There has been a lot of talk these days about ‘stigmatized’ houses and whether there is a duty on a Vendor to disclose that a prior tragedy, crime or ‘event’ took place in a property that is for sale. The ambiguity lies in the lack of a legal definition of ‘stigmatized’. However, the Real Estate Council of Ontario (RECO) provides that in the context of real estate, a stigma is a non-physical, intangible attribute of a property that may elicit a psychological or emotional response on the part of a potential buyer. While the law regarding these types of stigmatized properties continues to evolve, a Court of Appeal case recently analyzed whether a Vendor has a duty to disclose that a property is ‘haunted’.
Generally speaking, there are two types of defects in a property – patent defects and latent defects.
Patent defects are obvious flaws which can be easily discovered by a potential purchaser. The law of buyer beware would usually apply in such instance.
Latent defects are not known or discoverable on a routine inspection of the property. If a latent defect is discovered later, the Purchaser may have a claim for negligent misrepresentation against a Vendor if certain elements can be proven.
So…what about haunted houses? At first blush, it might appear that these are invisible but ‘latent’ defects that the Vendor may have to disclose to a potential Purchaser. But, what if the Vendor does not believe in ghosts? What if there are no specific accounts of ‘strange occurrences’? At the end of the day, it is up to the Purchaser to bring clear evidence to prove economic loss as a result of the “stigma of a haunted house”. Until then, the Court will allow the haunting to continue…
Technically speaking if there is no duty on the Vendor to disclose, as a potential Buyer, what can you do to protect yourself if you have a strong concern in this regard? The onus is on you to complete your due diligence on the property in question and to ask the ‘right’ questions. It is our opinion that Buyers and their Representatives need to think about and discuss which stigmatisms are of particular concern to them and then inquire with the Vendor and the Vendor’s Representative about whether any of those stigmas are present on the property. Additionally, you will want to ensure your Representative puts in the Agreement of Purchase and Sale a standard clause which includes a representation and warranty from the Vendor about the previous history of the property.
For assistance with your next real estate transaction, contact our real estate department or check out our real estate page here.
Cassandra Ironside, Jennifer Craddock and Joanne McPhail