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Law Offices of Ronald W. Rutz
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October 25, 2003: Real Estate Disclosure

Q: Recently as I was out and about, several people mentioned that Halloween might be the appropriate time to revisit the subject of buying and selling a "haunted" property. So this is what I was able to glean from various sources.

A: Before I address the topic directly, let's spend a few moments strolling down the real estate disclosure memory lane.

Not too long ago the rule in real estate was "buyer beware." It was up to the buyer to inspect the premises and make appropriate inquiries. As time went on, "known defects" were required to be revealed. Thus, usually the issues in dispute were about what was known and whether the defect was something that warranted disclosure.

The law evolved to require the seller to make a reasonable inspection and disclose anything that might "materially affect the sales price." The issues of the nature of the problems that required disclosure and if a particular item was that significant bounced around, often ending up in Court for the judicial system to decide on by a case by case basis.

The Colorado Real Estate Commission developed a Seller's Property Disclosure Statement that comprehensively lists the various physical, structural, environmental, and miscellaneous items, totaling 94-plus areas, and also with blank spaces to add additional concerns that could have a material affect on the property. (I bet you did not realize how many important items there are in a house.) And as time marched on, things such as asbestos and environmentally contaminated areas were added to the Disclosure Statement.

So we find ourselves in 1991 and at the Colorado legislature. Many social, emotional, and political concerns were swirling around during that time, catching the real estate industry right smack in the middle. So what happened? A law was passed, of course, that covered many areas and has been applied to paranormal phenomenon.

By statute, circumstances that could psychologically impact or stigmatize property need not be disclosed. For example, that a former occupant was HIV positive or had AIDS, or that the dwelling was the site of a homicide, suicide, or a felony are examples of items that need not be disclosed. References in the statute about ghosts or other paranormal events are absent.

I am told by local realtors who have sold properties in other states that in certain areas, if such activity exists, it must be disclosed. Nondisclosure can serve as grounds to set aside a sale, or even worse, a lawsuit for damages. Other jurisdictions seem to explicitly prohibit any disclosure to potential buyers. According to the Colorado Real Estate Commission, such occurrences do not have to be disclosed because such matters could psychologically impact or stigmatize real estate, even though such parapsychological events do not seem to match the examples listed in the statute to clarify its coverage and there seem to be no Colorado Supreme Court cases addressing the issue.

Thus, in the absence of specific language in the statute including ghosts as an example of covered prohibitions, and apparently with no Colorado Supreme Court cases to guide us, the current interpretation by the Colorado Real Estate Commission seems to be the strongest source for nondisclosure. So whose advice are you going to follow? Let your real estate agent or broker be your guide. But caution dictates relying on the law to not disclosure.

But if there should be a requirement in the future, the next question would be what triggers the disclosure—temperature changes, sounds or smells at night, orbs of light, sightings, or even a full blown Amityville experience?

But it also is intriguing to imagine that sometime in the future a cleansing or exorcism might be part of the real estate contract conditions along with the more traditional conditions such as termite inspection and the buyer's inspection, and who knows, maybe someday even a Feng Shui evaluation may become a common requirement.

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