“Stigmatized Properties”?….Do buyers have a right to know?… Are owners obliged to disclose?

Stigmatized Properties… What are they?. Lately I have been asked in three recent property sales if there was a death or sickness in the home.

I also had another potential client who was interested in listing her condo but was afraid she was going to take a  severe hit pricewise because 3 of her neighbors died in the last two years. Not on the property…Mind you, but she was still very concerned about perception. She was concerned that the property was stigmatized.

Thankfully it was not an issue I the previous sales, but that got me thinking. If people are asking, then it must be a concern. If it is a concern, how are we dealing with it?.

Buyers or tenants may shy away from property where someone has died, a murder or serious crime has been committed or even the belief that a house is haunted — and all of these factors may result in devalued appraisals.

As more and more people are also opting to die peacefully at home, how is this scenario playing out with buyers?.

In British Columbia there is currently no legal requirement for sellers, or the agents representing them, to disclose possible stigmas in respect of a property such as if a murder, suicide, gang shooting or ghost sighting may have occurred in or near the property.

Even though the “stigmatizing event” does not directly affect the appearance or use of the property, it has such a negative psychological effect on the potential buyer that they decide not to purchase the property. The property becomes known as a “stigmatized property” or a “psychologically impacted property”, potentially making it much more difficult to sell and ultimately adversely affecting its market value.

Although these issues always affect property values , there’s no legal obligation to disclose stigmatized property labels to potential buyers in most of Canada. On a side note, quite a number of US States are required to disclose this by law.

The only issue the realtor is obliged to disclose are material latent defects and a requirement to deal honestly with their clients. Whereas patent defects are completely evident, such as a structural or physical problem, latent defects refer to invisible problems that may not come up during a home inspection.

‘Do the right thing and disclose’

In real estate, stigmatized property is 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, such as grow-ops, murder, suicide, serious illness such as AIDS and belief that a house is haunted. The concept is controversial. Sometimes, the notion that a property has been neglected could possibly fall into that group.

It is argued that the seller has a duty to disclose any such history of the property. This, in practice, falls into two categories: demonstrable (physical) as well as emotional.

The Alberta Real Estate Association often reminds realtors they are under no legal requirement to release information, but there are no guarantees that prospective clients wouldn’t learn the backstory themselves but when it comes specifically to violent crimes committed on the property, Quebec is the only jurisdiction in Canada that has disclosure laws that oblige a seller to reveal a past murder.

“Let clients know before investing so that they can be better informed to make the best decision for themselves and their family.”

  • Criminal stigma: the property was used in the ongoing commission of a crime. For example, a house is stigmatized if it has been used as a brother, drug den or gambling den etc. In the case of drug dens, some drug addicts may inadvertently come to the address expecting to purchase illegal drugs. Most jurisdictions require full disclosure of this sort of element.
  • Debt stigma: Debt collectors unaware that a debtor has moved out of a particular residence may continue their pursuit at the same location, resulting in harassment of innocent subsequent occupiers. This is particularly pronounced if the collection agency uses aggressive or illegal tactics.]
  • Minimal stigma is known to, or taken seriously by, only a small select group, and such a stigma is unlikely to affect the ability to sell the property; in such a case, realtors may decide to disclose this information in a case-by-case basis. This is where I would insert he neglect of a house. Flooding or mold issues may tend to be grouped in this area.
  • Murder/suicide stigma – This speaks for itself.
  • Phenomena stigma: Many (but not all) jurisdictions require disclosure if a house is renowned for “haunting”, ghost sightings, etc. This is in a separate category from public stigma, wherein the knowledge of “haunting” is restricted to a local market.
  • Public stigma : when the stigma is known to a wide selection of the population and any reasonable person can be expected to know of it. Examples in Canada  include the Pickton Farm in Port Coquitlam . Public stigma must always be disclosed, in almost all American and European jurisdictions.
  • Other Stigma -Neighbor convicted of child porn, Nude beaches etc.

“Realtors are under Canadian common law, where it’s not incumbent on a seller or an agent to divulge anything that isn’t particular to the property itself that renders the property dangerous or uninhabitable”.

Aspiring homeowners curious about whether they have been eyeing stigmatized properties have online tools to find out.

HouseCreep.com, founded by Ottawa resident Albert Armieri and his Toronto-based brother Robert, launched in 2013.

“There’s a bedbugs registry, so why isn’t there a site about scenes of gruesome crimes for a prospective renter or buyer?” Armieri said. The site lists more than 20,000 properties in North America.

 Or simply ask your realtor….

“They can tell you the truth…….”Or if they’re under instructions from the seller not to disclose their information, they would have to say something to the effect of, ‘I’m sorry, I can’t answer that question, you’ll have to do your own research.’

And that would be a perfectly acceptable way of handling those issues.”