Requirement to disclose – case overturned by the High Court

An Auckland real estate agency has won an appeal about selling a property without disclosing that a suicide occurred in the garage about a year before the sale.

A brief reminder about the original ruling by the Real Estate Agents Disciplinary Tribunal:

• The Tribunal agreed that the agency was guilty of unsatisfactory conduct.
• The Tribunal also agreed that the Committee was correct to make no further order for compensation given the facts of the case.

This was based on rule 6.4 as to fairness, that states, “A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or fairness be provided to a customer or client”.

The High Court has overturned the Tribunal decision and ruled that the agency was not guilty of unsatisfactory conduct.  This was because, “The decision is so finely balanced and because there was no standard or guidance available”.

The Judge said that it was unreasonable for the agency to know whether or not to disclose the suicide given it took place in the garage over 12 months before the sale.

Both parties involved in this case asked the High Court for some guidance about the application of rule 6.4 and how it relates to fairness.  The Judge said that she was “reluctant” to attempt this.  Her view was that the industry should undertake this, so that it can hear submissions from those involved in the industry who would have considerably more experience in this area.

The Court did however give some general guidelines, but not any “hard and fast rules” to help agents determine when an incident should be disclosed.  The Court noted that each case should be considered on its own facts, and there is a need to consider questions of confidentiality, and fairness, to the vendor.

The general guidelines to be taken into account include:

• The fact that a murder, manslaughter or suicide has occurred on the property
• The location of the event (a tragedy in the grounds should be viewed differently to one in a living area of the house).
• The length of time from the event.
• The circumstances following the tragedy.  For example, whether the house has been lived in after the event.
• The surrounding circumstances of the death and its notoriety (even if it is just in the local neighbourhood).
• The likely reaction of prospective purchasers and the possible impact on price.
• The Court went on further to say that fairness could include other matters other than an unnatural death.  For example a notorious vicious crime should be disclosed because it would be unfair for a purchaser from an outside region to be ignorant of such an event.

What does this mean as an agent going forward?  As the guidelines mention above, every situation will need to be considered very carefully on its own circumstances.  This Court decision does not mean that every suicide will not need to be disclosed.