The doctrine of caveat emptor or buyer beware still places the onus on the purchaser to make enquiries that would reveal the "stigma" of a property being the scene of a violent crime. Stigma related defects, which are inherently subjective, do not render a property dangerous or unsafe for habitation or use. They are therefore not within the category of latent defects that a seller must disclose.
A murder is not a latent defect rendering the property dangerous or uninhabitable
The Supreme Court of British Columbia recently considered the issue in Wang v. Shao, [2018] B.C.J. No. 406. Raymond Huang was murdered in front of his house in Vancouver's upscale Shaughnessy neighborhood on November 3, 2007. The murder was unsolved. On September 3, 2009, Mr. Huang's wife entered into an agreement to sell the property for $6.1 million on behalf of her mother who was the legal owner of the property and for whom she was a power of attorney. When the purchaser learned of Mr. Huang's murder, she refused to close the sale. The seller sued.
The court rejected the purchaser's defence that Mr. Huang's murder was a latent defect rendering the property dangerous or uninhabitable. His death did not relate to the physical or intrinsic qualities of the property. The property was not inherently unsafe given the nature of the violent murder even though the sellers claimed to fear for their safety. The court explained that the assessment of risk related to this stigma highlighted the subjective nature of the enquiry, and that some purchasers may attach different weight to the nature of the violence and amount of time since the violent event.
Liability turned on the seller's answer to the frequently asked question, "why are you selling the property?". The seller's response, communicated through her real estate agent, was that her daughter was attending a new school on the other side of town and they wished to be closer to her new school. The court found that this representation, while true on its face, was incomplete. It concealed the fact that the seller's daughter changed schools as a result of her father's murder (she was asked to leave her previous school because of the murder) and that Mr. Huang's murder was a factor in the seller's decision to sell the property.
Fraudulent misrepresentation
This incomplete representation was a misrepresentation upon which the purchaser relied to her detriment. The court accepted the purchaser's evidence that she would not have agreed to purchase the property had she known that a reputed gang leader had been murdered at the property's front gate. The fraudulent misrepresentation vitiated the contract for purchase and sale and the seller's action was dismissed.
The authorities in Ontario are arguably less certain as to whether a stigma related defect could impose a duty to disclose on a seller. Decisions such as Swayze v. Robertson, [2001] O.J. No. 968, a case about water intrusion in the basement of a home, define latent defects broadly. In Swayze, the court stated that a seller's disclosure obligation goes beyond defects that render a premises dangerous or uninhabitable. According to the court, the correct approach asks whether the defect has caused any loss of use, occupation, and enjoyment of any meaningful or material portion of the premises.
Conceivably, a stigma related defect could affect an owner's intended use and enjoyment of a property. This might arise in a commercial context where the stigma has the potential to impact a property owner's ability to generate revenue. Consider a person who unwittingly purchasers a property to operate a daycare next door to the home of violent drug dealers. A reasonable person would not send their child to that daycare, thus thwarting the purchaser's intended use for the property. Whether an Ontario court would apply the doctrine of caveat emptor or adopt the Swayze line of reasoning and find in favour of this sympathetic, but perhaps less than diligent, purchaser remains to be seen.
A version of this article originally appeared on The Lawyers Daily website published by LexisNexis Canada Inc. on March 28, 2018
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