Acting for a Seller: Does a Murder Need to be Disclosed? What About "Nude Bodies Next Door"?
If you’re a lawyer acting for a seller, do potential buyers need to know there was a murder on the property? What about the fact there’s a nudist beach next door?
While unusual, these are gray-area questions can plague a lawyer for the seller in a real estate transaction. Whether the deal is routine or unique, there always comes the moment to decide exactly what information about the home – good or bad – must be given to the intended buyer.
The old adage of caveat emptor notwithstanding, sellers have a legal duty to disclose any latent defects that make the property inherently dangerous, or unfit for habitation. But the precise “bright-line” test for what amounts to a latent defect is hard to pin down with precision, even for the courts.
Two cases from the British Columbia Court of Appeal serve to illustrate.
In Summach v. Allen, the buyers put a $100,000 deposit on the purchase of the seller’s beachfront property, unaware that there was a nude beach located virtually next door. This was not evident at the time of the agreement, which the court pointed out had “occurred in the middle of November and even the sunny Okanagan weather cools off sufficiently to dissuade nude cavorting.”
The sellers had not mentioned the nude beach during negotiations; the buyers claimed it was tantamount to a latent defect. They refused to close, and demanded the return of their deposit.
The trial court initially dithered on what it called the “nude bodies next door”, stating it “may or may not be a defect”. Ultimately however it required considering a subjective test, rather than the buyer’s preference. The nearby nude beach was not a latent defect, especially since the nudity took place outside the property’s borders. The seller had no duty to disclose its existence.
The Appeal Court confirmed that lower court’s ruling. (And for the record: both trial and appeal judgments are silent on whether any photographic evidence was tendered, to demonstrate the extent of the “nude cavorting” in contention!)
The second case is Wang v. Shao, which featured a similar issue arising on the sale of a $7 million home – except it was the disclosure of a murder.
The seller was an elderly woman whose son-in-law had been gunned down on the sidewalk outside the home, in what was a targeted gang-related shooting. The seller’s agent told the buyer that the home was being sold because the owner’s young granddaughter was switching schools – which was true, but was only part of the reason for their move. The evidence showed the son-in-law’s death was also a factor in that decision.
The buyer learned about the murder from a friend who’d seen the TV news report a few days later. She promptly refused to close the deal.
The Appeal Court overturned the trial judge’s conclusion that there had been a misrepresentation “by omission”, and that the seller’s agent concealed an important fact – one he knew the buyer would find important. The agent’s answer was honest; he had no legal duty to supplement it with details of the violent chain of events that led to the daughter’s enrollment in a new school. The seller and her agent did not know – and had no reason to expect – that the buyer had a particular sensitivity to a murder that occurred two years earlier, and did not affect the quality of the house. The Supreme Court of Canada declined to hear the appeal in Wang v. Shao.
(Note that while both these cases were decided by the B.C. Court of Appeal, the common law principles in Ontario are similar; moreover the disclosure duties of sellers’ agents are clarified in legislation like the Real Estate and Business Brokers Act.)
As these decisions illustrate, when deciding whether to disclose a property characteristic, it can be a tough call for sellers and their lawyers alike. All the more so where, as far as neighboring nudists go, one person’s “latent defect” could conceivably be another person’s “selling feature”!