Friends of mine recently had the misfortune of experiencing a death in their house. As if this weren't bad enough, they now have to share this misfortune with every would-be buyer because the house is for sale.
Let's face it, most people don't like to talk about death. But the law says that a seller with a residence in which somebody has passed away--even by natural causes--within the last three years must disclose the death or risk being sued by the buyer.
The fact that a person has died on the premises--including a residence, guest house, garage, cabana or elsewhere--within three years before the sale of a property is considered by most real estate agents and legal experts to be a so-called material fact that must be disclosed to a buyer. A material fact is basically defined as something that a buyer would typically want to know about a property.
Buyers typically want to know if there has been a death in the house, especially if the death was a violent or shocking one. It's both an emotional and financial issue. Some people just feel uncomfortable buying and living in a residence where someone has died, particularly if the death was a murder or suicide. Other people worry more about the effect of a recent death on property values. Some houses with a death in their recent history can attract morbid curiosity in some buyers, say local real estate agents. But usually a recent death is more of a hindrance than a help in selling a home or condo.
Because a recent death is important to many buyers, it must be disclosed. Disclosure requirements are imposed both by statute and established case law. Although it's the seller that has the primary obligation to make disclosures, the seller's agent is usually on the hook too. The seller's agent has the duty to disclose material facts known to him or her and that the buyer doesn't know about. Also, a seller who fails to give a required disclosure because of the agent's failure to properly advise the seller may have a cause of action against the agent for negligence.
The result of all these disclosure requirements is that most lawsuit-wary sellers and agents now try to disclose anything and everything that a buyer might later complain about.
The requirement to disclose a death on the premises arose several years ago in a Ventura County case in which one of the owners had been murdered on the property about seven years before the sale, recalled David L. Shane, counsel for the San Fernando Valley Assn. of Realtors and a partner in the law firm of Walleck, Shane, Stanard & Blender in Woodland Hills. The court sided with the buyer and said that the death could be considered a material fact that requires disclosure to a seller.
The state Legislature has since narrowed the period for death-related disclosures by passing a law stating that no claim can be made against an owner or seller for failing to disclose a death on a property more than three years before the date of the buyer's purchase offer. This Civil Code statute does not impose a penalty for failing to disclose a death. But in providing immunity to sellers who don't report a death more than three years prior, there is an implicit requirement to tell buyers about something that happened within the last three years.
What happens if a seller or agent fails to make required disclosures? The seller and / or seller's agent may be liable for damages sustained by the buyer because certain information--such as a death in a residence--was suppressed, said Steve Sokol, associate general counsel for the California Assn. of Realtors.
"How you measure damages is one more thing for the lawyers to argue about," Sokol said. A buyer might also sue for negligent or intentional infliction of emotional distress. And the buyer may seek to rescind the sale--although a court isn't likely to grant this remedy.
What needs to be disclosed has pretty much been established by statute and by case law. How and when to disclose problems with a residence or a recent death in a home is more a matter of discretion and strategy, said Michele Morely, general counsel for James R. Gary & Co. Ltd. in Woodland Hills. "It's better to disclose something like a death in the house early on," Morley said. "A house is such an emotional purchase. Why open escrow and risk the deal falling through?" By telling the buyer all that's wrong with a house before escrow opens, she said, the buyer can't then use the problems as an excuse to get out of the deal.
Death-related disclosure requirements become further complicated when death in a house results from an AIDS-related illness. California's Civil Code states that no claim can be made against an owner or agent for failure to disclose that the occupant of a house or condominium died of AIDS. A death within the last three years still needs to be disclosed, but in the case of AIDS, the cause of death should generally not be disclosed.
If a buyer asks specifically about whether there was an AIDS-related death in a home within the last three years, the seller and / or seller's agent must answer truthfully if they have knowledge of an AIDS-related death.
To avoid violating the federal Fair Housing Act, however, legal experts generally advise agents to refuse to answer the question. "The conflict between confidentiality and disclosure can put an agent in a very difficult situation," Morley said.