If there’s been a grisly murder or a suicide in an apartment, do you need to disclose that to potential purchasers?
David Airey wrote on this subject in the Property Observer today talking about stigmatised history of a property.
It’s kind of disturbing that this happens so often that there’s actually a name for it. When a property is stigmatised there has been an “Event” of some description that might impact on some purchasers willingness to purchase the property. Airey notes
Such properties are known as ‘stigmatised houses’, and agents are obliged to be transparent with potential clients. If an agent knows that a house has been stigmatised then it is incumbent on them to advise the client, prior to a sale or leasing contract. The stigmatization does not need to be noted in the marketing for the property but raised with clients if a deal is to be struck.
Does Disclosure of Defects in Common Property Count?
Section 223 of the BCCM Act 1997 notes that the Seller warrants to the Buyer that the property is free from defects other than those that are included in the contract, which simply means that if there’s a problem in the common property of a body corporate and that fact is not disclosed to the Buyer they may void the contract.
All that’s required to circumvent the section is to disclose that the defects are there, which is the purpose of a Implied Warranty Statement and Form 2 Seller Disclosure Statement.
But does that relate to a stigmatising event? Should that be disclosed in the contract?
Each circumstance is individual. If the event in question made it into the body corporate records for the period inspected, then yes, absolutely this will be included in that sort of search. However if the event happened years ago, such as a unit being used to make drugs requiring the place be completed renovated, then maybe not.
The function of section 223 is to prevent Buyers being lumbered with property that’s clearly not fit to be used without their express consent. A stigmatising event such as someone dying on the property is not going to impact on the usability of the infrastructure and it may not come up.
A body corporate records search, which is a search undertaken on behalf of the Buyer, would definitely report any stigmatising events that have occured in recent past. That’s it’s function.
That said, it does not absolve the real estate agent, or owner if self acting, from disclosing an event to the purchaser.
And of course it would definitely depend on individual circumstances. In the past I’ve seen several fatal incidents where people have fallen from balconies and expired on common property. That I would not disclose in a disclosure, but certainly in a pre-purchase strata report.
That said I have seen several instances of drug labs in lots within body corporates, which I would likely disclose notwithstanding the incident doesn’t relate to common property. Drug labs have devastating impacts on buildings and its unlikely to be successfully contained within a lot only.
What to disclosure when selling a unit has more implications than those with a house because along with the lot the Buyer will also be buying a share of the common property. Reporting on the common property is as important as the lot itself.