By: Richard Hargreaves
Often, after running a training session for real estate agents, the audience has questions for me. I always enjoy this bit – agents deal with all sorts of characters, and often find themselves in the middle of ‘eccentric’ vendors and purchasers. Interestingly though, three times in the last year, I’ve been asked about the extent to which agents need to disclose grisly details of a property’s past. One agent’s client thought their 1950s bungalow might be haunted.

Noting that it’s Halloween soon, I thought it might be a good time to set out a quick summary of the New Zealand law on ‘stigmatised properties’, whether supposedly haunted, crime scenes, the location of an unusual death, or otherwise notorious.

Poltergeists in the USA

In New Zealand, this is a detour from the normal life of real estate agents (and the lawyers who advise them), but in America it’s a bigger concern. Houses rumoured to be haunted, or where a violent crime has happened, have posed enough of a problem for real estate agents that many states have legislated laws about supernatural disclosure. In most states, legislation requires disclosure of deaths, but prohibits cancellations of a sale for purely supernatural or psychological reasons. Arizona, however, has allowed buyers to cancel contracts because of failure to disclose alleged hauntings. What evidence is required to prove the haunting is unclear.

In New York State, there’s a famous case, Stambovsky v Ackley (N. Y. App. Div. 1991). Mrs Ackley owned an imposing Victorian house. She told reporters that poltergeists would wake her up every morning by shaking the bed, and that ghosts left gifts for her grandchildren. As a result of the published claims, the house became a local landmark ‘haunted house’. When it was listed for sale though, neither Mrs Ackley nor the real estate agent disclosed all these hauntings to the purchaser, Mr Stambovsky. They agreed sale, and only then did Mr Stambovsky hear the local stories of the poltergeists. He commenced proceedings to cancel the contract and claimed damages for misrepresentation.

The court’s judgment is full of ridiculous puns ("the plaintiff hasn't a ghost of a chance", "I am moved by the spirit of equity", “[a law] should be exorcised from the body of legal precedent" etc etc). Of course, the actual existence of ghosts was not proved, but the court ruled that having made such a big deal of the hauntings in the past, Mrs Ackley could not argue the supposed ghosts did not affect the value of the property. It was, the court held, ‘legally haunted’.
 
Stigmatised properties in New Zealand

Back in New Zealand, the courts and REA complaints process have unfortunately not considered cases about poltergeists. New Zealand houses are more likely to be haunted by borer, unconsented building work, or meth contamination.

While there are no New Zealand precedents on the presence of the supernatural, it is relatively common that someone has died at a property, or there has been a crime there.

The leading case on what real estate agents need to disclose about a property’s ‘stigma’ is  Barfoot and Thompson v REAA & Campbell [2014] NZHC 2817. Unfortunately, the previous tenant of a house had committed suicide there. The listing agent had been told about the death, but made the decision not to mention it to prospective buyers.

The complainants bought the house and lived there for some time before they found out about the tenant’s suicide. They subsequently sold the property on, and complained about the agent’s decision not to disclose the fact that someone had died there.

The REA Complaints Assessment Committee and the Real Estate Agents Disciplinary Tribunal decided that withholding information about the death was unfair, and amounted to unsatisfactory conduct. The agency appealed to the High Court, which overturned the Tribunal’s decision, and found that there was no unsatisfactory conduct. Reviewing case law from around the world, the Court found that whether ‘stigma’ needs to be disclosed to a potential purchaser will depend entirely on the situation – there could be no blanket rule. Because there was no guidance published by the REA on the topic, the Court did not think it was so obviously unfair that withholding details of a suicide was unsatisfactory conduct.

The Court listed relevant considerations to help to decide what to disclose (at [90]):
  • A ‘natural death’ does not need to be disclosed;
  • A murder, manslaughter, or suicide should be disclosed to serious potential purchasers;
  • The location of the event should be disclosed. It is reasonable to view a tragedy in the grounds of a property differently from one in the living area of a house;
  • The proximity in time from the event should be disclosed;
  • The circumstances surrounding the event might be disclosed. For example, whether the house has been lived in subsequently and, if so, for how long;
  • The circumstances of the death and whether the death has a degree of notoriety might be relevant (even if just in the local neighbourhood).
  • The likely reaction of potential purchasers and the possible impact on the price should be considered.
Now, the REA has published guidance based on the Court’s ruling, available on its website.  When in doubt, “erring on the side of disclosure” is the appropriate approach.

Ghosts in New Zealand

The Campbell case does not touch on selling an allegedly haunted house in New Zealand. There is certainly no pressing need to legislate on the issue, as there has been in the USA.
Our guess is that no Court would be persuaded that withholding an unsubstantiated claim of haunting would be deemed ‘unfair’. Practically speaking, if a house in New Zealand is old enough to have a ghost, it might actually be a selling point.

We would absolutely love to provide advice if you’re an agent asked to sell a haunted house. So, who you gonna call?
 
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