Stigmatization of properties

Do sellers in Ontario have a legal obligation to disclose information about suicides, murders, or any other matters which might stigmatize a property?

The answer is no. While other jurisdictions have implemended legislation to protect potential buyers, Ontario has not and the old common law rule “Buyer Beware” applies.

This principle was recently confirmed by Justice Sloan in 1784773 Ontario Inc. v. K-W Labour Assn. Inc, 2013 ONSC 5401 at para. 15: “I am not aware of any case law that would obligate the vendor of a commercial building to disclose to the purchaser that someone has died in the building, how they died or that there is a rumor that the building might be haunted.”

Exemptions apply where, for instance, the agreement of purchase and sale contains a clause similar to the following “The Seller represents and warrants that to the best of their knowledge there has never been a murder in the home, the home is not haunted or stigmatized in any way that could affect the Buyers decision to purchase the home”.

Another exemption applies where the purchaser expressly asks the seller if the house is stigmatized or expresses this specific concern.

Nevertheless, real estate agents are required by their regulator, the Real Estate Council of Ontario (RECO), to “discover and verify the pertinent facts relating to the property and the transaction.” RECO interprets its rules to mean that material facts regarding stigmatized properties need to be disclosed so that agents can treat all parties to the transaction “fairly, honestly and with integrity.”

The key element here is that if the agent is not informed about the property’s stigma — whether it is murder, suicide, a marijuana grow-op, meth lab, sex scandal, or even hauntings — there is no obligation under RECO’s by-laws to disclose something beyond the agent’s knowledge.

Disclosure requirements are currently being litigated in the Ontario Superior Court of Justice. In 2011, Eric and Sade-Lea Tekoniemi purchased a house in Bowmanville only to learn that a double-homicide took place there 15 years earlier. Consequently, they sued the seller, real estate agent and the real estate agent’s firm, claiming that all three defendants had a duty to disclose as the stigma psychologically impacted and tainted the property. How this case is ultimately decided by the court will have a major impact on the disclosure requirements of sellers and real estate agents going forward.

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