Stigmatizing
Issues – New
February 3, 2015
When
representing a buyer, it is the obligation of a registrant to use their best
efforts to identify properties that meet the buyer’s criteria and to
generally promote and protect the interests of the buyer.
REPRESENTING THE BUYER
Accordingly,
a registrant representing a buyer must obtain as much information as possible
from them before beginning the process of searching for a suitable
property and representing them with third parties. Registrants must
discuss in detail the buyer’s needs and wants regarding
property requirements, including constraints or restrictions, and any
other issues or concerns the buyer may have with respect to the purchase
of a property.
Communication
is a two-way street, of course, and RECO encourages buyers to be proactive
and provide information to their representative and to ask questions
regarding issues of specific importance to them and their families.
Nonetheless, registrants are encouraged to communicate extensively and
frequently with their buyer clients to best understand their wants, needs,
priorities and concerns. For the purpose of consistency and record
keeping, a registrant should consider documenting their inquiries through
the use of a questionnaire or similar tool.
DEALING WITH “STIGMA”
In the
context of real estate, a “stigma” is a non-physical, intangible attribute of a
property that may elicit a psychological or emotional response on the part
of a potential buyer. There may have been an event or circumstance that
occurred in or near the property that does not affect the
property’s appearance or function, but might be considered by some as
emotionally disquieting. Unlike a latent or patent defect, which may exist
at a property, there is nothing physically observable or
measurable associated with a stigma.
The Real
Estate and Business Brokers Act, 2002 (REBBA) does not define
“stigma”, but examples may include:
• the
property was used in the ongoing commission of a crime (e.g., drug dealing,
chop shop, brothel);
• a murder or suicide occurred at the property;
• the property was previously owned by a notorious individual (e.g., organized crime leader, known murderer);
• there are reports that the property is haunted;
• a former grow-op which has been remediated according to the local health or building authority.
• a murder or suicide occurred at the property;
• the property was previously owned by a notorious individual (e.g., organized crime leader, known murderer);
• there are reports that the property is haunted;
• a former grow-op which has been remediated according to the local health or building authority.
The relevance
and impact of a potential “stigma” or any other such non-physical circumstance
will be determined by a buyer’s personal values and perceptions, ethnic
background, religion, gender, age and other individual concerns. Given all
the possible occurrences or circumstances that might exist for a given
buyer to consider a property to be “stigmatized,” it is impossible for
registrants to determine in advance what these might be. Again,
communicating openly and early is key.
Registrants
representing the buyer are advised to discuss their specific needs or
requirements and any concerns and issues related to purchasing a property.
In its communications to consumers, RECO advises buyers to carefully
consider the areas of concern they may have and to discuss them with their
real estate professional to ensure the necessary inquiries will be made to
avoid purchasing a property they will not feel comfortable living in.
STIGMAS ARE DIFFERENT FOR DIFFERENT
PEOPLE
The
following questions and responses may demonstrate the difficulty, in practical
terms, of defining a stigma. For example, think about the possible
responses to this question: Would it matter to you if a death had occurred
in a property you were interested in buying? Some would say “Yes, absolutely!” However,
consider the following situations:
• Would
it matter if the death was from natural causes, or accidental, versus being
caused by a violent act or suicide?
• Would it matter if it was a crib death of an infant?
• Would you be as concerned by a death that occurred 20 years ago as you would with a recent one?
• Would it matter if it was a crib death of an infant?
• Would you be as concerned by a death that occurred 20 years ago as you would with a recent one?
These
examples illustrate how difficult it is to clearly define what constitutes a
“stigma.” What one person might find completely unacceptable may not be of
any concern to another.
SELLER DISCLOSURE OF STIGMA
Under
the doctrine of caveat emptor (“buyer beware”), buyers are ultimately
responsible to satisfy themselves that the property they are acquiring is
suitable for their purposes. However, many buyers and their
representatives will look to the seller and his or her representative to
provide them with information about the property.
It is
important for registrants to know that while sellers are required by law to
disclose material latent defects affecting a property that are known to
them (an obligation which also exists for the seller’s representative if
the material latent defect is also known by the representative), there is no
legislation or case law in Ontario to suggest that a seller, or his or her
representative, is required to disclose the existence of stigmas to
buyers. Registrants representing sellers should advise their clients to seek
legal advice if they believe that stigmatizing issues may become a factor
in selling the property.
If a
registrant is representing a buyer who is concerned about specific types of
stigmas, it is highly recommended that the registrant and buyer conduct
their own investigation, which could include an internet search and also
making direct inquiries of the seller or registrant representing the seller.
To further protect the buyer, the registrant could include in any offer a
representation/warranty regarding the status of the property. For example,
“The seller represents and warrants that to the best of his/her knowledge
and belief the property has not been the site of a murder.”
All
registrants have an obligation to act with fairness, honesty and integrity when
dealing with others in a real estate transaction. Similarly, registrants
must use their best efforts to prevent error and misrepresentation while
still promoting and protecting the best interests of their clients.
Therefore, when the registrant representing the seller is asked about the
existence of specific stigmas that might affect the property, that
registrant may either answer the question and provide the
information without qualification, or in the alternative, refuse to answer
the question and suggest the buyer ascertain the answer for themselves.
The
approach to be taken should be based on a detailed discussion with, and
instructions from, the seller. Registrants are expected to use reasonable
care and skill to ensure the accuracy and completeness of the information
conveyed to the buyer and/or his or her representative, and
should consider documenting such responses.
TREAD CAREFULLY
A
registrant cannot anticipate all the areas of sensitivity that an individual
buyer may have. This fact, combined with the fact that a seller may refuse
to answer questions about potential stigmas, means that registrants must
approach this subject carefully. They should keep in mind that a seller may
have no knowledge of events that occurred before he or she owned the
property, or the property may have been rented out and the seller may not
know of the events that occurred during the rental period.
Registrants
representing sellers should have a full and frank discussion with the seller
regarding stigma. If it is determined that there may be stigmatizing
issues associated with the property, the registrant should advise the
seller to seek legal advice regarding their rights and obligations related
to the issue, and get written instructions regarding the disclosure of the
stigma to buyers. Registrants representing buyers should have detailed
conversations with the buyer to identify relevant stigmatizing issues, and
be prepared to do some additional investigation or research if the
buyer indicates sensitivity to one or more such issues.
In a
multiple representation scenario, the issues become a little more complicated.
Before a seller is asked to consent to multiple representation, it must be
explained that any information about stigma will have to be conveyed to
the buyer, as part of the brokerage’s duties to the buyer. If the
seller objects to this, they should be advised that they do not have to
consent to multiple representation. If consent is not given, the
registrant must inform the buyer of this fact and the brokerage will have
to release the buyer to seek alternative representation.
Taking
a proactive, communicative and well-documented approach to stigmatizing issues
will minimize the risk of buyers being uncomfortable with their home and
filing a complaint, failing to complete a transaction or initiating a
lawsuit.
Acknowledgement:
This bulletin makes use of information originally published by the Real Estate
Council of Alberta (RECA). RECO is extremely grateful to RECA for its
consent to adapt its publication.
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