Part II of this video series concludes the discussion of the duties of a buyer’s agent and seller’s agent to disclose a prior occupant’s death. A helpful summary is provided at the end to tie together all the critical facts and rules surrounding this conduct covered in Part I and Part II.
And beware dear viewer: as this is the week of Halloween, you may encounter a ghost or two…
For Part I of the series, click here.
Deaths affecting market value
An agent’s duty to disclose material facts known to them is not limited to disclosures of the property’s physical condition.
Consider a buyer who enters into a purchase agreement negotiated by an agent, acting either as the buyer’s agent or the seller’s agent. The offer includes the seller’s TDS about the condition of the property. However, the buyer is unaware multiple murders occurred on the property more than three years before the buyer’s purchase offer.
The agent conceals their knowledge of the murders from the buyer. The agent is aware that the notoriety of the murders adversely affects the market value of the property, placing its value below the price the buyer is agreeing to pay.
The transaction closes and the buyer occupies the property. The buyer learns of the murders and sues the agent to collect their price-to-value money losses. The buyer claims the agent had a duty to disclose the deaths since the agent knew the property’s market value, due to the stigma of the deaths, was measurably lower than the purchase price paid.
The agent claims they do not have a duty to disclose the deaths since they occurred over three years ago and were not required to be disclosed on the TDS.
Did the agent have an affirmative duty to disclose the deaths?
Yes! The deaths had an adverse effect on the property’s market value and were material facts intentionally concealed from the buyer.
Thus, both the buyer’s and seller’s agent have an affirmative duty to disclose prior deaths when the death might affect the buyer’s valuation or desire to own the property. [Reed v. King (1983) 145 CA3d 261]
Desirability based on events within three years
Consider a buyer’s agent who is aware a death occurred on the real estate within three years of a buyer’s purchase offer.
The value of the property is not adversely affected by the death. Thus, the death is not a material fact about the property which needs to be disclosed.
The buyer does not ask their agent if any deaths have occurred on the property. After closing, the buyer learns of the death and is deprived of the pleasurable use and enjoyment of the property. The buyer’s attitude about death is an idiosyncrasy which was unknown to their agent.
The buyer claims their agent breached their agency duty by failing to disclose the death since it inflicted an intangible harm on the buyer, preventing them from enjoying the real estate.
Should the buyer’s agent have disclosed the existence of the death?
Yes! The death occurred less than three years ago so the buyer’s agent was required to disclose.
Further, and as a matter of prudent practice, the buyer’s agent ought to determine if a known death might affect the buyer’s decision to purchase the property — regardless of when the death occurred.
Remember, a buyer’s agent has a greater agency duty of care to protect the buyer than does the seller’s agent.
Thus, a buyer’s agent discloses any death occurring on the property within three years or otherwise, especially if they believe the death might affect the buyer’s decision to make a purchase agreement offer.
It is the buyer’s agent’s duty to investigate and disclose material facts about the property and the transaction. Thus, a greater burden is placed on the buyer’s agent to know and understand their client, known colloquially as the know-your-client rule.
Conversely, buyers have a duty of care owed to themselves. Buyers themselves have a duty to inquire and discover facts readily available to them or their agent in an effort to protect their own personal interests.