“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 licensee 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 location will be obvious. If, as a potential buyer, you are concerned about the less obvious structural and mechanical aspects of a property, 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”, or a “psychologically impacted property”. These terms are 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 in a residential context might include:

1.      a sexual offender is reported to live in the neighbourhood

2.      a former resident was suspected of being an organized crime gang member

3.      a death occurred in the property

4.      the property was robbed or vandalised

5.      there are reports that the property is haunted 

Significance Varies Individually

The significance of these or any other occurrence may be affected by a person’s beliefs, values and perceptions, ethnic background, religion, gender, age and other individual concerns. Therefore, to determine with any certainty all the possible circumstances 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 property.

Disclosure

While, under the doctrine of caveat emptor, buyers are ultimately responsible to satisfy themselves that the property they are acquiring is suitable for their purposes, many buyers look to the seller to provide them with information about the property. In British Columbia, it is important for consumers to know that while sellers and licensees representing sellers are required by law to disclose material latent defects affecting a property they are not required by law to disclose the existence of possible stigmas that might be of concern to specific buyers.  Therefore, British Columbia buyers, who are concerned about certain possible stigmas in regard to a property, are responsible to conduct their own investigation which could include inquiries of licensees who represent them or direct inquiries of the seller or licensees representing the seller. 

When asked by their client, a buyer’s agent must make the appropriate inquiries.  

When asked about the possible existence of stigmas that might affect the property the seller, or licensees representing the seller, may: 

a)      answer the question directly; or

b)      decline to answer the question and advise the buyer to conduct their own investigation.  

Sellers and their licensees who choose to answer such questions are expected to use reasonable skill and care to ensure the accuracy and completeness of the information provided to buyers.  

A refusal by the seller to answer questions may raise a warning flag for a prospective buyer who may then wish to find the answers through their own independent research.

An exception to the foregoing may occur where the seller and buyer have consented to the brokerage acting as a limited dual agent.  In that circumstance, where the buyer has made their concern about a stigma known to the brokerage through the licensee representing the buyer and the brokerage, through the licensee representing the seller, is aware of the existence of such a stigma the brokerage, as a limited dual agent, has a duty to disclose that information to the buyer.  Where the brokerage does not have knowledge of the existence of the stigma and an inquiry is made by the buyer the seller may, as with other inquiries, choose to: 

(i)         answer the question directly; or

(ii)        decline to answer the question and advise the buyer to conduct there own investigation.

Stigmas Are Difficult to Define

The following may help to 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:

1.      Would you find a death caused by a violent act or suicide unacceptable?

2.      What if the family brought an elderly grandmother home to die in the comfort of her family and familiar surroundings?

3.      Suppose it were a crib death of a newborn?

4.      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?

5.      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 their 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 licensee representing a seller responsible if an event was not disclosed to the buyer, even when the licensee 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 the licensee who represents you and instructing that licensee 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 the licensee who represents them to make inquiries on their behalf. This can be done professionally, while maintaining a level of privacy. For instance, the buyer’s representative could ask the seller and the seller’s representative, “Have there been any violent crimes committed in the property?”

Duty to Disclose

As noted earlier, sellers, may refuse to answer questions about such potential stigmas, or, if they do answer, would be expected to use reasonable skill and care to ensure the accuracy and completeness of the information they provide.  However, keep in mind a seller 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.
Sellers who are concerned that some circumstance 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 sellers will discuss all the variables, including their rights and obligations, with their own lawyer.
Sellers are cautioned to keep in mind that issues concerning stigmas differ from the responsibility of sellers to disclose material latent defects. A latent defect is a material defect not generally visible during a reasonable inspection, such as a serious crack in the foundation that has been covered over with paneling or improper wiring covered by drywall. Sellers and licensees who represent them must disclose all known material latent defects about a property to potential buyers. 

Summary

British Columbia law does not define stigmatized properties. It also does not require sellers or licensees who represent them to disclose circumstances which some may be considered to be stigmas. Buyers are advised to carefully consider the areas of concern they have, discuss them with their licensee, 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 independent legal advice. 

This article has been adapted from information published by the Real Estate Council of Alberta. It is printed with that organization’s permission.