By Gerry Neely
B.A. LL.B

Generally, when we consider a licensee's duty to disclose material facts concerning the property in question, we think of material facts relating to the physical condition of the property. In two cases in the U.S.A., decisions by the courts that "things" other than physical defects in the property could be material defects, led to amendments to real estate agency laws in at least 25 states.

The case which started it all involved the murder of a mother and her four children in a home 10 years prior to its sale. The stigma resulting from this tragedy deterred potential purchasers.

Subsequent to the sale of the home the buyer learned of the murders and of the stigma attached to the house and sued for a declaration that the property was worth less than he had paid because of the negative public perception of the property. The California Court of Appeal agreed that the purchaser would be entitled to recover damages if he could prove that the murder had a significant affect on the market value of the property.

A New York Court heard a case where the buyer purchased a home reputed to be haunted. The vendors had promoted the reputation of the house as haunted for their own profit, but did not disclose its reputation to the purchasers. Following their purchase of the house the purchasers commenced an action to rescind the purchase on the basis that its reputation was a material fact which should have been disclosed. The New York Appeal Court agreed that if the buyer could establish that the haunted house publicity materially impaired the value of the home, the buyer would be entitled to rescission because the impairment was one that a purchaser exercising reasonable care was unlikely to discover.

These properties became known as psychologically impacted property or stigmatized properties. Almost all of the states with legislation have provided that death by murder or suicide is not a material fact which needs to be disclosed in a real estate transaction. One exception to this is if the prospective purchaser advises the agent that this information is important to him. The California legislation would require disclosure of this information if the deaths occurred within three years prior to the sale of the property.

An additional five states have enacted legislation providing that the fact that the occupant of a home has aids or died from aids is not a material fact.

The closest we have come in Canada to stigmatized properties would be the UFFI houses. Since a judge rejected the class action claims of UFFI owners because they couldn't prove damages, will there now be a study which suggests that the complaints of the occupants of UFFI homes were created by psychological stress rather than the release of harmful chemicals?

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Reserving a right of way five feet wide adjoining the southwest boundary of said southwest one-half of Lot A for the use of the owner of Lot B, Plan 7881, his heirs and assigns.

Did this description of an easement give the person entitled to the use of it, the right to construct a walkway, staircase and railing on the easement?

The owner of the property over which the easement ran said "no". The owner of the adjoining property with the benefit of the easement said that it was essential for safety purposes, because of the steepness of the grade over a rock face on the easement area.

Even if the document granting the easement does not specify the rights of the person entitled to use the easement, the grant of easement carries with it the supplementary rights which are reasonably necessary for the exercise or enjoyment of the easement by the person entitled to use it. For example, an easement for storm drainage pipes gives the person entitled to the benefit of that easement the right to enter upon the easement area to repair the pipes.

The judge held that the grant of easement carried with it the right to construct the walkway, staircase and railing.¹

1.

Kasch v. Goyan, 21 R.P.R. (2d), page 199.

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