Violent, Gang-related Death at a Vancouver Mansion Leads to Lawsuit re What Sellers Must Reveal to Buyers in Real Estate Transactions
When selling a house in Canada (and other jurisdictions with similar legal systems), a vendor must typically disclose certain types of defects in the property to potential buyers. Now, what if murder, suicide, or other nasty violence occurred in the house? How much does a seller have to reveal? The short answer is that a seller is only obligated to reveal the death if specifically asked about it by the purchaser. The legalities of the long answer are much more interesting, as this blog post will elaborate with an example from Vancouver, British Columbia.
In the recent case of Wang v. Shao, 2019 BCCA 130, the BC Court of Appeal dealt in much detail with the question of disclosing murder in a real estate purchase. Of course, because I’m a lawyer, I expect everyone is vitally interested in the studied words of the eminent three judges making up the Court of Appeal panel, and so here’s a link to their complete judgement.
For everyone’s convenience, however, I’ve summarized the facts below.
Undisclosed Murder Leads to Law Suit Over Failed Real Estate Purchase.
Toward the end of 2009, a multi-million-dollar home in the Shaughnessy neighbourhood of Vancouver was on the market. The owners did not disclose to a potential buyer that a murder had taken place there, eventually resulting in a law suit.
Two years previously, in the fall of 2007, one of the occupants had been shot dead on the sidewalk in front of the house. The deceased man was Raymond Hong Chao Huang, alleged to be a high-ranking member of the Big Circle Boys, which is one of the largest Chinese organized crime groups (a.k.a. Triads) in BC.
Shortly after the murder, the administrators at the private school of Huang’s young daughter barred her from attending, ostensibly out of fear for the safety of other students. The girl’s mother, Gui Ying Yuan, eventually found another school in West Vancouver, and the two of them bought a house there to reduce their commute.
The house in Shaughnessy was owned by Ms. Yuan’s elderly mother, Mei Zhen Wang, who moved back to China. Seeing as there was no longer anyone living in the house, it was put up for sale.
An interested buyer named Fei Yun Shao asked why Ms. Wang was selling, to which the real estate agent responded that it was for the family to be closer to the school in West Van. When asked about any latent defects (i.e., problems that are not apparent, even in an inspection), the agent replied that there were none. In the belief that due diligence had been done, Ms. Shao signed a purchase contract.
Before the sale of the house was completed, Ms. Shao the buyer found out about Huang the gangster’s murder. Through a lawyer, she cancelled her purchase, claiming misrepresentation by omission. The house sold two months later to another buyer for approximately half-a-million dollars less than Ms. Shao had agreed to pay.
The seller filed a civil law suit against the buyer for breach of contract, to which the erstwhile buyer filed a counter-suit for misrepresentation. At first, the Court ruled in the buyer’s favour, but, upon appeal, the Court of Appeal overturned the ruling in favour of the seller.
Judges Rule Murder on the Property Doesn’t Affect the Use Value of a House, and so Sellers Don’t Need to Disclose Unless Asked Directly
The folks at On Point Legal Research have provided their own summary of the case, including an analysis of the judgement, which is available online in their Take Five newsletter from May 2019. Therein, we find the following helpful comments:
At the Court of Appeal, the sole issue before the court was the issue of fraudulent misrepresentation by omission. The Court concluded that an omission will not constitute a misrepresentation unless it relates to a material fact. The Court further concluded that the failure of the vendor to disclose facts relating to a subjective consideration of the purchaser (for example, the death of a person on the property) cannot constitute a misrepresentation unless the purchaser has made the vendor aware of the purchaser’s subjective concern. The Court found that absent a specific question there was no way for the vendor to know of the purchaser’s particular sensitivity to an event which occurred two years earlier and did not affect the quality of the house or its usefulness (para 49). In the context of the law of fraudulent misrepresentation, a representor cannot be held liable for fraudulent misrepresentation by omission for failing to disclose a fact which the representor did not know was material to the representee. (bold added, Dvorak 2019: 39)
Judges interpret written laws according to the specifics of the case in front of them, but they also refer to the precedents set by previous judgements. The BC Court of Appeal quoted extensively from a ruling made in the Province of Québec, Knight v. Dionne, 2006 Q.C.C.Q. 1260. Although the legal system there is slightly different than in other parts of Canada, the particulars of the case were quite similar. The seller’s son had committed suicide in the house, which the buyer found out about after the sale had closed. The buyer then filed a lawsuit for damages. The judge in Québec dismissed the claim, making the following remarks:
A death, suicide, or even a murder in a house cannot be considered to be something the seller is obliged to disclose to the buyer, just as there is no obligation to disclose domestic violence, trespasses, births, marriages, baptisms, or other life events, whether happy or sad, that may have occurred there.
This conclusion appears obvious to us, because if the compulsory disclosure of facts or events in the lives of the residents that are liable to significantly influence the buyer’s decision became a rule governing the sale of residential buildings, it would be extremely difficult to determine where the line should be drawn, and this could create a risk of unnecessary uncertainty.
Would sellers have to disclose domestic violence or domestic arguments? And if so, starting at what level of violence? Could the divorce or separation of the sellers be a factor that affects the value of a house and therefore important to disclose so that the buyer can make an informed decision?
In the case of a death, could the value of the residence be affected differently depending on whether the death had occurred suddenly, during sleep or after a long illness, or as the result of a suicide or a murder? And would the obligation to disclose vary accordingly? (Knight v. Dionne 2006: paras. 47–50)
Here’s what these judgments mean in lay terms. A vendor is not obligated to disclose all their personal reasons for selling a house, unless those reasons affect the objective value and/or the property’s usefulness. In the case of a violent death, there is no way for a seller to know if it would have a material impact on the buyer’s decision. The doctrine of ‘buyer beware’ [caveat emptor] prevails, and it is up to the purchaser to ask questions about issues that matter to them.
From a buyer’s perspective, the ruling has a slighting different relevance. If a buyer asks the seller directly about something like previous murder in a house that is for sale, the seller must disclose the facts. Maybe that’s a question folks might want to add to their due diligence checklist!