To Disclose, Or Not To Disclose – A Lesson For Vendors And Agents

When selling property, the most common consideration for vendors and agents is to get the best possible price. However, there are circumstances where information that can harm the value of a property may need to be disclosed. 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 is related 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).

The Gonzales case

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 misfortune of purchasing the ‘Gonzales House’, they backed away from the agreement and requested that their deposit be returned.

The deposit was eventually 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. For the agent in this case, it would have been far less costly to have simply disclosed the information.

Material facts

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 has persuaded the buyer to make a purchase that they wouldn’t have made otherwise? 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. For many religions and cultures, when a violent death occurs, the location where it happened, in this case a property, takes on a negative significance. Furthermore, when the scene of a crime becomes part of a community folklore, instances of people coming to see the infamous ‘Gonzales House’ would be a nuisance regardless of the owners’ personal beliefs.

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.

Ryan & Ryan Lawyers

Ryan & Ryan Lawyers are experts in property law. Our specialists understand how cultural and religious significance can affect a buyer’s decision, and we can help you if you feel you have been mislead to make a purchase decision.

For more information about property law, visit our website. If you are in need of our legal services, especially if you have accidentally purchases your local ‘murder house’, get in contact with us today.

The above is not intended as legal advice. You should obtain legal advice in relation to your own specific circumstances.

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