No Duty to Disclose Sex Offender

Read the full decision: Troja v. Pleatman
Ohio court rules that real estate professional had no duty to disclose the fact that a sex offender lived next door, as this was a nonmaterial defect that did not involve the buyer’s property.
When property buyers (“Buyers”) discovered that a convicted criminal lived next to the home they had under contract, Buyers sought to terminate the agreement.  The seller (“Seller’) refused to cancel the agreement and filed a lawsuit seeking specific performance of the purchase agreement.
The Buyers then filed third-party action against their real estate broker (“Brokerage”), alleging that the Brokerage had breached its fiduciary duty by failing to alert them to the presence of the convicted criminal next door.  The Brokerage served as a dual agent in the transaction.  The Buyers claimed they had asked about criminal activity in the neighborhood and the Brokerage had not told them about the neighbor.  One of the Buyers also repeatedly contacted the Brokerage about the case and made posts on social media that caused the court to enter a “no-contact” order against her, which she violated and was found in contempt of court.  The trial court entered judgment in favor of the Brokerage and the Buyers appealed.
The Ohio First District Court of Appeals affirmed the trial court.  The court first examined whether the Brokerage owed the Buyers a fiduciary duty to disclose the presence of a convicted criminal next door. A real estate licensee has a duty to disclose all material defects known to the licensee, with the state statute defining material defects as physical defects found on the property.
The court looked at two other cases involving breach of fiduciary duty allegations when non-physical defects were allegedly not disclosed to the buyer. Both cases involved deaths on the property that was purchased, one of which involved a murder.  In both cases, the courts determined that these “psychological stigmas” were not material defects and so did not need to be disclosed by the real estate professional. 
The court affirmed the trial court’s determination that the presence of a convicted criminal next door was not a material defect and therefore the Brokerage was not required to disclose this fact, even if known.  The court further stated that there was no evidence that the Brokerage even knew about the presence of the convicted criminal and that the Buyers could have learned about the presence of the felon in the neighborhood by conducting their own investigation.  Therefore, the court affirmed the trial court’s ruling in favor of the Brokerage.
Troja v. Pleatman, 2016-Ohio-5294, 2016 WL 4212366 (Ohio Ct. App. Aug. 10, 2016).  [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.]
Editor’s Note:  NAR Legal Affairs would like to thank Ohio Association of REALTORS® General Counsel Peg Ritenour for alerting us to this decision.