Death at a Property #502
If someone dies at a property, is the death a material latent defect that must be disclosed in writing to all other parties before entering an agreement under Rule 5-13?1 Or, is the death a stigma and, if so, must the listing agent disclose it?
In Wang v. Shao, the owner was a grandmother whose daughter, son-in-law and two grandchildren lived at her property on Vancouver's westside.2 The 10-year-old granddaughter attended a private school nearby. In November 2007, someone shot and killed the son-in-law immediately outside the property's front gate. When media reports linked the son-in-law to organized crime, school authorities asked the granddaughter to leave the school. The girl finished the school year at a local public school. Then, she enrolled in a private school in West Vancouver where she would have more opportunities to speak English. In approximately June 2008, the family moved to West Vancouver. But for the son-in-law's murder, the granddaughter would have stayed at her westside private school and the family presumably would not have moved.
Roughly a year after the family moved to West Vancouver, the owner's daughter (the seller) listed the now vacant property under a power of attorney. She told the listing agents that she was selling because of the granddaughter's move to private school in West Vancouver, where she would have more opportunities to speak English. The seller intended that the REALTORS® would convey that explanation to any buyer who asked the reason for selling.
The seller also asked if she had to disclose the murder to buyers. After consulting her managing broker, the senior listing agent advised the seller to seek her lawyer's advice. The senior listing agent understood that she need not disclose the murder, but if a buyer asked whether anyone had died there, she would reveal it. In her Property Disclosure Statement, the seller denied knowledge of any material latent defect in the property.
At the buyer's request, the buyer's agent asked the listing agent the reason for selling. The listing agent answered by repeating the explanation that the granddaughter had moved to a school in West Vancouver with more opportunities to speak English. The listing agent did not know that the murder had prompted the school change.
In September 2009 the buyer entered a contract to purchase the property for $6,138,000. Shortly after subject removal, the buyer learned about the murder. She refused to complete. The buyer feared that the assailant could return and mistake her children for members of the son-in-law's family. Later, the seller sold the property to someone else for less money.
The seller sued the buyer for the loss on the re-sale. The buyer counter-claimed for rescission for failure to disclose the murder as a material latent defect, or alternatively, misrepresentation.
The court distinguished between a property defect and a stigmatizing event. A defect involves some intrinsic quality of the property. The son-in-law's death was not a defect in the property, but it was potentially a stigma, being an event or circumstance that a buyer personally dislikes. Since a seller cannot predict what the buyer might subjectively dislike, the seller does not normally have to voluntarily disclose a stigma. The buyer must ask.
But, when the listing agent conveyed the seller's explanation that she was selling because the granddaughter had changed schools, it was a fraudulent misrepresentation by omission. The answer, while true on its face, was an incomplete half-truth. It concealed the fact that the granddaughter changed schools as a result of the son-in-law's death, and that the murder was a factor in the decision to sell the property. In Wang, the buyer was entitled to rescind the contract.
Once aware of a stigma, a listing agent should seek instructions to voluntarily disclose it, or alternatively, to disclose it if asked. A buyer's agent should ask about any stigma of concern to the buyer.
When a buyer asks whether anyone has died at the property, if a listing agent chooses to answer, they must tell the truth. But, what if the death is linked to the seller's reason for selling, as in Wang, and the listing agent knows it? If a buyer asks the reason for selling, and the listing agent elects to answer, then the agent must tell the truth and disclose the death.Mike Mangan
|1.||Real Estate Council of British Columbia Rules, Section 5-13, https://www.recbc.ca/licensee/rules.html#section5-13.|
|2.||Wang v. Shao, 2018 BCSC 377.|
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