A question that pops up every so often is what are the obligations of the seller when selling a house which has a somewhat murky or mysterious past?
It goes without saying that properties hold many stories within their walls, hence the colloquial “if the walls could speak’, however as a buyer in Queensland there are no specific requirements in relation to the seller or selling agents disclosure about ‘psychologically stigmatised property’ and it is generally caveator emptor or “buyer beware”.
‘Psychologically stigmatised property’ results when non-physical defects to the property (i.e. no defect on the title of the property, or to any physical aspect of the property) cause psychological/emotional, religious, moral or other discomfort to a buyer.
A property can generally be classed as psychologically stigmatised where an undesirable event has transpired there, or:
- It has been the scene of a violent crime;
- An untimely death such as a murder or suicide has occurred there;
- The neighbours are undesirable or troublesome (for example registered sex offenders or members of gangs);
- The house was used as a drug laboratory;
- Previous occupants owed money and were pursued by debt collectors leaving the new owners to be harassed by debt collectors mistakenly believing the people who owed money are still living there;
- Previous occupants suffered from a severe illness;
- The house suffers from environmental factors such as pollution or contamination; and/or
- There is/has been presence of ‘ghosts’ or paranormal activity.
The scope of what other circumstances can be categorised as psychologically stigmatising to property is broad, as it essentially boils down to ‘any material fact’ which, if disclosed to the buyer prior to their entry into the contract, would have affected their decision to purchase the property. It goes without saying that this is a very subjective issue and what would influence one person’s decision to purchase property, may not necessarily affect another. There is no way to know how a material fact would have affected the buyers choice if it is not disclosed at the outset.
By way of example, someone passing away in a property peacefully in their sleep at 90 years of age is very different to someone being murdered in a property. Most people would not have any qualms about purchasing the property if the elderly person had passed away in their sleep of natural causes, however they may have an issue if it was a homicide. Some cultures consider it bad luck to live in a property that someone has died in, regardless of how the death occurred, and accordingly it is very likely that would be an influencing factor in their decision to purchase the property.
The above list is by no means exhaustive, and we reiterate that a stigmatising event is subjective, and would generally be determined on a case by case basis depending on what the proposed purchaser would have considered to be a ‘material fact’ about the property.
Consumer Law Protection
The Australian Consumer Law does offer buyers some protection in relation to issues of false, misleading or deceptive behaviour in relation to the marketing of the property. If the purchaser is able to show that particular disclosed information about the property prior to entry into the contract would have influenced their decision to purchase the property, then they may be able to have the contract overturned by the Court. However, it is important to remember this is likely to be a lengthy and costly process.
The current ‘test’ is whether a ‘material fact’, should have been disclosed to the proposed buyers, prior to them entering into the contract to purchase the property, which may have caused them not to proceed with the purchase of the property.
As discussed above, what is classed as a ‘material fact’ depends entirely on the particular circumstances of each case.
Where to from here?
Because there are no specific guidelines in relation to the sale of psychologically stigmatised properties, it is difficult for sellers and real estate agents to know what they should be disclosing to prospective buyers, and the updating of legislation pertaining to disclosure in this area has been the subject of numerous discussions.
Generally, real estate agents must perform their duties in accordance with codes and standards of conduct issued by their respective real estate institutes, together with acting honestly, fairly and reasonably in their dealings with clients. The Australian Consumer Law also prohibits agents from engaging in misleading or deceptive conduct when it comes to their clients.
While real estate agents are generally at the mercy of the seller in relation to the history of the property, they are not exempt from asking reasonable questions about the property, and conducting basic due diligence to ensure they find out any relevant information about the property. Failing which, they may be opening themselves up to the possibility of a law suit for misleading or deceptive conduct.
Although this area of law is unsettled in Australia, there is likely to be a ‘reasonable expectation’ that a horrific event occurring in the property would be disclosed to a potential purchaser and real estate agents should take care when dealing with properties which may be classed as ‘psychologically stigmatised’.
If in doubt, it is best to err on the side of caution and disclose any and all information and material facts pertaining to a property, particularly as silence or failure to correct or qualify statements made may still constitute misleading and deceptive conduct.
If you need any further information in relation to the above, or require the assistance of one of our experienced and professional Property Lawyers, please do not hesitate to contact our office on 07 5563 8970.