Stigmatized Property – Will I Need to Sell for Less?
When people choose to buy a property, factors like the location, construction and appearance are not the only criteria to affect the purchase price. While the former are obvious factors, there could be other concerns that may force buyers to think twice or negotiate a lesser price.
What are the events that lead to property stigma? Wikipedia defines a Stigmatized property as “property which buyers or tenants may shun for reasons that are unrelated to its physical condition or features. These can include death of an occupant, murder, suicide, serious illness such as AIDS, and belief that a house is haunted.”
In all provinces of Canada except Quebec, there are no laws requiring sellers to disclose property stigma. In the absence of any rules, the onus is on the buyer, i.e. “caveat emptor” (buyer beware). Legally, sellers or their real estate agents have no legal obligation to disclose details about the property’s unpleasant past that may stigmatize a property.
However, the Real Estate Council of Ontario (RECO), the regulator of real estate agents, expects those agents to check and verify the pertinent facts relating to the property and the transaction. This means that agents should share at least material facts about their clients’ properties so all parties involved in the transaction can be treated with integrity and honesty.
Conventional legal rules state that a seller cannot be held responsible for failing to do something. This means a seller is not obliged to tell the buyer if it’s a stigmatized property or not.
Exceptions to the rule arise: 1) when a seller fraudulently misrepresents or “conceals a knows of latent defect of the house rendering it unfit for habitation, 2) is reckless as to the truth or falsity of statements relating to the fitness of the house or 3) has breached the duty to disclose defects that render the house dangerous”.
Ultimately, a seller should use common sense and disclose information that materially affects the price of the property, and that the buyer wouldn’t have been expected to ask about. However, the question remains: what factors affect price? If something affects price, then should not the purchaser ask such or spend the money for a home inspection. The rule is still “Buyer beware”. The buyer must ask, get a wrong answer and then prove it.
If you are a seller or planning to sell your property soon and have learnt that your property may be stigmatized, it is advisable to first get in touch with an attorney to explore your options. At Mackesy Smye our real estate lawyers are experienced to advise you of your rights and represent you in court.