June 5th - 2013

Legal Beat: Disclosing presence of sexual offender in neighbourhood

Questions sometimes arise in real estate about how to deal with the sale of a property in the neighbourhood of a convicted sex offender.

Questions sometimes arise in real estate about how to deal with the sale of a property in the neighbourhood of a convicted sex offender.

In one case heard by the courts in 2011, arguments were made about whether the sellers of a house had to disclose the presence across the street of an individual convicted of child pornography offenses. The judge in the case observed that “The question on this motion is whether it is ‘plain and obvious’ that the seller of a house does not have to disclose to a purchaser with young children the fact -- which was common knowledge in the neighbourhood -- that a person convicted under child pornography provisions of the criminal code lives across the street.” Alternatively stated, is this a plain and obvious “latent defect” by law, and is it of such a nature that it must be disclosed to buyers? The judge concluded that “It is not plain and obvious that if the danger posed by the defect is considered sufficiently grave, a duty to disclose will not be imposed on the sellers.”

Dennis v Gray 2011 ONSC 1567

Similar issues have arisen in the past. Here is a question posted to the Legal Forum section of the Ontario Real Estate Association website, along with my response.

QUESTION: What are the disclosure requirements for the presence, in the past, of a sex offender in the neighbourhood? Our clients’ next-door neighbour has a family member who was a sex offender. Two years ago the person was released into the neighbour’s custody. A few months after that, he was arrested and incarcerated for breach of probation. The neighbour says that he won't take the offender back, if and when the latter gets out of jail. What would our disclosure requirements be, given that it was in the past?

RESPONSE: Whether the sellers are liable for any such disclosure issues would depend on any representations that they made and the outcome of a case currently before the courts, all of which the sellers should discuss with their lawyer. As a listing registrant, you must disclose a material fact as discussed in section 21 of the REBBA Code of Ethics. The facts of when the offender moved to the neighbourhood and the knowledge of neighbours, the sellers and everyone concerned would be significant before any determinations of liability could be made. The code requires registrants to take reasonable steps to determine material facts that are known or ought to be known. The impact of the section is discussed in several OREA seminars including the RECO Real Estate Update. See the Legal Pamphlet, Caveat REALTOR® - Disclosing Defects.

Reference to that disclosure could be noted in the non-public Remarks section of the listing data, and all other registrants and potential buyers should be informed of details prior to any showings. Have the seller consent and confirm in writing that this will be done. An acknowledgement could be included in any offer. For an even earlier discussion on disclosure, look at the September 1999 article in the REALTOR® EDGE newsletter titled “Things that go bump in the night.”  

Whatever the courts might say about “stretching the boundaries of the latent defect principle” and about a seller’s obligation to disclose, REALTORS® are bound by a higher duty as set out in the code of ethics. This is just one more reason why a wise buyer should work with a REALTOR® rather than directly with a For Sale by Owner (FSBO) seller.

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