A Pennsylvania court has considered whether real estate professionals had a duty to disclose that the former owner had allegedly shot his wife and then killed himself on the property.
In 2006, Kathleen and Joseph Jacono (“Sellers”) purchased a property through an auction from the Koumboulis estate. The former owner had allegedly shot his wife and then committed suicide on the property. The Sellers listed the property for sale in 2007 with Fran Day and Thomas O’Neil of Re/Max Town & Country (“Listing Broker”). Prior to listing the property, one of the Sellers had spoken with the Pennsylvania Real Estate Commission (“Commission”) about whether murder/suicide was a material defect requiring disclosure and the Sellers were told that these circumstances did not require disclosure. The Listing Broker had a conversation with the Pennsylvania Association of REALTORS® Legal Hotline, and was also advised that murder/suicide was not a material fact requiring disclosure.
Janet Milliken (“Buyer”) learned of the Sellers’ property through her real estate representative, John Restrepo of Fox & Roach LP (“Buyer’s Representative”). The Buyer entered a purchase agreement with the Sellers, and received the Sellers’ property condition disclosure (“PCD”) statement. The PCD did not disclose the murder/suicide as a material defect. The PCD also stated that the property was last occupied in 2006, and the Sellers had owned the property for seven months. The Buyer later testified that she was not aware of the murder/suicide until three weeks after she moved onto the property, although she had received documents prior to closing that listed the alleged murderer as the owner.
The Buyer filed a lawsuit against the Sellers, the Listing Broker, and the Buyer’s Representative, alleging fraud and misrepresentation over the failure to disclose the murder/suicide on the property. The defendants argued that they were not required to disclose the murder/suicide because it was not a material defect. The trial court entered judgment in favor of the defendants, and the Buyer appealed.
The Superior Court of Pennsylvania affirmed the trial court. The court first looked at whether the state’s property condition disclosure law (“Law”) required disclosure of the murder/suicide. The Law required the disclosure of all material defects on the property. The Law defined a “material defect” as “a problem with a residential real property…that would have a significant adverse impact on the value of the property or involves an unreasonable risk to people on the property.” The law then identifies specific structural and legal defects as the particular classes of defect requiring disclosure, listing potential defects such as the roof, electrical system, and drainage, or potential legal impairments, such as homeowner or condominium association rules. Because the legislature had not included psychological defects associated with the property in the Law, the court determined that psychological defects were not the type of “material defect” that the Law required sellers to disclose.
The Buyer argued that the murder/suicide was a psychological defect that had a significant economic impact on the property and so fell within the definition of a “material defect”. The Buyer also argued that the legislature could have specifically excluded psychological defects from disclosure but had not done so. The court rejected both of these arguments. First, the court ruled that the legislature had specifically excluded any requirement of the disclosure of psychological defects, and instead had limited disclosure to legal or physical defects. Second, it is difficult to define what constitutes a psychological defect. What constitutes a psychological defect may vary by consumer and is subjective, unlike objective defects such as a leaky roof or basement. Thus, the court rejected creating a rule requiring sellers to make such subjective disclosures. Therefore, the court affirmed the trial court’s ruling that the Law did not require disclosure of the murder/suicide.
The court also affirmed the trial court’s ruling in favor of the defendants on the other allegations made by the Buyer. Both the fraud and negligent misrepresentation claims involve the failure to disclose a material fact. Since the court had ruled that the failure to disclose a psychological defect such as murder/suicide is not a material fact, both of those claims failed. Thus, the court affirmed the rulings in favor of the Sellers, Listing Broker, and the Buyer’s Representative.
Three judges dissented, finding that the murder/suicide had an adverse impact on the property and thus constituted a material defect requiring disclosure.
Milliken v. Jacono, No. 2731 EDA 2010, 2012 PA Super 284 (Pa. Super. Ct. Dec. 26, 2012). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information.]