Stigmatized Properties and a Vendor’s Duty to Disclose

What are a Purchaser’s rights if he discovers, either before or after closing, that the property he is buying has been used in the past for an illegal activity, or perhaps that a murder or suicide has occurred there?  This depends on the terms of the Agreement of Purchase and Sale that the Purchaser signed, and the extent of the Vendor’s obligations to disclose such information.

In general, defects related to a property can be characterized as either patent or latent. Patent defects are those that are obvious, and discoverable upon a reasonable inspection by the Purchaser.  The principal of caveat emptor or “buyer beware” applies to these types of defects, and the Vendor is generally under no obligation to point them out to a Purchaser.  Latent defects are those that are not know or easily discoverable upon a reasonable inspection.  With respect to latent defects, a Vendor may have an obligation to disclose such defects to a Purchaser, provided the Vendor is aware of the defect and if the defect negatively affects the use or habitability of the property.  Vendors are further obliged not to do anything to hide or conceal defects from the Purchaser’s inspection.

So, what happens if a Purchaser discovers that the property they are buying was once used as a marijuana grow operation?  What if the Vendor had knowledge of this fact?  Unless the Purchaser specifically asked the Vendor about this, or unless there was a representation in the Agreement of Purchaser and Sale that the property was never used for such an activity, the Vendor would generally not have an obligation to disclose such information to the Purchaser, unless the fact of the property having been previously used as a grow op negatively affects the use or habitability of the property.  This can be an unfortunate outcome for a Purchaser who fails to ask the “right” questions when he is buying, which many good agents and lawyers will try to avoid by introducing representations into Agreements of Purchase and Sale, that the property had never been used for those activities.