For many years, the theory of “caveat emptor” or “let the buyer beware” prevailed in residential real estate transactions. The landscape changed in 2000 with the passage of RESDL, the Real Estate Seller Disclosure Law. Under RESDL, there are 16 specific categories of information that need to be provided by the seller relating to a sale of a property.
In Pennsylvania, the Real Estate Seller Disclosure Law mandates that the seller “deliver” a signed and dated copy of the property disclosure form to the buyer prior to the execution of an agreement of sale. As the term is used in the statute, “deliver” means to give to the buyer by personal delivery, first-class mail, certified mail/return-receipt requested or facsimile to buyer or buyer’s agent. In practical application, a seller’s agent usually leaves several copies of the disclosure form at the property for potential buyers to take with them upon looking through the house for the first time.
Examples of the types of issues covered by disclosure forms include:
- When the property was last occupied by seller;
- Condition of the roof;
- Structural problems;
- Water and sewage systems or service;
- Electrical system;
- Heating and air conditioning;
- Plumbing system;
- Presence of hazardous substances;
- Municipal violations against the property; and
- Presence of mold.
Janet Milliken purchased a $610,000 home in Delaware County but was not informed that the property had been the site of a murder/suicide. She filed suit in Delaware County Court alleging that she had been defrauded by concealment of the aforesaid information. Her expert witness asserted that the value of the home was 10 to 15% less because of what had happened there.
The Delaware County Court dismissed the case on preliminary objections based upon the fact that the specific mandatory disclosures outlined in RESDL deal with the actual physical structure of the house, its components and the condition of the ground, not potential psychiatric damages relating to what may have happened within the property.
The Pennsylvania Superior Court, on appeal, reversed and concluded that a factual question to be decided by the jury had been raised. This is apparently the first time that “psychological” damage to a property has been held to be a possible object of mandatory disclosure. There are many problems with the ruling including determining what types of issues meet the threshold requirement for disclosure. Must a murder 100 years old be disclosed? A dissenting opinion noted that requiring a seller to reveal this type of information may force a seller to sell a house under market value and allow the buyer to realize a windfall when for example the house is re-sold ten or 20 years later, and when memories have faded.
The Milliken decision is not yet final but it raises a red flag concerning the issue of “psychological damage” to a home.
— Bill Brennan