Duty to Disclose that a House for Sale is Haunted?

Originally published by Jamie Ribman.

Vlad “Dracula” Smith was looking for some new digs big enough to accommodate his growing family. While searching the MLS listings, Dracula stumbled across a castle belonging to Victor “Frankenstein” Jones.  Little did Dracula know, but the castle was widely reported to be haunted.  “Frankenstein” had even made the front page of the local paper when he reported the haunting to the local paper and Reader’s Digest last Halloween.  However, in negotiations for the sale of his castle, Frankenstein, and his broker, failed to tell Dracula about the newspaper and magazine articles.  When Dracula later learned of the stories, he sued Frankenstein for rescission and damages. Did Frankenstein have a duty to disclose the haunting to Dracula?

Yes.  Dracula, as the buyer, could not have determined, by reasonable inspection of the castle and property, that it was reported to be haunted, much less if it was haunted.  Although “buyer beware” (known legally as “caveat emptor”) would normally deny the buyer the right of rescission and demand for return of his money, “the most meticulous inspection and search would not reveal the presence of poltergeists at the premises or unearth the property’s ghoulish reputation in the community.”  As Frankenstein reported the castle to be haunted, he cannot deny the existence of ghosts.  As a matter of law, the castle is “haunted.”  Whether the castle was truly haunted or not, the fact that it had been widely reported as haunted will affect its value, and therefore rescission is available to Dracula.

Another spine tingling case brought to us by the State of New York!  For more information, please see Stambovsky v. Ackley, 572 N.Y.S.2d 672 (NY App. Div. 1991).

(This post was originally posted on Tilting the Scales in October 2008 and authored by Jamie Ribman, a former Gray Reed attorney.)

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