In a June 5, 2019 article in REMonline.com, the BC Court of Appeal (BCCA) reversed the decision of a lower court in the case of Wang v. Shao, 2019 BCCA 130. BCCA ruled that home sellers do not need to disclose a murder on the property unless specifically asked.
Murders, suicides, deaths, ghosts, etc. are considered to be stigmas of properties and the home seller is not required to disclosed them unless specifically asked. This ruling has firmed up that "buyer beware" applies and the onus is on buyers to ask specific questions (more below). There has been some debate among us Realtors of what and when stigmas need to be disclosed. By addressing the one stigma, murder, which most people likely think should be disclosed this ruling has provided some much needed direction.
The author of the article noted; "The court drew a distinction between 'subject and purely personal grounds' that could affect the value of a property in the eyes of an individual (potential buyer), from factors relating to the 'objective and intrinsic' value of the property." In other words, the impact of the stigma is personal, in the mind of the buyer, and the event does not have an effect on the property and buildings values as a defect would.
A brief review of the facts presented to the lower court include:
- The home seller's son-in-law was murdered in a gang-related killing on the sidewalk outside the seller's house.
- The extensive publicity of the event was causing problems at a private school where a daughter of the seller's was attending and she was asked to leave. The daughter enrolled in a different private school some distance from the home.
- The buyer asked why the seller was moving and was told to be closer to the school her daughter was attending. No information was given as to why the daughter was attending that school.
- After the contract went unconditional (subjects removed by the buyer) the buyer, who was from out of country, learned of the event and refused to close the transaction and sued for the return of their deposit.
- I read this case and there was additional extraneous information that brought the seller's integrity into question. Including the son-in-law's alleged gang and criminal activity.
- The judge of the lower court felt the answer to why they were moving was a half-truth and misleading or fraudulent. The judge ruled in favour of the buyer and ordered the deposit and court costs to be returned to the buyer.
When I reviewed this case sometime ago, I have to admit that I agreed with the judge. However, when reviewing the Appeal Court's decision, I can also see where they are coming from. Lawyers and courts can see things dispassionately. Most people would be worried in a past gang related murder that they might come back not knowing the sellers had moved. That happened in the interior where a couple was murdered and the seller had been involved in criminal and gang related activities. I don't believe there had been a prior murder in this case. I always suggest to my buyer clients to talk to the neighbours. I am going to add to that to do a Goggle search on the address.
The Appeal decision, which reversed the lower court ruling, stated that the case of caveat emptor (buyer beware) applies to purchasing a property. The buyer alone is responsible for checking with specific questions and they ruled that "why are you moving" is too general of a question and the author of the article, who is a real estate lawyer, commented "then vendors would have to disclose all their personal reasons and explain the causes for those reasons, even when they have no relationship to the objective value or usefulness of the property."
The ruling focused on two factors, firstly, that the degree something is important to the buyer, which may be different for different people, is impossible for the seller to know. From the ruling; "The court is of the position that the events and facts of the life of the residents of a residential property cannot normally be considered to be liable to significantly influence the consent of the adverse party, unless there have been questions asked about those events and facts." In plain English, if the home seller is not asked specific question they don't know what is important to the home buyer.
I reviewed a case a few months ago where buyers of a certain religious faith bought a waterfront house in the winter. Come summer they learned that their waterfront was part of a nude beach. They sued the sellers and were unsuccessful. I can certainly see how this would be an issue for them, or families with children. On the other hand, it may not be an issue for some buyers, those from some European cultures, for example.
This brings up the second factor the Appeal Court considered, where to draw the line? Most buyers would want to know about a murder, what about a suicide, assisted or not? Is there a difference between break-in sexual assault and spousal sexual assault? Should sellers disclose domestic violence and if so, what level of violence? From the ruling, "The conclusions appears obvious to us, because if the compulsory disclosure of facts or events in the lives of the residents that are liable to significantly influence the buyer's decision became a rule governing the sale of residential buildings, it would be extremely difficult where the line should be drawn, and this could create a risk of unnecessary uncertainty." (emphasis added).
The author of the article did some additional research in law and regulations. She found that the only place in Canada where this is addressed was in Quebec where the seller is required to disclose a murder. However this is limited to a three year period.
"A canvass of the United States legislation reveals the same outcome. There are only some jurisdictions with laws with regard to disclosing if a murder occurred, and where there are, it is most commonly limited to three years."
The next area she explored was the guidance provided to Realtors. The only "stigma" we are required to disclose is grow-ops. I put stigma in quotations here as grow-ops often have negative impacts on the building, mould and water damage. If the grow-op has not been running for a period of time, dry rot can exist in the walls and floor and would not show up in a regular inspection. Our code of ethics require that we be truthful when an inquiry is made.
She then looked at case law (prior court decisions) and found that there is no case law requiring disclosure by the seller or the Realtor. "You can remain silent until specifically asked. Then you must answer truthfully and not be misleading."