stigmatized properties - Pranv Pranav at Khemka Law
Courtesy of Khemka Thursday Tidbits
The Real Estate Council of Alberta (“RECA”) states that a stigmatized property is a property that buyers or tenants may “shun for reasons that are unrelated to the [property’s] physical condition or features.” For instance, stigma can arise in the following circumstances:
- A suicide or death in the property;
- Reports that the property is haunted;
- The property was the site of a marijuana grow op; or
- The property was subject to vandalism in the past.
The effect and significance of a stigma on a person is dependent on that person’s values, perceptions, background, race, religion, etc. Therefore, the effect of stigma on everyone varies. This Tidbit will cover real estate professional’s obligations when acting for a buyer or seller in relation to stigma.
Real Estate Professional’s Obligations When Acting for A Buyer
A real estate professional is required to use their best efforts in locating a property for their client that is in line with the buyer’s requirements. To determine what the buyer requires, an agent must engage in active and, at times, extensive written and verbal communications with their client to determine their requirements. RECA suggests that agents should discuss stigma concerns with their clients when determining the buyer’s requirements.
When a potential property is found that meets the buyer’s requirements, the agent must take reasonable efforts to discover any relevant facts about the property and disclose them to their client in a timely fashion, which involves, but is not limited to, asking questions to the seller’s agent, adding conditions into the purchase contract to satisfy their client’s concerns, making inquiries with the seller’s neighbors or requiring a property inspection.
If the inquiries do not satisfy the client’s concerns regarding a potential stigma associated with the property, a real estate professional should provide the following options to their clients:
Proceed with the purchase of the property without an answer to the stigma question;
Research the stigma issue further before proceeding; or
Find another home.
Real Estate Professional’s Obligations When Acting for A Seller
The seller and their agent are required to answer honestly when asked questions about the potential existence of stigmas by the buyers or their agent. However, this may put your client in a dilemma as disclosure can negatively affect the value of their property or prevent the sale of their home.
The common law requires a seller or their agent to disclose all known material latent defects to the buyer or their agent. However, there appears to be no similar requirement concerning questions revolving around stigma – known or otherwise. As such, a seller’s agent (under lawful instructions from their client) may choose to:
- Refuse to answer the buyer or their agent’s question and suggest they determine the answer from alternative sources;
- Answer their question with a disclaimer that the buyer should not rely on the accuracy of their information and should verify the information for themselves; or
- Answer the question without qualification.
A prudent real estate agent will discuss concerns regarding stigma with their client, their rights and obligations and suggest that the client seeks legal guidance, if need be, for further help at the outset of the relationship. They should also obtain lawful instructions regarding disclosure of stigma related questions from their clients, accordingly.
If you have any questions concerning stigmatized properties, please do not hesitate to contact Khemka Law or counsel of your choosing. We are always here to assist you and your clients. Thank you for your time and consideration.
Pranav Khemka, Barrister & Solicitor
T: (403) 457-9577 | F: (403) 457-9578