Duty to Disclose: Selling Stigmatized Property

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What is Stigmatized Property?

Stigmatized property is a home or apartment where there has been a suicide, murder, cult activity, AIDS, famous adulteries, or other misfortunes and crimes.  Examples include the house that Nicole Simpson was murdered in, which sold for much less than desired. Homes that Christie Brinkley’s ex-husband had affairs in had to be taken off the market.

The general rule in property buying and selling is caveat emptor – let the buyer beware.  Also, a seller cannot be held responsible for failing to do something. Based on these traditional legal rules, sellers do not have to tell buyers whether the property is stigmatized.

Are There Any Exceptions To Caveat Emptor?

The main exception to this rule, however, is where the seller makes a “misrepresentation,” or lies, about an aspect of the house.  A seller has a duty to reply truthfully about important facts, and in a manner not aimed toward misleading the buyer. Even silence or evasive answers can constitute a misrepresentation if an average buyer would have been misled. 

The next exception to the general rules is that a seller must disclose an important fact affecting the price of the property where that fact would not have been thought of by the buyer.  For example, in some states, a buyer must inform a seller that a house is haunted, because a reasonably prudent buyer could not be expected to take this possibility into consideration.

However, sellers do not have to tell buyers if previous owners had AIDS or if registered sex offenders live nearby. The buyer is responsible for finding out this information on her own. Ultimately, a seller should use commonsense and disclose information that materially affects the price of the property, and that the buyer wouldn’t have been expected to ask about.

What Types of Stigmas Must Be Disclosed?

The seller has the duty to disclose stigmas which could affect the value of the property. These stigmas can include, but are not limited to:

Should My Agent Disclose The History of My Property?

The answer will be on a state by state basis. If your property is in California, for example, you and your real estate agent have an obligation to disclose murders or suicides. In Tennessee though, no such duty exists. In a state which does not require stigmatized property to be disclosed, a seller’s agent can be liable for breaking the fiduciary relationship if the agent discloses the information without your permission.

What Should I Do if I Bought Property and Discover It Is Stigmatized?

You may want to consult an attorney.  In a lawsuit against the seller you may be entitled to compensation for any necessary repairs. An experienced real property lawyer can advise you of your rights and represent you in court.

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Last Modified: 04-16-2014 06:07 PM PDT

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