Selling Haunted Houses Involves Concerns for Lawsuits Alleging Failure of Disclosure

Question: Are sellers legally obligated to disclose if a house is haunted?

Answer: While it's unlikely a seller will face legal action specifically for a haunted house, full disclosure about the property's conditions is wise to avoid potential disputes. Providing transparency can protect against risks associated with stigmas affecting property values, as highlighted in McGrath v. MacLean, [1979 CanLII 1691] and 1784773 Ontario Inc. v K-W Labour Association, [2013 ONSC 5401].

Does the Seller of a House Need to Disclose That the House Is Haunted to the Buyer?

While It Is Unlikely That a Lawsuit About Whether a House Is Haunted Would Succeed In Court, It Is Always Best That a Seller Provides Full Disclosure to a Buyer and Then Refrain From Stating Anything That May Stigmatize a Property.

Understanding the Law Regarding Disclosure Obligations When Selling a House Perceived As Haunted

The case of 1784773 Ontario Inc. v K-W Labour Association et al, 2013 ONSC 5401, suggests that a seller who jokes about selling a haunted house may be subsequently sued by the buyer for failure to disclose the haunted status.  The buyer, concerned that rumours of the haunted status may cause a stigma with resulting harm in the form of reduced property values and the claim sought compensation for failing to disclosure the haunted status during the sales negotiations.

The Law

On the issue of proper disclosure within realty transactions, the law in Canada appears clear that the seller has a duty to disclose to the buyer any latent defects in the property that may pose a danger or make the house uninhabitable.  This rule was established by the Ontario Court of Appeal in the case of McGrath v. MacLean et al., 1979 CanLII 1691.

As for the concern involving failure to disclose that a house is haunted, the court in the 1784773 Ontario Inc. case determined that as the statements regarding the haunted status were made jokingly and the Plaintiff was without actual evidence to prove that the house was actually haunted, the case was dismissed.  Of course, it is interesting to wonder what the decision of the court would be if some evidence of paranormal activity was available.  Another interesting case involving a haunted house, was the Manitoba Free Press v. Nagy, [1907] S.C.R. 340, decision of the Supreme Court of Canada which involved allegations of negligence against a newspaper for publishing an article suggesting that a vacant house was haunted and thereby causing a reduction in the property value of the house.

Summary Comment

The chances of getting sued for spreading a rumour that a house is haunted is slim, a former owner of a house should avoid spreading rumours that may adversely affect the value of the property. A seller limits the risk of legal trouble by providing proper disclosure during the selling process and thereafter keeping quiet.