It’s a tale as old as time: newlyweds visit an open house. They fall in love with the ancient ivied walls and quaint secret passageways, only to learn that a gruesome murder took place in the house years before and now the halls are haunted by a poltergeist that won’t leave the premises. According to the law, only some states require property owners to disclose whether they live in a “haunted house.” In other states, purchasers may discovery this after the sale when their only recourse is to hire an exorcist and hope for the best.
Most states require sellers to make certain disclosures regarding material facts about a property’s condition. These disclosures include physical defects known to the seller. For example, an inoperable doorbell or foundational crack must be disclosed to potential buyers so they can make an informed decision about whether to purchase the property. In some states, physical defects are the only required disclosures. In others, sellers must also disclose “emotional defects.” Properties with these attributes are called “stigmatized properties” by real estate professionals. Emotional defects often include prior murders or suicides on the premises, nearby homeless shelters, reports of paranormal activity, and nearly anything else that may make the house less desirable.
In Massachusetts, property owners are under no obligation to disclose “psychological defects.” In Virginia, emotional defects need only be disclosed if those defects also affect the property. For example, a friendly (or unfriendly) ghost wandering the halls would not need to be disclosed. However, bloody handprints that cannot be washed off a ceiling, or lights that inexplicably turn on every morning at 3:15 a.m., are defects that require disclosure. In some states, the manner of death affects disclosure requirements. Property sellers in Texas needn’t disclose non-violent or accidental deaths that took place on their property, but one or more violent deaths, like a massacre perpetrated with a chainsaw, would necessitate a mention.
California law requires emotional defect disclosures, but only if it has occurred in the past five years. So, the murder-suicide of star-crossed lovers that occurred in the 1920s need not be mentioned, but the fact that a black cat walks through bedroom walls every full moon should be addressed. Neither Pennsylvania nor New Jersey considers a prior murder or death in the house a “material defect” as it does not actually affect the flesh and bones of the house itself. Similarly, in North Carolina, though property owners are required to furnish a disclosure statement, there is no duty to disclose whether a property is stigmatized or not. However, when a prospective buyer asks about supernatural occurrences or whether the house is haunted, a seller cannot lie.
The most famous legal case regarding this issue was Stambovsky v. Ackley. The dispute involved the sale of a Victorian home about 30 miles north of New York City. According to the facts of the case, the owner believed the house to be haunted, claiming she had seen ghosts in colonial clothing and the bed would shake on its own. She even listed it as haunted for the purposes of a haunted tour. However, when she put the house on the market, she made no mention of the alleged haunting. A man decided to buy the house and, after submitting a down payment, he was asked by a local resident, “oh, you’re buying the haunted house?” After which, he confronted the seller, who refused to admit wrongdoing and would not let him out of the sale. The man sued for rescission of the sale. The lower court dismissed the case, citing the principle of caveat emptor, also known as “buyer beware.” Nevertheless, the Court of Appeals reversed the decision, saying the fact that the house was reported to be haunted affected the value of the home and its potential for resale, regardless of whether the house had any actual supernatural activity. The Court concluded, “when a condition which has been created by the seller materially impairs the value of the contract and is peculiarly within the knowledge of the seller or unlikely to be discovered by a prudent purchaser exercising due care with respect to the subject transaction, nondisclosure constitutes a basis for rescission as a matter of equity.” As such, the sale was rescinded.
For those buyers who are hesitant about purchasing a property that was the site of a death or haunting, they should be aware of their state’s laws concerning required disclosures, as most states abide by the caveat emptor philosophy. Sellers of psychologically impacted property would also do well to know the disclosure laws in their state and if they live in a state where stigmatized property must be disclosed, perhaps they can use it to their advantage in marketing their home.
 Stambovsky v. Ackley, 169 AD 2d 254 (1991).