AIDS DISCLOSURE AND OTHER STIGMAS
reprinted courtesy N.A.R. website 2/10/08
Agency disclosure, property condition disclosure - what other kinds of
disclosures do real estate professionals need to make to consumers? How about
stigmas such as murders, suicides, or AIDS? Do these factors need to be
disclosed during the real property transaction?
The NATIONAL ASSOCIATION OF REALTORS® defines stigmatized property
as: "a property that has been psychologically impacted by an event which
occurred, or was suspected to have occurred, on the property, such event being
one that has no physical impact of any kind."
In other words, when dealing with a stigmatized property, real estate agents
are not dealing with facts about physical characteristics -- they are dealing
with the fears of a potential purchaser. The most common events associated with
stigmatized property are murders, suicides and criminal activity. Stigmatized
property also includes property in which a current or former occupant has been
infected with HIV or diagnosed with AIDS.
AIDS DISCLOSURE
The 1988 Fair Housing Act Amendments established the handicapped, which
includes people diagnosed with AIDS, as a new protected class. It is now
illegal to discriminate against people with handicaps just as it is illegal to
discriminate on the basis of race, color, religion, sex, national origin or
familial status.
According to the Department of Housing and Urban Development (HUD), it is
illegal for real estate agents to make unsolicited disclosures that a current
or former occupant of the property has AIDS. If a prospective purchaser
directly asks an agent if a current or former occupant has AIDS, and the agent
knows this is in fact true, HUD advises that the agent should not respond. NAR
advises that the agent respond as follows:
It is the policy of our firm not to answer inquiries of this nature one way or
the other since the firm feels that this information is not material to the
transaction. In addition, any type of response by me or other agents of our firm
may be a violation of the federal fair housing laws. If you believe that this
information is relevant to your decision to buy the property, you must pursue
this investigation on your own.
OTHER STIGMAS
Although federal law provide guidelines for handling AIDS disclosures, there
are still grey areas surrounding disclosures of other stigmas. When a property
defect is physical, disclosure is mandatory in most states. When the defect is
an emotional stigma, however, disclosure becomes dependent on materiality. The
following guidelines are designed to help a listing agent, when faced with
information regarding a potential stigma, determine whether or not a stigma is
material to a particular real estate transaction.
STEP #1
Determine whether the information is fact or fiction.
Investigate the sources of the information, e.g., check newspaper accounts,
talk to neighbors, etc. Separate rumor from reality. If the stigma is based on
rumor and not on fact, you are under no obligation to disclose. If, on the other
hand, the stigma turns out to be factual, e.g. there was in fact a murder, you
should proceed to the next step.
STEP #2
Check state laws.
Many states have enacted laws that generally apply to AIDS, homicides, or
suicides, and provide that the stigma is not a material factor which needs to
be disclosed.
If a state does not have a specific law governing disclosure of stigmas, there
may be other laws, such as privacy laws, that influence or affect disclosure
decisions. State statutes vary widely, however, so it is essential that an
agent be familiar with the laws of his state.
If there is a law governing disclosure, it will probably state that you have no
duty to disclose. Because there is no disclosure obligation, investigation into
the issue ends here. If there is no law governing disclosure, proceed to Step
#3.
STEP #3
Determine materiality.
To analyze the materiality of a stigma, you should ask yourself this question:
would knowing about the stigma affect the willingness of most people to buy the
property or reduce the amount of money they would pay for the property?
Most stigmatized property cases involve stigmas that are less sensational than
say a multiple-murder. Less sensational stigmas may or may not impact on the
market value of the property. However, it is your job to make an analysis of
what a reasonable person would do with this information. Would a reasonable
person be willing to buy the property knowing about the stigma? Or, would a
reasonable person pay less for the property knowing about the stigma?
If, at this point in the analysis, the answer is yes to either question, you
have concluded that the stigma is a material fact which should be disclosed.
STEP #4
Discuss disclosure with the sellers.
Go back and talk to the sellers about what you have determined. Walk them
through your analysis and show them why this particular factor may make a
difference in the sale of their property.
If the sellers agree to disclose the stigma, make the disclosure judiciously.
It is not necessary to disclose information about a stigma to those who simply
express interest in the property. The best time to disclose is at the contract
proposal stage. Present the subject as one more relevant piece of information
about the property and use simple non-threatening language.
If the sellers disagree and refuse to disclose what you have determined to be a
material factor regarding the property, you will need to give up the listing.
Because the sellers are your clients, you cannot disclose information that they
have specified should remain confidential without violating one of the duties
inherent in your agency relationship with them. However, you may also be in
violation of the basic duty to disclose material factors that affect the value
or desirability of the property. The best way to handle this dilemma is to give
up the listing.
CONCLUSION
Remember, property stigmas are emotional issues that need to be handled
carefully. To reduce the legal risks in this area, it is essential that real
estate agents:
understand the issues associated with stigmatized property,
know pertinent federal and state laws, and
know how to evaluate facts and make informed decisions about disclosure.
Original article at http://www realtor.org/LetterLw.nsf/pages/94aidsdisclosure?OpenDocument&Login
Copyright NATIONAL ASSOCIATION OF REALTORS®
reprinted courtesy N.A.R. website 2/10/08
Disclaimer: we have no information if the content of this article is correct or not, we are reprinting it only for general information.