HOME HISTORY: REALTY PROFESSIONALS

AND STIGMA DISCLOSURE

Professional Liability Defense Federation

2013 Annual Meeting and Presentation

October 9-10, 2013Jay Barry Harris, Esquire

Fineman Krekstein & Harris

CAVEAT EMPTER

Obligation of inquiryRecession not permittedExceptions◦Material defects affecting the value of the property

◦Varies by jurisdiction

PSYCHOLOGICAL DAMAGE

Death, violent crime on the property

Stigma attaches to property and devalues it, but not a material defect

STIGMATIZED PROPERTY – THREE APPROACHES

No duty to disclose - Pennsylvania

Duty to disclose - CaliforniaNo duty to disclose absent

inquiry from the buyer - Ohio

NO DUTY TO DISCLOSE

PA Real Estate Disclosure Law – details what must be disclosed

Suicide, homicide, violent crime – not on the list

SIMPLE ANALYSIS

Not listed in the statute; no duty to disclose

Allegations of fraud are irrelevant

Seller’s and agent’s knowledge is irrelevant

If a contractor cannot cure it, simply not relevant

DIFFICULT ANALYSIS

Passage of time, damage recedes, unlike structural damage

Psychological impact varies by individual

Slippery slope◦Types of crime◦Location of crime

DIFFICULT ANALYSIS

Intangible – speculative expert opinions

Duration – passage of time mitigates damage

Internet – keeping bad news “alive”

RESULT

Buyer has burden to investigate

Discourage investors

DUTY TO DISCLOSE

Stigma = material defectFailure to disclose = fraud

SUBJECTIVE STANDARD IMPOSED UPON SELLER

Facts materially altering value or desirability of property

Accessible only to sellerUnknown to buyer

NO DUTY TO DISCLOSE ABSENT BUYER INQUIRYSeller, no duty to disclose

unless an exception existsLatent defect coupled with

misrepresentation and concealment

Trend towards full disclosure of stigmatized property

MISREPRESENTATION OR NON DISCLOSURE

Material – aware it is important to buyer

Must respond by inquiry with full disclosure

IMPACT OF HIV

HIV positive person occupied house

Statutory requirement to disclose, even in “no duty to disclose states”

CONCLUSION

Three approachesTrend towards full disclosureRealtor may now have

obligation to make buyer aware