California law requires property owners and real estate agents to disclose material defects to prospective buyers. These are issues that would either reduce the value of a house or apartment or prompt individuals shopping for a home to look elsewhere. The death of a person on a property is considered a material defect under the California Civil Code, but sellers or their agents are only required to disclose recent deaths. They do not have to tell prospective buyers about deaths that occurred three or more years before the sale.
Some deaths cannot be disclosed to buyers even if they occurred recently. AIDS is classified as a disability in California, which means sellers and real estate agents are not permitted to reveal AIDS-related deaths even if they occurred within the last three years. There are also situations where deaths stigmatize a property and must be disclosed even if they occurred decades ago.
A survey conducted by the National Association of Realtors found that only 15% of homebuyers would consider paying the asking price for a stigmatized property. Many of the respondents said that they would expect a discount of between 30 and 50%. Properties usually become stigmatized when they are the scenes of suicides or violent crimes like murder, but reports of paranormal activity can also be stigmatizing. The California Courts of Appeals weighed in on the issue of stigmatized properties in 1983 when the justices ruled that a seller had a duty to disclose to the person who bought his home that the property had been the scene of multiple murders a decade earlier.
Attorneys with experience in this area can file lawsuits on behalf of homeowners against property owners or their agents for failing to disclose material defects. The damages awarded in this kind of litigation are normally calculated to compensate the plaintiff for the difference between the amount they paid for the property in question and its true value, but this could be a difficult figure to arrive at when the defect is not structural in nature and estimating repair costs is not possible. In these situations, attorneys could use studies like the one conducted by the NAR to show how death and stigmatization can affect property values.