Property 101: Psychologically stigmatised property

Property 101: Psychologically stigmatised property
Property 101: Psychologically stigmatised property

A property where some tragic or traumatic event, such as murder, rape, suicide, violent crime or other horrific event has occurred is referred to as a "psychologically stigmatised property".

Such a characterization does not involve a defect as to title or the physical features of the land. The stigma in such cases is said to emanate from some non-physical defect that causes religious, moral, emotional or psychological discomfort to a buyer.

Is there a duty of disclosure?

Silence as to the history of a property may constitute misleading and deceptive conduct, particularly where the silence is coupled with the failure to correct or qualify statements that lead a purchaser into error. If a horrific event occurred in a dwelling, there is likely to be a "reasonable expectation" that it will be disclosed to purchasers.

It is an offence under state and federal law for an estate agent or representative to mislead or deceive a client (seller or landlord) or a consumer (buyer or tenant) by their conduct or representations. While agents around the country have ethical responsibilities under their codes of conduct, the laws surrounding these issues vary from state to state and none of them is uniform.

Concealment and silence

Misrepresentation can be about what is not said as well as what is said.  Schedule 1 (3) of the Property, Stock and Business Agents Regulation 2003 states that: "You must be fair and reasonable to all parties, and must not mislead or deceive any parties in negotiations or a transaction."  

There is no stand alone duty of disclosure, but silence can be misleading in certain contexts, and this should be avoided. There is a need to consider the background of other facts against which the silence occurs. Agents need to consider whether silence in that context can lead reasonable people to believe that a particular state of affairs exists where it does not. Remaining silent or only telling half the story where there is a reasonable expectation of disclosure means you are breaking the law. Licensees and certificate holders must be open and honest with clients and customers.  

If information is known to the agent they must not conceal or suppress information about a property if there is a reasonable expectation that the information will be of concern to a buyer or seller and is not readily apparent. Refer to Fair Trading NSW website here

Garth Brown from from conveyancers Brown and Brown said there has been considerable debate over the years since the issue of stigmatised properties came to the fore in 2004 when a real estate agent in New South Wales was successfully prosecuted by the Commissioner of Fair Trading for marketing a home in North Ryde without revealing to prospective purchasers that a tragic triple murder had occurred in the house, the media had dubbed this case "the Gonzales murders". 

"The law in Australia is not yet settled on this issue but as in the Gonzales case the onus of responsibility may come down to the selling agent who has a moral obligation and a duty of care to inform prospective buyers that the events that occurred in the property may affect its value now and in the future," he said.

"Since the Gonzales case there have been a number of similar cases and the debate has been kept alive how to handle the issue, it has even been suggested in the industry that this type of disclosure could be captured in the contract for sale of land and is part of the conveyancing process with the prospective buyer's conveyancer or lawyer making the enquiries to ensure the land/property doesn't have a stigmatized history.

For more information, contact Brown and Brown Conveyancers here.

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