This case did not happen in Miami, and I do want to note up front that different states and countries have different real estate disclosures laws. But I find the basic question to be interesting: Should a Realtor be required to disclosure that a murder or suicide (or both!) took place in a home they have listed for sale or lease?
Background: Janet Milliken purchased a house in Thornton, Pa., for $610,000 in June 2007. After she moved in, a neighbor told her about the murder-suicide of previous owners, Konstantinos and Georgia Koumboulis, in February of 2006. Following the crime, the house was purchase by Joseph and Kathleen Jacono in October, 2006, before being sold to Ms. Milliken in 2007.
Ms. Milliken sued the Jacono’s and their listing broker and her own real estate agent for fraud and misrepresentation. Ms. Milliken’s case was first dismissed in summary judgement, appealed, sent back to the lower court for trial, lost at trial, appealed again, lost in Superior Court, and has now appealed to the State Supreme Court of Pennsylvania.
Her attorney, Tim Rayne, was quoted last week saying they “hope to have Pennsylvania recognize that having a horrific event occur within a property can be just as damaging and troubling to a future homeowner as a physical defect, or perhaps even more so. Having a gunshot murder-suicide committed within the home is much more devastating than having a small leak concealed by the previous homeowner. Physical defects can be fixed. Troubling events that could and did occur in this home could never go away.”
Judge Kate Ford Elliott, of the Pennsylvania Supreme Court, wrote an excellent opinion raising some of the issues for consideration:
There are other problems as well. First, how recent must the murder be that the seller must inform the buyer? What if the murder happened 100 years ago? What if numerous owners have lived in the house in the interim? In fact, the appellants here are themselves one buyer removed from the murder/suicide at issue. This raises another concern. This sort of psychological damage to a house will obviously decrease over time as the memory of the murder recedes from public knowledge. Requiring a seller to reveal this information may force the seller to sell the house under market value and allow the buyer to realize a windfall when the house is resold 10 years later and memories have faded. The passage of time has no similar curative effect on structural damage, legal impairments, or hazardous materials.
Second, how can a monetary value possibly be assigned to the psychological damage to a house caused by a murder? The psychological effect will vary greatly from person to person. There are persons for whom no amount of money would induce them to live in such a house, while others may not care at all, or even find it adventurous. Further, as noted, the monetary value of such a psychological defect will dissipate with the passage of time as the memory of the murder recedes.
Third, is this disclosure limited to murder, or must other crimes be revealed also? A buyer might want to know that a house has been burgled 10 times in the last year because that would indicate that the neighborhood
is dangerous. What about crimes that did not occur on the property itself? Suppose numerous burglaries had occurred in other homes in the neighborhood. Further, a buyer might want to know that a child molester
lived in the neighborhood.
Should we maintain, as Judge Ford Elliott and the State of Pennsylvania does, that “Sellers should only be required to reveal material defects with the actual physical structure of the house, with legal impairments on the property, and with hazardous materials located there”? Or should we attempt to incorporate “psychological defects” into our disclosure laws as well. For instance, California Code – Section 1710.2(a) states “No cause of action arises against an owner of real property or his or her agent, or any agent of a transferee of real property, for the failure to disclose to the transferee the occurrence of an occupant’s death upon the real property or the manner of death where the death has occurred more than three years prior to the date the transferee offers to purchase, lease, or rent the real property, or that an occupant of that property was afflicted with, or died from, Human T-Lymphotropic Virus Type III/Lymphadenopathy-Associated Virus.” This seems to suggest that the murder-suicide described above would have been a required disclosure under California law since it happened less than three years prior to Ms. Milliken’s purchase.
The California code assumes (as does Judge Ford Elliott) that the passage of time will reduce the “psychological defect” – will it? If someone is adversely affected by the idea of living in a house where a murder took place, will that aversion suddenly disappear after three years? If not, should municipalities be required to maintain a record of all deaths in the property as part of an accessible public records database similar to title records or the permit history?
Moreover, the California law doesn’t even address other possible “psychological defects,” such as burglaries, rapes, child molestations, ghosts, deaths by natural causes or diseases. California’s law specifically exempts disclosure of AIDS-related deaths, citing medical privacy, while some definitions of “stigmatized property” specifically includes it. Does this difference of opinion matter to buyers who want the information? How should a buyer’s right to know be balanced against a previous owner’s right to privacy?
My personal opinion is that requiring these types of disclosures exceeds reasonable expectation on several levels. First, disclosures should be about the property itself – not the people living in it. I read about a similar case wherein the blood stain on the floor from a murder in the master bedroom was covered up with an area rug. The buyer sued over failure to disclose the murder. I think the suit should have been over the failure to disclose the blood stain.
Second, while I think it is important to assist buyers with information not directly related to the actual property, we as real estate agents have to be careful not to pretend we can read our buyers’ minds as to what is important to them. We direct buyers to independent sources with empirical data about the quality of the schools, parks, area restaurants, crime, etc. because our opinion of what’s *good* may not be the same as theirs. Likewise, opinions as to what constitutes a “psychological defect” varies.
My third concern is practical. What information should a real estate agent (or seller) know, and for how far back into history? In the Pennsylvania case, the Seller and listing agent acknowledge knowing about the murder/suicide. But what about the buyer’s agent? She sued him too. Was he supposed to know about every crime in every house in the area in the absence of the seller or other agent telling him? If so, how?
Give me a minute to put on my flame-resistant suit, and then let me know what you think.