Ohio court finds no duty to disclose neighbor’s criminal record
On November 14, 2016
By Peg Ritenour, OAR Vice President of Legal Services/Administration
Did a brokerage and agent have a duty to tell a buyer that a neighbor’s son was recently released from prison and was living with his parents? According to the First Appellate District Court in Hamilton County, the answer is no.
In this case, the brokerage had a property listed in the Cincinnati suburb of Indian Hills. The seller entered into a purchase contract with buyers who were represented by another agent in the same brokerage. After entering into the contract, the buyers learned that the next door neighbor’s son had recently been released from prison after serving 10 years for the kidnapping and attempted murder of a 13-year-old girl. After meeting with the neighbors and their son, the buyers initially indicated an intent to close on the transaction. However, they later changed their mind and when the buyers attempted to terminate the contract, the seller sued them for specific performance. The buyers then filed a third party complaint against the brokerage and their buyers’ agent alleging a breach of fiduciary duty, civil conspiracy and fraud. The buyers and seller ultimately settled their claims and the trial court granted summary judgment in favor of the brokerage and the buyers’ agent. The buyers appealed.
In ruling in favor of the brokerage and agent, the appellate court reviewed the statutory and common law duties of a licensee. The first is the duty to disclose to the client, any material facts of the transaction of which the licensee is aware and that are not confidential under another agency relationship. A licensee also has a duty to disclose defects of which the licensee has knowledge and that buyers could not discover on their own. Due to a lack of case law on the issue of whether a licensee must disclose the presence of a convicted criminal on neighboring property, the court relied on two earlier Ohio cases that held that there was no duty to disclose a “stigma” that existed on property being sold. The court applied the reasoning from those two cases, finding that under the circumstances of this case, the criminal history of the neighbor’s son was not material to transaction and that the brokerage had no duty to disclose what the court found was a nonmaterial defect that did not involve the property that was the subject of the transaction.
The court also relied on language in the real estate purchase contract as well as the Ohio Residential Property Disclosure form regarding offsite conditions. The purchase contract signed by the buyer specifically stated that the “seller makes no representations with regard to conditions outside the boundaries of the real estate, including crime statistics… and Buyer assumes sole responsibility for researching such conditions.” The Ohio Residential Property Disclosure form that the buyers signed also stated that the “purchaser should exercise whatever due diligence the purchaser deems necessary with respect to offsite issues that may affect the purchasers decision to purchase the property.” The court pointed out that the buyers could have readily found information in the public records concerning the criminal history of the neighbor’s son.
It is important to point out that the court found that there was nothing in the record that showed that either the listing agent or buyers’ agent knew that the neighbor’s son was living next door. Also, although a manager in the brokerage had knowledge of this fact, the court held that her knowledge could not be imputed to the agents and the court reiterated that there was no duty on the part of the brokerage to inform the buyers of “a nonmaterial defect on property not involved in the transaction.” Even if such a duty existed, the court held that there was no evidence that this duty was breached or that any misrepresentation occurred.
It appears likely that the buyer will appeal this decision to the Ohio Supreme Court. However the Ohio Supreme Court is not required to accept all appeals. We will let you know whether such an appeal is filed and if so, if the Supreme Court agrees to hear this case.
Next week, I’ll explain the implications of this case for Ohio’s REALTOR community.
Legal articles provided in the OAR Daily Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.