NJ COURT REQUIRES DISCLOSURE OF PRIOR DEATHS IN HOME
Petrosino v. Ventrice, A-0020-13T1 (August 27, 2015) A “psychological impairment” may be so intertwined with a physical condition of the property that it must be disclosed.
BACKGROUNDThe Seller and the Listing Broker Do Not Disclose a Prior Death in the Home. In 2011, Mr. and Mrs. Ventrice listed their Colts Neck home for sale with Coldwell Banker. The Ventrice's daughter was the listing agent. The home came equipped with an elevator. In 2002, a caretaker's two young daughters were crushed to death when they became trapped between the cab and the wall of the elevator shaft. Prior to listing the home, the listing agent asked her broker if her parents, the sellers, had to disclose the deaths. She was told that the deaths did not have to be disclosed because they represented a "psychological impairment". The agent passed this advice onto her parents. The buyers, Mr. and Mrs. Petrosino, were represented by Better Homes Realty. The Petrosinos had four small children between the ages of four and eight. Prior to the purchase, Mr. Petrosino met the Coldwell Banker agent and Mr. Ventrice at the home. Petrofina asked the Coldwell Banker agent if the elevator was safe. Ventrice told Petrosino that the elevator posed no risk and demonstrated its operation. The Coldwell Banker agent said nothing. The Petrosinos purchased the home in November 2011. Six days after the closing, the Better Homes agent told the Petrosinos that he had just learned of the prior accident and the deaths of the girls in the elevator shaft. The Petrosinos had the elevator inspected, moved out of the house, later moved back in and then had the elevator removed. They sued the sellers and both brokers.
DISCUSSIONThe Trial Court Dismissed the Case Due to Destruction ("Spoliation") of Evidence. The trial court dismissed the action because the Petrosinos, by removing and disposing of the elevator, had destroyed evidence that was central to the case and which prejudiced the defendants' ability to defend the action. The trial court denied a motion made by Coldwell Banker to dismiss the claims for consumer fraud and negligence arguing that there was no duty to disclose the prior deaths because they were not a physical condition of the property. The Appellate Court Rules That the Deaths Should Have Been Disclosed by the Realtors for Two Reasons: (1) The Deaths Occurred Due to a Physical Condition of the Property and (2) Realtors(R) Have a Duty to Disclose all Material Facts Known to Them. On appeal, the court reversed the dismissal for destruction of evidence and remanded for the trial court to determine if there was a less drastic remedy other than dismissal of the case. As to the trial court's denial of the broker's motion to dismiss the negligence and consumer fraud counts, the Appellate Division upheld the denial of the motion, stating: Underlying their position that the complaint fails to state a cause of action as to each of these claims is the broker defendants' contention that the children's deaths in the elevator in 2002 represented only a "psychological impairment" to the Colts Neck property, which they were under no duty to disclose. We conclude they misapprehend both the nature of the condition and their duties to plaintiffs. The Appellate Division started with a review of the regulation governing realtor(R) duties - N.J.A.C. 11:5-6. That regulation requires the disclosure of all "material information" concerning the physical condition of the property either known to the realtor or discoverable after making a reasonable inquiry of the seller and a visual inspection of the property. See N.J.A.C. 11:5-6(b). However, the regulation contains an exclusion for disclosure of "psychological impairments". Id. ("Information about social conditions and psychological impairments as defined in (N.J.A.C. 11:5-6(d)) is not considered to be information which concerns the physical condition of a property."). Psychological impairments are defined to include, among other things, murder and suicide. See N.J.A.C. 11:5-6(d). However, the rule further provides that if a specific inquiry is made concerning a psychological impairment, the realtor(R) has a duty to disclose it. See N.J.A.C. 11:5-6(d)(3) ("(U)pon receipt of an inquiry from a prospective purchaser or tenant about whether a particular property may be affected by a . . . psychological impairment, licensees shall provide whatever information they know about the . . . psychological impairments that might affect the property."). Turning to the facts of the case, the Appellate Division reasoned that the request made by the Buyer as to whether the elevator was "safe" was an inquiry regarding a physical condition of a major mechanical system of the home - and a system that the court characterized as having "a history of dangerously defective operation". Thus, the court reasoned, the realtors(R) had a duty to disclose any history of issues related to that system. Further, although the deaths of the two girls in the elevator shaft in 2002 might be a "psychological impairment", the realtors(R) nevertheless had a to disclose all material facts known to them when asked a direct question concerning the event.
CONCLUSIONThe Petrosino case represents a good reminder for New Jersey realtors(R) of the law regarding disclosure. A realtor has a duty to make a reasonable inquiry of the seller, and to perform a visual inspection of the property, to determine material facts related to the property. N.J.A.C. 11:5-6(b). A fact is material if a "if a reasonable person would attach importance to its existence or non-existence in deciding whether or how to proceed in the transaction, or if the licensee knows or has reason to know that the recipient of the information regards, or is likely to regard it as important in deciding whether or how to proceed". N.J.A.C. 11:5-6(b)(2). Further, although a realtor does not have to disclose psychological impairments such a murder or suicide at the property (see N.J.A.C. 11:5-6(d)), the realtor does have a duty to disclose that information when a specific inquiry is made (see N.J.A.C. 11:5-6(d)(3)). If there is a "twist" to the Petrosino case, it is that a "psychological impairment" may be so intertwined with a physical condition of the property that it must be disclosed. It is unlikely that a murder or suicide would create such a problem. However, an accidental death in a home caused by some physical condition there, may require disclose even absent a specific inquiry about the event.