Is a builder obligated to disclose to a purchaser the fact that a suicide occurred in the house just before the sale closes?
That was the question posed to me recently by my colleague Howard Litowitz, who practises real estate law in Richmond Hill. He told me that his client, a builder, had a new home about to close when one of his staff discovered a deceased intruder in the premises.
The police and coroner agreed that the person had broken in and had committed suicide.
Litowitz and his client asked for my opinion on whether they had to disclose the incident to the purchaser who was about to close on his brand new home within the next few days.
Even though the intruder left no physical evidence of his gruesome visit, there is a belief in the real estate industry that a suicide may render the property stigmatized. This is a code word for the perception that the value of a property has been reduced by non-physical, non-scientific or even irrational perceptions by the buyer.
My own view is that, under Ontario law, there was no obligation on the builder to disclose the fact of the suicide. Just to make sure, however, I decided to ask two other industry gurus if they agreed.
Barry Lebow is a well-known real estate appraiser, broker and educator based in Toronto. He has testified as an expert witness in more than 500 trials. Lebow's view was that the seller likely does not have to disclose, although the agent, if there was one, must disclose.
Even if the vendor was obliged to disclose, Lebow mused about whether the death created a stigma or a reduction in value. Of course, proving this might be difficult.
Lebow added, "Could make for a good lawsuit after the fact, though."
Merv Burgard is a London, Ont., lawyer who lectures to real estate agents. He reminded me of a similar case which went to court in Quebec back in 2006.
In 2003, Sylvie Knight bought a house on Larivière St. in Saint-Constant from Marcel Dionne for $122,000. Several months after closing, Knight learned from neighbours that the son of the former owner had committed suicide by hanging himself in the basement of the residence that she now occupied.
Knight sued Dionne, and when the case went to trial, she told Judge Gabriel de Pokomándy that she never would have bought the house had she known about the suicide.
Under Quebec law, unlike ours in Ontario, the seller of a house must declare that he or she is not aware of any undisclosed fact relating to the property that is liable to significantly reduce its value.
The issue the court had to decide, in this case, was whether a suicide in a residential building is a factor that the seller ought to have disclosed, and if he did not do so, whether that justifies awarding damages.
After carefully reviewing the facts, the court concluded that "the story of Marcel Dionne's son, who committed suicide by hanging himself in one of the rooms of the house more than 10 years ago, cannot be considered to be the kind of factor liable to affect the value of the building."
The suit was dismissed.
In the case of the Richmond Hill-area builder, Litowitz reported to me last week that the new home sale finally closed. He told his client that he was not aware of any disclosure requirement. As a result, neither the purchaser nor the real estate agent was advised of the incident.
Should the Richmond Hill builder have disclosed the suicide? Was the court right in not penalizing the seller? What do you think?
Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp. Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly. E-mail bob@aaron.ca
January 20, 2009
Legal |