BARRISTER'S BRIEFING: Ghosts, Crimes, Death, and Disease: Your Duty to Disclose
Brian Levine | October 2019
It’s Halloween, so let’s delve into the darker side of real estate with a ghost story and a discussion on a Realtor’s duty to disclose.
Stambovsky v. Ackley, 169 A.D.2d 254 (N.Y. App. Div. 1991), was a lawsuit that has been talked about for years and has had far-reaching impact on the industry. Helen Ackley, a homeowner in Nyack, NY, often wrote about her house being haunted in local and national publications for years. She stated that there were at least three ghosts in her home: a married couple (Sir George and Lady Margaret) who lived in the 18th century, and a Navy Lieutenant in the American Revolution. She wrote that the poltergeists would wake her daughter up by shaking her bed and people would receive “gifts” of baby rings and coins, which later disappeared. She saw a floating male ghost sitting in midair while she painted on an eight-foot ladder and her husband came face-to-face with a female apparition in a dress one haunted evening. Ackley wrote that she would hear phantom footsteps and slamming doors, and paranormal researcher Bill Merrill and medium Glenn Johnson both claimed to have made contact with the spirits in the home.
All was fine, albeit spooky, until Ackley decided to sell her home through a local Realtor. In doing so, she did not disclose this ghostly activity. The Stambovsky’s saw the home, agreed to purchase the property, and signed contracts. It was at this point that the spooky history of the home was uncovered and the potential buyers were not happy. They filed a lawsuit alleging, amongst other things, that the seller and the Realtor fraudulently misrepresented the property’s condition and should have disclosed the existence of the ghosts because it affected the value of the property and their ability to resell it.
The Courts Ruling
The lower court dismissed the case, and the Stambovskys appealed. The Appellate Division heard the case and reversed the decision, holding that because Ackley had created the condition by reporting her house as being haunted in national and local publications, “as a matter of law, the house is haunted” and this affected the value—it was a material defect. The court held that although there was no fraudulent misrepresentation by the homeowner or the Realtor for the nondisclosure, the court held that the Stambovskys were entitled to rescission of the contract and recovery of their down payment.
This decision, forever known as the “Ghostbuster Ruling,” is a unique ruling about a person’s duty to disclose a “material defect”. It does not impose a duty to disclose the existence of ghosts. It only holds that if you’re going to tell the public there are ghosts in my home, you can’t later hide that fact. But, it raises the question of what you must disclose and what is a “material defect.”
In general, New York applies the “caveat emptor” rule, meaning “let the buyer beware” and the buyer has a duty to discover all the physical things that may affect the value of a home. A material defect is a physical attribute of the property or area that affects the property’s value. As a Realtor, we must disclose, pursuant to New York Real Property Law §443-a, any material defects to the property that the agent is aware of. This does not mean that a Realtor must be versed in all areas, such as mold, structural engineering, asbestos, water damage, etc., or that an agent must crawl into every nook and cranny of a building to find latent (hidden) defects. However, it does mean that if a homeowner or an expert has informed a Realtor of a material defect, they must disclose it. But, there are many things that are not material defects.
Is Death, Murder, or Disease a Material Defect?
As we have learned, a ghost is not a material defect to a property, unless you’re openly espousing their existence to the public. So, is someone’s death in a house a material defect? What about a murder? What if an occupant had A.I.D.S.?
New York Real Property Law §443-a (1) specifically states that the following, whether suspected or actual, are not material defects to a property:
• location of a homicide, suicide or other death by natural causes;
• location of any crime punishable as a felony;
• where the prior owner or occupant carries a human immunodeficiency virus or acquired immune deficiency syndrome, or any other disease determined by medical evidence to be highly unlikely to be transmitted through occupancy of a dwelling place.
Failure to disclose these facts is not grounds for discipline or a cause of action in law. However, if the discovery of this information is important to the decision of the buyer, the potential purchaser may inquire by submitting a written inquiry for this information. This request is presented to the homeowner and the homeowner will decide whether or not to respond (Note: they are not required to respond).
The duty to disclose is specific and required. You must disclose any known material defects, meaning something physical that affects the value of the home. Ghosts, murder and felony locations, etc., are not material and do not have to be disclosed. While material defects can vary, one thing is constant; if a buyer finds out about the stigmatized property after they purchase and they were unaware of its reputation, they may not be happy. The courthouses and professional hearing calendars are filled with cases where something was not disclosed. So, sometimes with the owner’s permission, full disclosure is a good thing. It’s a discussion you should have with your homeowner. And oddly enough, some people want to live in these haunted homes. I always wanted to live at 112 Ocean Avenue in Amityville…you know the place, don’t you?! Happy Halloween!