(CN) - Pennsylvania realtors have no obligation to warn buyers if a murder occurred in the property they are selling, the state superior court ruled.
In February 2006, 50-year-old Konstantinos Koumboulis allegedly shot his 34-year-old wife and then killed himself in his West Chester, Pa., home. The house was sold at a real estate auction to the Jacono family, who in turn commissioned local Re/Max agents to sell it.
The Jaconos and Re/Max confirmed with both the Pennsylvania Real Estate Commission and the Pennsylvania Association of Realtors that they were not obligated to report the murder-suicide to buyers.
One year later, a woman named Janet Milliken purchased the home for $600,000. Unaware of the Koumboulis history, Milliken believed that the home had gone into foreclosure. She learned of the tragedy three weeks after moving in and sued the Jaconos, Re/Max and her own realtor for fraud and misrepresentation.
The trial judge granted summary judgment to the defendants, finding that Pennsylvania law does not require realtors to disclose that a murder occurred in the home.
A divided panel of the appeals court affirmed last week.
"If the murder/suicide cannot be considered a defect legally, or if the Sellers were under no legal obligation to reveal this alleged defect, there can be no liability predicated upon the failure to so inform," President Judge Emeritus Kate Ford Elliott wrote for the six-member majority.
"Today, we find that psychological damage to a property cannot be considered a material defect in the property which must be revealed by the seller to the buyer. Thus, each of Buyer's issues on appeal must fail."
Though the state Legislature requires realtors to disclose any material defects of the property to buyers, they do not have to report "psychological damage" to the property or its reputation, according to the ruling.
Ford Elliott pointed out three main concerns with requiring such disclosure.
First, "this sort of psychological damage to a house will obviously decrease over time as the memory of the murder recedes from public knowledge," Elliott wrote. "Requiring a seller to reveal this information may force the seller to sell the house under market value and allow the buyer to realize a windfall when the house is resold 10 years later and memories have faded."
Such a result would be nonsensical, she argued.
"Second, how can a monetary value possibly be assigned to the psychological damage to a house caused by a murder?" Elliott asked. "The psychological effect will vary greatly from person to person. There are persons for whom no amount of money would induce them to live in such a house, while others may not care at all, or even find it adventurous."
And finally, requiring disclosure of nonmaterial damage could lead to a slippery slope, the court found.
"If psychological defects must be disclosed then we are not far from requiring sellers to reveal that a next-door neighbor is loud and obnoxious, or on some days you can smell a nearby sewage plant, or that the house was built on an old Indian burial ground," Elliott wrote. "Indeed, one could identify numerous psychological problems with any house."
The state Legislature, rather than the courts, must decide whether such an extension would be appropriate, according to the ruling.
Milliken also failed to allege negligent representation because the seller did not owe her special duty.
"Sellers simply did not engage in any deceptive conduct. Sellers merely declined to inform Buyer about a factor of which they were under no obligation to disclose," Elliott wrote.
Judge John Bender penned a dissenting opinion joined by Judges Sallie Mundy and David Wecht.
"The single certainty that permeates every aspect of this case is that Janet Milliken, who has now suffered a six-figure economic loss (and untold aggravation), was destined to discern the occurrence of a murder/suicide in her new home either before consummating her purchase or - as fate would have it - afterward," Bender wrote.
"The majority's ruling, which deprives Milliken of any legal remedy, rewards those sellers and short-circuits the legislative intent of the Real Estate Seller Disclosure Law."
The definition of a "material defect" under RESDL could be read to include psychological damage, Bender pointed out.
"A 'material defect' is 'a problem with a residential real property or any portion of it that would have a significant adverse impact on the value of the property or that involves an unreasonable risk to people on the property,'" he quoted.
"Whereas the majority would consign the stigma of murder/suicide to the ethereal realm of 'psychological damage,' the statute recognizes it for what it is - documented economic loss - and a 'material defect' that must be disclosed."
The dissent pointed to a ruling by the California Court of Appeals, which held that undisclosed information must be analyzed to determine the "gravity of the harm inflicted by nondisclosure; the fairness of imposing a duty of discovery on the buyer ... and its impact on the stability of contracts if rescission is permitted."
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