Amityville Lawsuit
In 1975, George and Kathy Lutz and their three children moved into a six bedroom house in Amityville, a suburban town on Long Island, New York. They bought the house for the bargain price of $80,000. Thirteen months earlier, Ronald DeFeo, Jr. had shot and killed six members of his family in the house. At trial he pleaded insanity, claiming voices told him to commit the murders. The plea was unsuccessful, and he was sentenced to six consecutive life terms.

Amityville Lawsuit Buyer George Lutz repeatedly woke up around 3 a.m. each morning to check the boathouse. Later, he would learn that this was
the estimated time of the DeFeo killings. Blood was said to have oozed from walls in the hall and from the keyhole of the playroom door in the attic. A month after arriving, the Lutzes left the house, claiming to have been terrorized by the paranormal phenomena. Author Jay Anson, in his best
selling 1977 book, The Amityville Horror: A True Story, told their
story at length. New owners, who experienced no unusual phenomena, aside from extensive harassment from tourists, subsequently occupied the house. They sued the Lutzes, publisher Prentice-Hall, and author Anson
for $1.1 million in damages. The lawsuit was settled for an undisclosed amount.

The Amityville lawsuit raised concerns within the real estate community whether there is a duty to disclose crimes, paranormal phenomena, and psychological stigmas to prospective buyers. Obviously, the death or illness of a past occupant of a property rarely presents a risk to a future resident. Some buyers believe, however, that such events have a psychological impact that reduces the market value of the property and diminishes their
enjoyment of it.

In Massachusetts, the Consumer Protection Act, also known as Chapter 93A, requires disclosure of each “fact” that may influence a buyer not to
enter into a transaction. Real estate professionals must disclose known facts, even if the buyers do not ask. According to Chapter 93A, if an agent were found to have intentionally withheld a known fact, the agent could
be subject to suit for treble the actual damages, plus attorney’s fees. The Amityville case created uncertainty as to whether paranormal phenomena or the history of a crime at a property is a “fact” that is required to be disclosed to prospective buyers.

Stigmatized Property Law
In 1998, MAR spearheaded a successful effort to enact legislation, clarifying the duties owed by real estate agents, commonly known as the
“Stigmatized Property Law,” Chapter 93, Section 114. Specifically, the
Stigmatized Property Law states that whether a property is “psychologically
impacted” is not a material fact requiring disclosure. By legislatively
establishing that a psychological stigma is not a “fact,” the Law provides
important relief.

The legislature, concerned about limiting access to accurate information, stated in the Stigmatized Property Law that no seller or real estate agent may make a misrepresentation when responding to a direct question. By adding this qualification, the legislature distinguished between eliminating the
duty to volunteer facts and the duty to respond accurately and completely when asked. If asked about a crime or the death of an occupant at the
property, a real estate agent must respond accurately concerning what
is known.

For example, suppose the listing agent knows that a particular home was the site of a suicide or rape. While there is no duty to volunteer information about the event, if asked by a buyer, a real estate agent must truthfully and completely disclose what the agent knows. Buyers who have additional questions should be referred to the police department, town historian, or librarian. The agent should not act as investigator.

Although disclosure is the usual rule, agents must recognize questions that relate to matters within the scope of “protected classes” under the Fair Housing Act. Just as with inquiries from buyers that concern other protected classes, the agent should explain that the inquiry concerns a subject that is off-limits according to the anti-discrimination laws, just as if the inquiry concerned the race, religion, or natural origin of the prior owner.

Crimes and Stigmas
While the Stigmatized Property Law clarified the issue of deaths or crimes occurring within the boundaries of a listed property, the issue of crime in the neighborhood of a listed property (or in another unit in a condominium) was not expressly addressed in the law. When faced with a neighborhood issue, care should be taken to avoid “steering” buyers away from a neighborhood, since doing so may be interpreted as a fair housing violation. It is recommended that when asked about high crime areas, the agent should refer the buyer to the local police department.

Similarly, there is no Massachusetts statute or case dealing with the need to disclose whether a sex offender resides in the vicinity of a listed property. Unlike physical problems affixed to the land, a sex offender may move out
of the area tomorrow. Moreover, there is uncertainty as to where to draw the line for disclosure based upon the geographic distance from a property—two blocks away, ten blocks, a mile? The best guidance
may be from the 1997 Massachusetts Supreme Judicial Court decision in
Urman v. South Boston Savings Bank.

While that case dealt with disclosure of off-site physical contamination, the court suggested that there may not be a need to disclose non-physical
“transient social conditions” in the neighborhood. Unfortunately, the dilemma faced by real estate agents when dealing with the issue of sex offenders is not merely nondisclosure, but how the agent will cope with the moral or ethical issues. Agents are cautioned not to investigate records regarding a sex offender in the vicinity of a listed property. There is only a duty to disclose facts that are known, not a duty to investigate or discover facts.

Disclosure Considerations
When entering into a buyer representation agreement, a welldrafted
agreement will expressly limit the agent’s obligation to investigate. When acting as a seller’s agent, the agent should tell the buyer what the agent knows, and the buyer should be given the opportunity to investigate. If
a seller objects to disclosure, the agent should give serious consideration to
withdrawing from the listing. One approach that may convince a seller to authorize disclosure is to discuss the potential ramifications. Sellers are
unlikely to have insurance coverage in the event that disclosure is not made
and a problem arises.

If a disclosure decision is met, avoid identifying sex offenders by name or house number in order to limit the risk of a claim for slander due to misidentification. Identifying the approximate location where a sex offender lives or works and directing buyers to the Massachusetts Sex Offender Registry should be sufficient.