Guest blog written by David A. Yavil, Esq
David Yavil is a senior associate in Segal McCambridge’s Philadelphia office. Mr. Yavil has extensive experience representing a wide array of clients including product manufacturers, licensed professionals, health systems, premises owners, real estate brokers and agents, insurers and employers in various civil litigation matters including personal injury, premises liability, real estate, medical malpractice and employment.
On December 26, 2012, ruling on Milliken v. Jacono, the Superior Court of Pennsylvania clarified the scope of the disclosure requirements contained in Pennsylvania’s Real Estate Seller Disclosure Law (“RESDL”).
By statute, Section 7303 of the RESDL requires sellers of residential real estate to disclose “material defects.” Under the RESDL a “material defect” is defined as a “problem with a residential real property or any portion of it that would have a significant adverse impact on the value of the property…” Any agent and/or broker involved in a transaction must also disclose known material defects. In 2006, Kathleen and Joseph Jacono (“Sellers”), purchased and later listed for sale a property where the former owner had allegedly shot his wife and then committed suicide on the property. Prior to listing the property for sale, the Sellers contacted the Pennsylvania Real Estate Commission (“PREC”), and their listing broker contacted the Pennsylvania Association of Realtors Legal Hotline (“Association”), to determine whether the RESDL required disclosure of the prior murder-suicide. Both the PREC and the Association advised that the disclosure was not required. As such, the required Property Condition Disclosure (“PDC”) made no mention of the murder-suicide.
Milliken (“Buyer”) purchased the subject home and later learned of the prior murder-suicide. Buyer filed suit alleging fraud and misrepresentation. The trial court entered judgment in favor of the Sellers, finding that, under the RESDL, the murder-suicide was not a material defect and did not require disclosure. The Buyer appealed the ruling, taking the case to the Superior Court of Pennsylvania.
The Superior Court affirmed the trial court’s decision, also holding that a prior murder which occurred at the property for sale is not subject to mandatory disclosure.
Before the Milliken ruling, it was not clear whether a property’s non-physical and legal history were subject to the disclosure requirements of the RESDL. However, this recent decision clarifies that the law does not require disclosure of “psychological damage” to a property. The Court reasoned that the RESDL was enacted to ensure disclosure of material defects including structural matters, legal impairments and hazardous materials. A murder may affect the reputation of the property but not its actual physical structure.
In explaining its position, the Superior Court addressed the slippery slope that would be created if a prior murder is considered a material defect. How recent must the murder be to require disclosure? What if the murder occurred over 100 years ago? What if numerous owners have lived on the property in the interim? What if the murder occurred next door to the property? These are all very good questions.
An expansion of required seller disclosures to include “psychological damage” would be a massive undertaking and require action from the Legislature to change Pennsylvania law.
While the Milliken ruling may be good news for sellers, agents, and brokers, the issue may not be fully resolved. On July 17, 2013, the Supreme Court of Pennsylvania granted Milliken’s Petition for Allowance of Appeal from the Superior Court’s decision, allowing her to appeal the ruling. However, the Supreme Court’s review will be limited to whether non-disclosure of the murder-suicide leads to viable claims for common law fraud and negligent misrepresentation as well as a possible violation of Pennsylvania’s Unfair Trade Practices Consumer Protection Law.
The Milliken decision is clearly a benefit to sellers, real estate agents and brokers. While the decision specifically addressed the disclosure of a prior murder, the holding may be applicable to other similar types of ”psychological damages”. Real estate professionals should follow the Supreme Court’s review of the decision for additional updates and clarifications on this aspect of the RESDL.