes applied to a property that has had some circumstance occur in or near it, but
which does not specifically affect the appearance or function of the property itself.

Examples of these in a residential context might include:
1. a sexual offender is reported to live in the neighbourhood
2. a former resident was suspected of being an organized crime gang member
3. a death occurred in the property
4. the property was robbed or vandalised
5. there are reports that the property is haunted

Significance Varies Individually
The significance of these or any other occurrence may be affected by a person’s beliefs,
values and perceptions, ethnic background, religion, gender, age and other individual
concerns. Therefore, to determine with any certainty all the possible occurrences that
might cause a property to be considered “stigmatized” is daunting if not impossible.
Further, in the event of a lawsuit resulting from an undisclosed stigma, the buyer would
have to prove what harmful effect the stigma had because these issues are often
personal ones that do not affect the appearance, function or use of the property.

Information Upon Request
In British Columbia, it is important for consumers to know that the seller and the seller’s
representatives are not required by provincial legislation to disclose this type of
information about a property unless asked. Therefore, British Columbia consumers, who
are concerned about certain types of events in regard to a property, are responsible to
make inquiries of licensees who represent them, and of the property owner. When
asked, a licensee who represents you must make the appropriate inquiries, and sellers
and licensees who represent them must respond truthfully.

Stigmas Are Difficult to Define
The following may help to show the difficulty in defining a stigma. Think about your
response to this question:
Would it matter to you if a death had occurred in a property you were interested in
buying?

Some would say “Yes, absolutely!” However, consider the following situations:
1. Would you find a death caused by a violent act or suicide unacceptable?
2. What if the family brought an elderly grandmother home to die in the comfort of
her family and familiar surroundings?
3. Suppose it were a crib death of a newborn?
4. What if you learned the owner’s pet had recently died in the home? Would you
feel differently if the death was natural or if poison was suspected?
5. Would you be concerned if a person had been killed by a car on the street in
front of the house?

Would you be as concerned by a death that occurred 50 years ago as you would with a
recent one?

These examples illustrate how difficult it is to clearly define what a “stigmatized” property
might be. What one person might find unacceptable may be of little or no importance to
another.

Treading Carefully
It is impossible to anticipate all the areas of sensitivity individuals may have. While the
feelings and concerns of individual buyers are understandable, it’s also easy to see that
sellers might be unfairly hurt by a requirement to disclose such things. For instance, if
the law required that all deaths in properties must be disclosed, regardless of how and
when they occurred, the act of bringing a grandmother home to die may cause the
owners to lose property value.

It may seem unfair to place the onus on the buyer to make such inquiries about a
property they are interested in. On the other hand, would it be fair to require a home
owner to label their property as stigmatized without a clear understanding of what the
term means, or when it means different things to different people? Is it fair to hold a
licensee representing a seller responsible if an event was not disclosed to the buyer,
even when the licensee was not advised by the buyer that such events are important to
them?

Protect Yourself
You can take steps to avoid buying a property you might consider to be stigmatized by
discussing your individual concerns with the licensee who represents you and instructing
that licensee to ask specific questions about the property.

For example, suppose a family has had a tragic experience wherein their daughter was
sexually assaulted while she was alone at their home. She is no longer comfortable in
that home and this is their reason for moving. If she was to learn their new house had a
similar event occur in it, she would be understandably upset.

To avoid this, the buyers should instruct the licensee who represents them to make
inquiries on their behalf. This can be done professionally, while maintaining a level of
privacy. For instance, the buyer’s representative could ask the seller and the seller’s
representative, “Have there been any violent crimes committed in the property?”

Duty to Disclose
When asked, the seller and a licensee who represents them must disclose the
information that is known to them. However, keep in mind the current owners may have
no knowledge of events that occurred before their ownership or the property may have
been rented out and the seller may not know of events that occurred during the rental
period. For serious concerns, consumers are advised to make inquiries of the local
police service.

Sellers who are concerned that some event may cause the seller’s property to be
considered stigmatized will face a dilemma – do we disclose and risk harming our
property value, or do we not disclose and risk the buyer learning the information later
and pursuing us for damages? Prudent sellers will discuss all the variables, including
their rights and obligations, with their own lawyer.

Sellers are cautioned to keep in mind this issue differs from the responsibility to disclose
material latent defects. A latent defect is a material defect not generally visible during a
reasonable inspection, such as a serious crack in the foundation that has been covered
over with paneling or improper wiring covered by drywall. Sellers and licensees who
represent them must disclose all known material latent defects about a property to
potential buyers.

Summary
British Columbia legislation does not define stigmatized properties. It also does not
require sellers or licensees who represent them to disclose, unless asked about them,
events which some may consider as stigmas. Buyers are advised to carefully consider
the areas of concern they have, discuss them with their licensee, and ensure the
necessary inquiries are made to avoid purchasing a property they will not feel
comfortable living in. Sellers should consider the consequences of disclosure compared
with no disclosure and seek independent legal advice.

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