Real Estate, Haunted Houses and Ohio.

Written on October 31, 2014

It seems appropriate on “All Hallows Eve” to see what Ohio real estate law and haunted houses have in common.

For example, do you need to disclose the presence of spirits (not the distilled kind) prior to the sale of your "psychologically impacted" or otherwise "stigmatized" property? Depending on the state, owners and real estate agents may or may not be required to inform prospective buyers of properties with such issues. Currently, about twenty-one states have property disclosure laws.  Even in such states, however, there is variability in what must be disclosed. In fact, some states like Florida provide, as a matter of law, what need not be disclosed. Florida specifically provides that it is not a material fact that a homicide occurred within a home, and that a failure to disclose such fact would not be actionable in a court of law. Ohio’s disclosure statute merely deals with physical defects such as roof and drainage issues.

Apart from statutory law, however, there is case law on this issue, most notably the 1991, Stambovsky v. Ackley decision out of New York State. In Stambovsky, a buyer of property claimed such property was haunted, and sued to rescind the contract of sale on the premise that the seller knew it was haunted and fraudulently failed to disclose this fact prior to the sale. The court in Stambovsky admitted that there was no duty to disclose the paranormal activities to the buyer, but, according to the court, it thought it appropriate to make an exception to the doctrine of caveat emptor because the court was “nevertheless moved by the spirit of equity [fairness] to allow the buyer to seek rescission of the contract of sale and recovery of his down payment.”

While no case directly on point in Ohio was uncovered by my research, it is interesting to speculate. Based upon case law to date, however, I think we would get the same outcome in the Buckeye State, on facts similar to the facts in Stambovsky v. Ackley.

Basically, the doctrine of caveat emptor in Ohio precludes a purchaser from recovering for a property’s defective condition if the following conditions are met:  1) the property defect is discoverable upon inspection or open observation; 2) the purchaser has an unimpeded opportunity to examine the property and 3) there is no fraud on the part of the seller. Layman v. Binns, 35 Ohio St.3d 176 (1988). 

 In the context of real estate transactions, there are basically two types of fraud: fraudulent misrepresentation and fraudulent concealment (with “fraudulent nondisclosure” sometimes being referred to as either a third type of fraud, or, a type of fraudulent concealment).  If there is no actual statement, made, there is no fraudulent misrepresentation.

 The basic elements of fraudulent concealment are (a) actual concealment; (b) of a material fact; (c) knowledge of the facts concealed; (d) intent to mislead another into relying upon such conduct; (e) actual reliance; and (f) injury resulting to such person because of such reliance.  Even without an affirmative misrepresentation or “actual” concealment, an action for fraud, commonly referred to as “fraudulent nondisclosure” is also maintainable in Ohio for failure to fully disclose material facts where there exists a duty to speak.  In such regard, the Supreme Court of Ohio has held that a “vendor has a duty to disclose material facts which are latent, not readily observable or discoverable through a purchaser’s reasonable inspection”.  Binns, 35 Ohio St.3d at 178. 

In Binns, the Ohio Supreme Court reasoned that a steel bracing supporting a defective wall was readily observable and discoverable; hence no fraud. In a 2013  decision of the Summit County Court of Appeals in Wilfong v. Petrone, 2013-Ohio-2434, the court found that a heater mounted on a ceiling of a lake house supported by stilts in a flood zone (and other observable facts) indicated that water intrusion was observable and discoverable; hence, no fraud was involved.

 In Stambovsky v. Ackley, the haunting of the house was widely known in the area and the house had even received national press attention. Accordingly, it seems that just by talking to the neighbors, and checking with “Mr. Google” online, the buyer could easily have discovered the “stigma”. Based on similar facts, it seems likely the Ohio Supreme Court would say no duty to disclose; hence, no fraud. While the Stambovsky court did not believe the “hauntings” were easily discoverable, the decision is over 20 years old, and the online information age is much more upon us now.

Even though courts have carved out exceptions to the rule, over the years, the moral of this scary story for buyers is still caveat emptor. Don’t pin your hopes on costly litigation and an equitable judge looking to make new law. Certainly hire a broker and a house inspector; but don’t end your due diligence/investigation there. Seek to know exactly what you are buying. Talk to neighbors, go online, don’t be haunted after you buy.