Question Box: What Are Stigmatized Properties?

With the recent listing and sale of the Dalhousie home that was the site of the grisly murder/suicide, some questions regarding disclosure and “stigmatized” properties may arise.   Remember, stigmas are not to be confused with material latent defects which must always be disclosed.  For the record, the Dalhousie home was publicly marketed as needing to disclose important information to any potential buyer.  (The listing contained: “Please call listing agent (or have your agent contact the listing agent) for property disclosure details.”)

The following article from RECA will help shed more light on stigmatized properties and the role you as a buyer need to play. (I would link directly to the article, but I can’t find it since their recent site redesign.  RECBC has an almost exact article on their site for BC residents):

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“Stigmatized” Properties

Sometimes when dealing in real estate, the onus will be on you, the client, to ask questions regarding issues of specific importance to you and your family, rather than relying on a real estate professional to try to anticipate all of your needs.

Concerns Not Physical, Structural, or Obvious

When selecting a property to buy, most often the physical appearance of a property and the neighbourhood will be obvious. If you are concerned about the less obvious structural and mechanical aspects of the house, you can have a property inspection done. However, consumers may have other areas of concern that would cause them to avoid a property. Certain events may cause a property to be described as a “stigmatized property.” This term is sometimes applied to a property that has had some circumstance occur in or near it, but which does not specifically affect the appearance or function of the property itself.

Examples of these might include:

  • a pedophile is reported to live in the neighbourhood
  • a former resident was suspected of being an organized crime gang member
  • a death occurred in the property
  • the property was robbed or vandalised
  • there are reports that the property is haunted

Significance Varies Individually

The significance of these or any other occurrence will be affected by a person’s values and perceptions, ethnic background, religion, gender, age and other individual concerns. Therefore, to determine with any certainty all the possible occurrences that might cause a property to be considered “stigmatized” is daunting if not impossible. Further, in the event of a lawsuit resulting from an undisclosed stigma, the buyer would have to prove what harmful effect the stigma had because these issues are often personal ones that do not affect the appearance, function or use of the real estate.

Information Upon Request

In Alberta, it is important for consumers to know that real estate seller and the seller’s representatives are not required by provincial legislation to disclose this type of information about a property unless asked. Therefore, Alberta consumers, who are concerned about certain types of events in regard to a property, are responsible to make inquiries of their real estate industry member and the property owner. When asked, your industry member must make the appropriate inquiries and sellers and their representatives must respond truthfully.

Stigmas Are Difficult to Define

The following may help to answer these questions and show the difficulty in defining a stigma. Think about your response to this question:
Would it matter to you if a death had occurred in a property you were interested in buying?

Some would say “Yes, absolutely!” However, consider the following situations:

  • Would you find a death caused by a violent act or suicide unacceptable?
  • What if the family brought an elderly grandmother home to die in the comfort of her family and familiar surroundings?
  • Suppose it were a crib death of a newborn?
  • What if you learned the owner’s pet had recently died in the home? Would you feel differently if the death was natural or if poison was suspected?
  • Would you be concerned if a person had been killed by a car on the street in front of the house?
  • Would you be as concerned by a death that occurred 50 years ago as you would with a recent one?

These examples illustrate how difficult it is to clearly define what a “stigmatized” property might be. What one person might find unacceptable may be of little or no importance to another.

Treading Carefully

It is impossible to anticipate all the areas of sensitivity individuals may have. While the feelings and concerns of individual buyers are understandable, it’s also easy to see that sellers might be unfairly hurt by a requirement to disclose such things. For instance, if the law required that all deaths in properties must be disclosed, regardless of how and when they occurred, the act of bringing a grandmother home to die may cause the owners to lose property value.

It may seem unfair to place the onus on the buyer to make such inquiries about a property they are interested in. On the other hand, would it be fair to require a home-owner to label his property as stigmatized without a clear understanding of what the term means, or when it means different things to different people? Is it fair to hold a seller’s real estate industry member responsible if an event was not disclosed to the buyer, even when the industry member was not advised by the buyer that such events are important to them?

Protect Yourself

You can take steps to avoid buying a property you might consider to be stigmatized by discussing your individual concerns with your industry member and instructing the industry member to ask specific questions about the property.

For example, suppose a family has had a tragic experience wherein their daughter was sexually assaulted while she was alone at their home. She is no longer comfortable in that home and this is their reason for moving. If she was to learn their new house had a similar event occur in it, she would be understandably upset.

To avoid this, the buyers should instruct their industry member to make inquiries on their behalf. This can be done professionally and while maintaining a level of privacy. For instance, the buyer’s representative could ask the seller and the seller’s representative, “Have been any violent crimes committed in the property?”

Duty to Disclose

When asked, the seller and their industry member must disclose the information that is known to them. However, keep in mind the current owners may have no knowledge of events that occurred before their ownership or the property may have been rented out and the seller may not know of events that occurred during the rental period. For serious concerns, consumers are advised to make inquiries of the local police service.

Home sellers and seller’s representatives who are concerned that some event may cause the seller’s property to be considered stigmatized will face a dilemma – do we disclose and risk harming our property value, or do we not disclose and risk the buyer learning the information later and pursuing us for damages? Prudent industry members will discuss all the variables with the seller and should suggest obtaining a lawyer’s advice as to the seller’s rights and obligations.

Home sellers are cautioned to keep in mind this issue differs from the responsibility to disclose material latent defects. A latent defect is a material defect not generally visible, such as a serious crack in the foundation that has been covered over with paneling or improper wiring covered by drywall. Sellers and their representatives must disclose all material latent defects about a property to potential buyers, or otherwise risk being liable to the buyer for the costs of repairing the defect.

Summary

Alberta legislation does not define stigmatized properties. It also does not require real estate industry members to disclose events which some may consider as stigmas, unless asked about them.

Buying consumers are advised to carefully consider the areas of concern they have, discuss them with their industry members and ensure the necessary inquiries are made to avoid purchasing a property they will not feel comfortable living in. Sellers should consider the consequences of disclosure compared with no disclosure and seek legal counsel.

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Copyright Alberta Real Estate Association. Reprinted with permission.  AREA makes no guarantee as to the accuracy or completeness of this information.
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Edit:  An article in the Vancouver Sun, June 10 2010 regarding Stigmatized properties.

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