Real Estate Disclosures – Does it matter if my house is haunted?
In February of 2012, I wrote a blog post entitled What do you mean, my house is haunted? I commented on the case Milliken v. Jacono where the purchaser of a home had sued the seller and the seller’s real estate agent for fraud and misrepresentation when, three weeks after closing, she learned that a previous owner had allegedly killed his wife and himself in the property. She contended that she would not have bought the house had she known of this crime. A three judge panel of the Superior Court, at that time, by a two to one decision, held that the murder/suicide could be a material defect in the property requiring disclosure under Pennsylvania’s Disclosure Law. The panel decided that a jury could decide if this event was a material defect in the property.
The panel’s dissent pointed out that psychological defects may vary greatly from person to person and questioned whether or not disclosure is limited only to murder/suicide. Requiring disclosure of psychological defects would be a “descent down a very slippery slope”.
The slippery slope argument was persuasive to the entire panel of the Superior Court who recently issued a six to three opinion and found that psychological damage to a property cannot be considered a material defect in the property which must be revealed by seller to buyer. In reaching this conclusion, the majority of the Court noted that certainly, in the age of the internet, the modern homebuyer has a powerful tool to uncover the notorious history of a house or neighborhood.
Pointing to the ethics of the disclosure in this case and citing Shakespeare “truth will come to light; murder cannot be hid long”, (Shakespeare, Merchant of Venice, Act I, Scene II). The Court’s opinion points out that the reputation of a property can have an economic benefit as well as a detriment. “George Washington slept here” is worth something and ill will, conversely, may depress the value of a property. To the extent the buyer in this case would have been able to prove casual connection between a significant reduction in value and the non-disclosed murder/suicide, such non-disclosure would amount to a “material defect” requiring it to be spelled out under the seller’s disclosure statement.
However, not only did the Court decide that psychological damage to a property cannot be a material defect and disclosure is not required under the Disclosure Act, the Court also considered whether or not the failure to disclose amounted to common law fraud or violated the provisions of Pennsylvania’s Unfair Trade Practice and Consumer Protection Law. Under neither theory is disclosure required. Under common law fraud, liability exists only for failing to reveal objective material defects which the Court concluded was not the case with psychological damage. The Court also determined that the seller in this case simply did not engage in any deceptive conduct. The seller merely declined to inform the buyer about a fact of which the seller was under no obligation to disclose.
Although I haven’t seen a list of haunted houses in Pennsylvania, I did come across this disclosure of 6 real all-American haunted houses. If you happen to be a buyer who is in the market for a haunted house, this might be a place to start.
Craig Russell is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Temple University and has been practicing in the area of real estate law, both commercial and residential, for over 40 years.