Real estate agent’s failure to disclose purely psychological stigma connected to a property does not constitute material defect of that property such that liability would arise for fraud, negligent misrepresentation or a violation of the (UTPCPL).

The plaintiff brought this action following the purchase of a piece of property from the defendants. Prior to placing the property for sale, the defendants consulted with their attorney, their real estate agent and representatives of the Pennsylvania Real Estate Commission in order to determine whether a murder/suicide that occurred on the property was a material defect that must be disclosed pursuant to the Real Estate Seller Disclosure Law (RESDL). The defendants were assured that a murder/suicide was not a material defect that had to be disclosed, and therefore, they proceeded to sell the property to the plaintiff after completing and signing a Seller’s Property Disclosure Statement omitting the murder/suicide. After purchasing the property and learning of the murder/suicide, the plaintiff brought suit against the sellers and the real estate company for fraud, negligent misrepresentation and a violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL). Whether psychological stigmas are material defects was an issue of first impression for the Pennsylvania Supreme Court, which held that purely psychological stigmas are not considered material defects such that they must be disclosed in order to escape liability.

Case Law Alerts, 1st Quarter, January 2015