Haunted houses do exist. So ruled the Supreme Court of the State of New York in a landmark decision, known as the Nyack Case, in the 1990s. It clearly set out the parameters of what a stigma problem can do to a property.
An out-of-town purchaser came to Nyack, New York and inspected a lovely older home that many described as a replica of the Munster Home from the well-known television series.
The buyer put in an offer and a deposit. Only after they engaged a local architect did they find out that the locals knew the property as the town haunted house. It seems that the former owner, in order to promote her bread and breakfast operation, had heavily advertised the house as a haunted house. It was decorated as a haunted house at Halloween, and throughout the year reports of strange happenings appeared in the local newspaper. An article about this haunted house had even appeared in Reader’s Digest. The owner had described various ghosts in her interviews over the years. The buyers knew nothing of these events.
The Supreme Court of New York, in a 3-2 vote for the buyers, gave them a release of their deposit and damages. The courts found that if the buyers had been given all of the facts, they could have made their own determination before submitting an offer. This was denied to them due to non-disclosure by the seller.
Judge Rubin, in his decision stated, “Whether the source of the spectral apparitions seen by defendant seller are parapsychic or psychongenic, having reported their presence in both a national publication and the local press, defendant is estopped to deny their existence, and, as a matter of law, the house is haunted.” (author’s note – I actually understood some of the words the judge used).
What is evident from this case and is of concern to any real estate salesperson is that the entire case rests on a simple statement: “Stigma does not have to be real to be realized.”
During the 1980s I was involved with hundreds of houses with urea formaldehyde foam insulation (UFFI). It was never the big deal it was hyped to be, but the media played it up, houses became stigmatized and I kept testifying in court cases about the losses in value. The losses in value were solely reflections of the public reaction to a situation that made for good press.
In your own real estate business, how do you sell a house that had a notorious murder? What happens if there is half-way house in a neighbourhood and a convicted paedophile moves in? What about the expanding market for grow houses? What happens with a toxic spill or a leaking underground tank? How are these items measured and what can you do to protect not only your buyers and sellers from a lawsuit, but yourself?
I do not care where you work in Canada, there is one easy rule to live by” “when in doubt, disclose”. I have testified in many cases where agents were sued for non-disclosure. Some were as stupid as testifying that the seller gave them strict instructions not to disclose. Any seller who would demand that I help them in committing fraud would become a former client very quickly.
In coming issues I will get into various ways to measure loss and what to do. In the next issue I will outline the case of having to deal with a notorious murder site. Is there a loss in value? Does the next-door neighbour lose value? What about the house across the street or behind?
A haunted house does exist, as the New York Supreme Court ruled that it did. From that case, we can learn a lot from the disclosure aspect and the fact that the concept of a problem may be greater than the problem itself.
By: Barry Lebow