Barfoot & Thomson wins appeal over non-disclosure of suicide in house sale

Tuesday 18th November 2014

Auckland real estate agency Barfoot & Thompson has won a High Court appeal against a censure it received for selling a Flat Bush property without disclosing a suicide had occurred there a year earlier.

In a reserved judgment, Justice Susan Thomas has reversed a ruling by the Real Estate Agents Disciplinary Tribunal that the agency had engaged in unsatisfactory conduct, although she said the decision was “finely balanced”.

The case followed a complaint by Richard and Evette Campbell who had bought the South Auckland house in 2012 without being told about a suicide in the garage by a tenant the year before.

Under scrutiny is the fairness test for disclosure in the conduct rules of the Real Estate Agents Act, which set minimum standards for licencees to protect consumers. While both Barfoot & Thompson and the Real Estate Agents Authority had asked the High Court for guidance on applying the fairness test in the case of suicides, Justice Thomas said the industry should undertake that exercise itself through wider consultation.

“Because the decision is so finely balanced and because there was no industry standard or guidance available, I conclude that it is inappropriate to find the appellant in breach of the rule,” she said.

Disclosure over so called stigmatised properties is an issue worldwide and the judge cited several overseas judgments on the matter. She provided a range of relevant considerations on disclosure the industry could take into account in future: whether a murder, manslaughter, or suicide had occurred; the location of the event as on the grounds may be different to within the house; how long since the event occurred; the circumstances of the tragedy including whether the house had been lived in and for how long; whether the death had a degree of notoriety; and the likely reaction of potential purchasers and possible impact on price.

The Real Estate Agents Disciplinary Tribunal had upheld a complaints assessment committee ruling that Barfoot & Thompson should have told prospective buyers about the death, but declined to award any damages. The couple told the tribunal they had put the house on the market five months after moving in as they felt uneasy living there and that the house was "dark and felt sad and depressing”. When they learned from neighbours about the suicide, they told a subsequent purchaser who then decided against moving into the property and relisted it.

The other joint agent on the property, Century 21, had told potential buyers about the suicide and failed to sell it. Tribunal chair Justice Paul Barber said “simply put, we think that the fair thing was, quite clearly, for Barfoots to disclose in succinct and general terms the sad event to reasonably interested prospective purchasers; because for many people the suicide event would be offputting and affect use and enjoyment of the property.”

Barfoot & Thompson argued the tribunal’s approach to the fairness test meant there was no consideration of fairness to the family of the deceased. The REAA committee said the advice the agency gave to its licensee regarding disclosure of the suicide was not in line with current industry training or current accepted practice. But Barfoot & Thompson argued there was no industry training on the sensitive matter.

Justice Thomas said where a matter was so finely balance the doubt should weigh in favour of the party whose actions were under scrutiny - the real estate agency. While the tribunal’s test might be an appropriate rule of thumb in practice, it wasn’t the correct interpretation of the Act, she said.

BusinessDesk.co.nz

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