Nondisclosure can haunt real estate deals
Class will discuss real estate transactions involving haunted or possibly haunted houses.
As TVs flicker with horror movies for Halloween, it turns out paranormal activities have a place in the real estate industry.
In the next few weeks, students at Western Michigan University’s Cooley Law School will discuss what disclosures must be made prior to a real estate transaction. For most of the class, the typical material disclosure of a cracked foundation, leaky roof or finicky water heater will be laid out, WMU Cooley Professor Chris Trudeau said.
Normal home ownership issues aside, what if poltergeists had regular conversations with a previous homeowner?
In some states, certain disclosures about psychological baggage from an event on the property, also known as “stigmatized property,” must be made, he said.
Trudeau will spend some time with his class on Stambovsky v. Ackley, or the Ghostbusters ruling. The case from the New York Supreme Court often is found in case law books, Trudeau said, as it is one of the wackiest property law examples.
In 1990, Jeffrey Stambovsky sued Helen Ackley to rescind his contract to purchase her home in Nyack, New York, which Ackley knew was haunted through various interactions with a ghost. Both Ackley and her real estate agent failed to disclose the haunting to Stambovsky, despite features in local newspapers and a Readers Digest article.
The home was frequently a stop on haunted tours and a destination for ghost hunters, according to a 2014 article in the Nyack News and Views. A 1990 New York Times article on the lawsuit said Ackley believed there were three ghosts in her home.
Once Sambovsky learned of the haunting, he wanted out of the deal. Stambovsky paid a $32,000 down payment for a $650,000 purchase in the late 1980s.
“That particular house in the case was a well-known haunting,” Trudeau said. “This guy coming from New York City had no idea and felt like he was taken advantage of.”
New York’s trial court dismissed Stambovsky’s suit, a decision he appealed and won at the state’s appellate court in 1991, as Ackley had advertised her home as haunted to others but hid the fact from Stambovsky to sell it.
The appellate ruling held multiple references to ghosts, including Hamlet and Ghostbusters.
“Whether the source of the spectral apparitions seen by defendant seller are parapsychic or psychogenic, having reported their presence in both a national publication and the local press, defendant is stopped to deny their existence and, as a matter of law, the house is haunted,” the ruling read. “The impact of the reputation thus created goes to the very essence of the bargain between the parties, greatly impairing both the value of the property and its potential for resale.”
According to the 1990 New York Times report following the trail court’s initial decision, dozens of offers were made on the house. Ackley sold the home in 1991 and moved to Florida. The home was most recently sold in January for $1.7 million, according to trulia.com.
“Under Stambovsky, when a homeowner tells others their home is haunted, they would have to disclose this information,” Trudeau said. “If a home has a reputation, or is known as haunted, it will need to be disclosed. The house in the Stambovsky case had the reputation and had media coverage about it being haunted.”
More than 20 states have statutes to disclose stigmatized cases, such as haunting, Trudeau said. The statutes mostly relate to the disclosure of happenings, such as suicides, mass murders or other violent crimes, but can extend to paranormal activity.
The disclosures are often based on who knows what about a property, he said, which is why the haunted reputation of the house in the Stambovsky case was significant.
“Such disclosures would be positive under good faith,” he said.
It also could be a matter of how haunted a house is to the seller, said Renalia DuBose, a professor at WMU Cooley in Tampa Bay.
“Depending on how much the seller thinks the home is haunted and the more an individual has publicly spoken about the haunted activities depends on what needs to be disclosed,” DuBose said. “If it is just some inkling, one would not have to disclose, so it would vary on the amount of certainty of the owner. The more likely an individual thinks a home is haunted, the more likely a disclosure is expected.”
In some states, the statues protect the seller, such as in Florida.
“In Florida, there is a stigma statute that absolves responsibility of disclosing HIV or past murders,” DuBose said.
Trudeau said HIV is covered under disabilities and the Fair Housing Act, so the illness no longer needs to be disclosed.
“Those types of cases were in limbo for a while,” Trudeau said. “If so and so had HIV, I wouldn’t care, but some buyers might have cared just in case something was left over.”
In other states, such as South Dakota, a seller must disclose all aspects of a home a potential buyer might consider a defect, Trudeau said.
Many states, including Michigan, still treat stigmatized cases as common law, or “buyer beware,” Trudeau said. Most states, he said, do not require a haunting to be disclosed in a sale.
Should a potential buyer ask about stigmatized defects, Trudeau said the questions pose another gray area for sellers, but he would never advise clients to lie.
Trudeau likes to spend a portion of a class on stigmatized cases to provide some interesting questions to his students. There aren’t many outlandish scenarios, but enough statutes are popping up across the country for stigmatized cases.
“The laws aren’t that crazy, it’s the situations that come up within in them,” he said. “Weird cases are why the legislature has to step in. The law doesn’t adapt well to some of these situations.”