When selling property, the most common consideration for the vendor is to get the best possible price. However, can this interest be reconciled with the obligation of the agent (on the vendor’s behalf) to notify potential buyers about non-physical defects which will likely decrease the value of the asset? The specific example this blog will identify relate to selling a property in which someone has shuffled off this mortal coil and whether or not disclosure to potential buyers is required (and we apologise in advance for the various Hamlet references).
In July 2001, Sef Gonzales murdered his mother, father and sister in their family home. Three years later, the house was put on the market and buyers, who were shown through the property on numerous occasions but never informed about the tragedy, paid an $80,000 deposit towards the purchase of the house. When the buyers realised they had the outrageous fortune of purchasing the ‘Gonzales house’, they backed away from the agreement and requested that their deposit be returned. Eventually, the deposit was refunded and the real estate agent was found to have breached section 52(1) of the Property, Stock and Business Agents Act 2002 (NSW) (Act), due to their misleading behaviour in promoting the property for sale.
Section 52(1) of the Act states inter alia that it is an offence for an agent to conceal a material fact that induces someone to buy.
The question becomes, what is a material fact and how can you tell if not disclosing such a fact persuaded the buyer? This will turn on the circumstances of each individual matter. The first consideration is in relation to the incident itself. How long ago did the death occur? What were the circumstances – natural causes, criminal or anything in between? Are there culturally sensitive issues involved such as suicide or domestic violence? The second consideration is in relation to the specific buyer. Would disclosing this information deter them? In Gonzales, the fact that the purchasers were devout Buddhists may have strengthened their claim.
Take home point
To avoid the risk of a potential claim by a buyer after a sale, it is best practice to fall coward of your conscience and disclose all material facts that might otherwise dissuade the buyer. Be all my sins remembered… but, more importantly, disclosed. Translation: if you don’t disclose these sorts of issues, it may be a very costly mistake.
The above is not intended as legal advice. You should obtain legal advice in relation to your own specific circumstances.