Is a NJ Realtor(R) Required to Disclose a Murder or Suicide at a Listed Property?

Every New Jersey Realtor® has a duty to “make [a] reasonable effort to ascertain all material information concerning the physical condition of every property for which he or she accepts an agency.” N.J.A.C. 11:5-6.4(b). A “reasonable effort” has two requirements”: (1) inquiries of the seller or the seller’s agent concerning physical conditions that affect the property, and (2) a visual inspection of the property to determine if there are any readily observable conditions that affect the property. N.J.A.C. 11:5-6.4(b)(1). “[I]nformation is ‘material’ if a reasonable person would attach importance to its existence or non-existence in deciding whether or how to proceed in the transaction, or if the [Realtor®] knows or has reason to know that the recipient of the information regards, or is likely to regard it as important in deciding whether or how to proceed.” N.J.A.C. 11:5-6.4(b)(2). Finally, New Jersey Realtors® have a duty to “disclose all information material to the physical condition of any property which they know or which a reasonable effort to ascertain such information would have revealed”. N.J.A.C. 11:5-6.4(c).

In a nutshell, every Realtor® has a duty to investigate a property for physical conditions that a reasonable person would find important when deciding to purchase the property, and if the Realtor® has reason to know of any special needs or concerns of a client, the Realtor® must investigate for those concerns too. Furthermore, a Realtor® has a duty to divulge those material facts in his or her knowledge to potential buyers.

Is a murder, a suicide or a murder-suicide a “physical condition that affects the property” so that a Realtor® must disclose the event to a potential buyer?

No New Jersey court has ruled on the issue. However, in the Summer of 2014, the Pennsylvania Supreme Court addressed this very issue. Milliken v. Jacono, 103 A.3d 806 (PA 2014).

In Milliken, in February 2006, a prior homeowner shot and killed his wife in the home and then turned the gun on himself and committed suicide. In September 2006, Mr. and Mrs. Jacono purchased the home from the estate of the prior owners for $450,000 - which amount represented a savings of over $100,000 from the fair market value. The Jaconos then invested several thousand dollars to clean and renovate the home. They listed the property for sale in June 2007. At the time of the listing, they informed the broker of the prior murder-suicide. The Jaconos also asked their attorney and the Pennsylvania Real Estate Commission if they were legally obligated to disclose the murder-suicide. Both the attorney and the Real Estate Commission informed the Jaconos that a murder-suicide was not a “material defect” that had to be disclosed. The real estate broker also contacted the Real Estate Commission and was told the same thing. After receiving the opinion of their attorney and the Real Estate Commission, the Jaconos completed and signed a Seller’s Property Disclosure Statement, which did not disclose the prior murder-suicide.

Also in June 2007, Ms. Milliken, a resident of California who was unfamiliar with the murder-suicide at the property in Pennsylvania, viewed the home and received a copy of the Seller’s Disclosure. She entered into a contract to purchase the home. She asked her real estate agent about why the Seller had paid only $450,000 just a year and a half before her contract for $610,000 to purchase the same home. The agent stated that perhaps the Jaconos had purchased the property from a mortgage foreclosure. Despite being provided with title documents showing that the Jaconos had purchased the home from an estate, Ms. Milliken made no further investigation concerning the prior owners. After the closing of title, and after moving into the home, Ms. Milliken was informed that there had been a murder suicide in her home less than two years prior to her purchase.

Ms. Milliken sued the Jaconos and the real estate brokers for the non-disclosure of the murder-suicide. Both the Jaconos and the real estate broker filed motions to dismiss the claims on the grounds that a murder-suicide was not a “material defect” of the property. The trial court granted the motions and dismissed the claims. Ms. Milliken then appealed the trial court’s decision. The appeal eventually made its way all the way up to the Pennsylvania Supreme Court, which stated they would review the trial court’s decision to determine “whether the occurrence of a murder/suicide inside a house constitutes a material defect of the property” that must be disclosed to potential buyers.

The Pennsylvania Supreme Court ruled that a murder-suicide is not a material defect that had to be disclosed to potential buyers. The Court reasoned:

“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 [Consumer Protection Law’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.”

Milliken v. Jacono, 103 A.3d at 810.

In New Jersey, the duty to disclose is not limited to Real Estate Commission regulations. Rather, New Jersey courts have also imposed upon New Jersey Realtors a common law duty to disclose. In Weintraub v. Krobatsch, 64 N.J. 445 (1974), the New Jersey Supreme Court quoted with approval, a holding by the Tennessee Supreme Court, which stated that: a real estate broker or agent “is not only liable to a buyer for his affirmative misrepresentation and intentional misrepresentations to a buyer, but he is also liable for mere non-disclosure to the buyer of defects known to him and unknown and unobservable by the buyer.” Id. at 454 quoting Simmons v. Evans, 185 Tenn. 282, 206 S.W.2d 295 (1947). The Weintraub case dealt with an insect (roach) infestation, and the Simmons matter dealt with limited water service to the home. Thus, both cases dealt with a “physical condition” of the property. The Weintraub case does not broaden the Real Estate Commission disclosure requirement found in N.J.A.C. 11:5-6.4 to conditions that are not “physical”.

The ruling of the Pennsylvania Supreme Court in Milliken v. Jacono, supra, is not binding on New Jersey courts. Until the issue is settled, the safest course of action is to disclose any adverse fact regarding a listed property that is known to the Realtor®.