The Lawletter Vol 40 No 3
Brad Pettit, Senior Attorney, National Legal Research Group
The motion picture industry has produced many horror or suspense films that are centered on the theme of an individual or couple who purchase a dream house, only to subsequently discover, by way of terrifying sights, sounds, and other stimuli, that a gruesome event once occurred on the property. In a courtroom drama sequel to those movies, the Supreme Court of Pennsylvania made it clear that the occurrence of a murder/suicide or similar tragic event inside a house does not constitute a "material defect" therein that must be disclosed by a seller to a purchaser. Milliken v. Jacono, 103 A.3d 806 (Pa. 2014), as modified on reconsideration (Nov. 12, 2014). Accordingly, the Milliken court held that a real property seller's failure to disclose the occurrence of a murder/suicide inside a house to a buyer thereof did not constitute actionable fraud, negligent misrepresentation, or violations of unfair trade practices, consumer protection, and real estate sales disclosure laws. In short, the Milliken court concluded that "purely psychological stigmas are not material defects" in property that a seller must reveal to a buyer. Id. at 811. The Milliken court's reasons for its decision were as follows:
Regardless of the potential impact a psychological stigma may have on the value of property, we are not ready to accept that such constitutes a material defect. The implications of holding that non-disclosure of psychological stigma can form the basis of a common law claim for fraud or negligent misrepresentation, or a violation of the UTPCPL's catch-all, even under the objective standard posited by appellant, are palpable, and the varieties of traumatizing events that could occur on a property are endless. Efforts to define those that would warrant mandatory disclosure would be a Sisyphean task. One cannot quantify the psychological impact of different genres of murder, or suicide—does a bloodless death by poisoning or overdose create a less significant "defect" than a bloody one from a stabbing or shooting? How would one treat other violent crimes such as rape, assault, home invasion, or child abuse? What if the killings were elsewhere, but the sadistic serial killer lived there? What if satanic rituals were performed in the house?
It is safe to assume all of the above are events a majority of the population would find disturbing, and a certain percentage of the population may not want to live in a house where any such event has occurred. However, this does not make the events defects in the structure itself. The occurrence of a tragic event inside a house does not affect the quality of the real estate, which is what seller disclosure duties are intended to address. We are not prepared to set a standard under which the visceral impact an event has on the populace serves to gauge whether its occurrence constitutes a material defect in property. Such a standard would be impossible to apply with consistency and would place an unmanageable burden on sellers, resulting in disclosures of tangential issues that threaten to bury the pertinent information that disclosures are intended to convey.
Id. at 810.
The Milliken court also pointed out that although Pennsylvania's Real Estate Seller Disclosure Law, 68 Pa. Cons. Stat. §§ 7301–7315, requires that a seller of a property disclose to a buyer all known material defects about the property that are not readily observable, the murder/suicide in that case was not a "latent" defect in the realty, because the tragic event had been well publicized. The Milliken court went so far as to say that "[s]ome graphic events, having matured into historical curiosities, may even increase the value of . . . property." 103 A.3d at 810.
An excellent summary of a previous decision in the Milliken chain of decisions, Milliken v. Jacono, 96 A.3d 997 (Pa. 2014), republished with additional material, 103 A.3d 806 (Pa. July 21, 2014), as modified on reconsideration (Nov. 12, 2014), and withdrawn from N.R.S. bound volume (Oct. 15, 2014), can be found in Misrepresentation: Murder/Suicide Is Not a Material Defect, 44 Real Est. L. Rep. 6 (Sept. 2014).
The lesson of the Milliken case is that in a case involving a real estate seller's alleged failure to disclose to the buyer a purported defect in the property, a court is likely to focus on whether the seller failed to disclose material facts that relate to the quality of the property as opposed to the reputation thereof.
