August 21 2014

Every Town Has Its Amityville Horror

Written by  Kevin J. Handy

By:  Kevin J. Handy, Esq.

If you found out that someone was murdered in a home you were interested in buying, would you still be interested in buying it? What if the home were used as a crystal meth lab? What if satanic rituals were performed there? Criminal or traumatic circumstances that might be a deal breaker for the average homeowner are not automatically disclosed – nor are they required to be.

The Pennsylvania Supreme Court decided a case last month on the so-called “psychological stigma” attached to real estate with a scandalous past. In Milliken v. Jacono, the Court ruled that a murder-suicide at a Delaware County home did not constitute a “material defect” that was required to be disclosed by the seller under Pennsylvania’s Real Estate Seller Disclosure Law.

The Pennsylvania Real Estate Seller Disclosure Law requires only that sellers reveal “material defects” to potential homebuyers. A material defect is defined as “a problem with a residential real property or any portion of it that would have a significant adverse impact on the value of the property or that involves an unreasonable risk to people on the property.” So structural deficiencies, problems with heating, toxic ground water, hazardous materials on the property, and termite infestations are firmly on the list, but murder-suicides are apparently not.

The homeowner in the Milliken case testified that she had been curious about the former owners’ rapid turnover of the property (the sellers had bought it from the murder suspect’s estate). But she did not pursue that hunch beyond a general question put to the realtor, who answered circumspectly – and legally.

The homeowner sought to have the sale overturned claiming that the murder-suicide constituted an undisclosed material defect. The Supreme Court of Pennsylvania ruled that psychologically disturbing acts, such a murder or suicide, do not constitute actionable material defects in part because it would be impossible to quantify what acts would qualify as sufficiently “psychologically disturbing.”

In one fairly graphic paragraph, the justices ask: “Does a bloodless death by poisoning or overdose create a less significant ‘defect’ than a bloody one from a stabbing or shooting? How would one treat other violent crimes such as rape, assault, home invasion, or child abuse?”

They go on to point out that some properties are only temporarily stigmatized, and that grotesqueries can later enhance a property’s value. Or quite possibly that some buyers might consider the scandal the home’s best asset.

Ultimately, the Court based its decision on the impossibility of defining what sorts of traumatic events would constitute “psychological stigma.” That makes sense. Where would the list of required disclosures end? Why limit disclosure to psychological stigma? What about other potential negative issues with the house, such as being under a flight route, on a road where people frequently speed, or next to problematic neighbors? The list could be endless.

The law is more ambiguous when it comes to drug activity on the property. Colorado, for instance, has specific real estate disclosure laws for homes that have been used to produce crystal meth. Pennsylvania does not. But the Pennsylvania Association of Realtors notes a disclosure clause targeting “hazardous substances,” which could cover the kinds of damage meth production can wreak and the toxic substances it can leave behind.

The court also left open the possibility that a claim could be based on a failure to truthfully respond to a direct inquiry about murder, suicide or other disturbing events. So, when buying a house, you might want to ask the seller some interesting questions.

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