You’ve located the perfect house for the buyers. Or is it? The buyers have a 6-year-old daughter and a convicted sex offender lives nearby. What duty do you, as a real estate licensee, have to investigate and reveal the presence of this sex offender?
The U.S. government and all 50 states now have enacted regulations to register convicted sex offenders. Although courts are just beginning to interpret these regulations, one thing has become clear: This area is a potential minefield for real estate licensees.
Background
In 1994, 7-year-old Megan Kanka was brutally raped and murdered by a convicted sex offender living in her neighborhood. The community was outraged and argued that this could have been averted if they had known the sex offender lived there. As momentum gathered for registering the location of sex offenders, the question became: Who would be responsible for providing this information to homeowners and prospective homebuyers?
The federal law requiring a public registry of known sex offenders came into effect in 1996 as an amendment to the 1994 Violent Crime Control Enforcement Act. The U.S. Department of Justice then delegated implementation of Megan’s Law to the states, including the issue of whether or not real estate licensees have a duty to disclose such information.
Unfortunately, few states have clarified the extent to which real estate agents must investigate or disclose information concerning sex offenders. A recent NAR survey revealed that only 16 states have exempted real estate licensees from sex-offender related disclosure responsibilities: Arizona, Georgia, Idaho, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, and Wyoming.
Four states--Alaska, California, New Jersey, and Virginia--limit a licensee’s duty to telling potential buyers/tenants in writing where information concerning the location of sex offenders can be found.
Recent Cases
Although state law determines how each state’s courts will interpret Megan’s Law, two recent state decisions provide some insight into the risks faced by real estate professionals.
In 1994, a Texas court in Sanchez v. Guerrero held that a broker’s failure to disclose that an alleged child molester previously lived in the home violated the Texas Deceptive Trade Practices Act. In this case, the broker knew that a tenant had been tried and acquitted of child molestation charges but did not tell the buyer, who had asked about previous owners. The buyers were awarded damages to compensate them for their losses, as well as $100,000 for mental anguish even though they never moved into the house.
In sharp contrast, in Glazer v. LoPreste, decided in January, the New York Court of Appeals dismissed a lawsuit by the buyers against the sellers and salespeople where the buyers were not told that a convicted sex offender lived across the street. The court ruled that, under the doctrine of "caveat emptor," (buyer beware), neither the sellers nor the salespeople had a duty to disclose this information to the buyers since there was no active concealment and the information was available to the buyers in newspapers.
Issues Facing Real Estate Licensees
The main issue for real estate licensees is if and when they must disclose information about sex offenders. This issue is particularly troublesome in states where no legislation specifies Megan’s Law disclosure duties and where regulations require licensees to disclose facts that are material to the transaction.
Other unanswered questions that pose risks for real estate professionals depend upon the specific circumstances. For example, what if sellers direct their broker not to reveal Megan’s Law information? If the broker provides information to the buyers without the sellers’ authorization, will the broker be liable to the sellers if the sale fails to close?
What duty does the licensee have to keep abreast of sex offenders moving in and out of the neighborhood? How do you define neighborhood?
When you know where a convicted sex offender lives or works, do you have to disclose it to people living (or working) on adjacent properties or within a specified number of feet or the city limits of the property?
Is the duty any different with regard to short-term/seasonal rentals?
If a brokerage promotes its services by advertising it will search for sex offenders in the area of the buyers’ prospective new home, does this increase the broker’s liability?
NAR advocates that Megan’s Law information should be disseminated solely by the law enforcement officials who maintain the information to ensure that it is provided to the public properly and accurately, as in New Jersey and several other states.
Since Megan’s Law still is evolving, real estate professionals should check their state law to ensure that they are complying.
In states that do not have clear guidelines, brokers should consider providing written disclaimers concerning the dissemination of Megan’s Law information and notices advising buyers where they can obtain the information.
Moreover, if a seller directs a listing broker not to provide Megan’s Law information, it may be in the broker’s best interest to decline that listing.
Megan’s Law is an emotionally charged issue that, absent clear-cut guidelines, potentially will create new duties and liabilities for real estate licensees across the country.
Finally, in Mulligan v. Panther Valley Property Owners Association, a New Jersey court held in 1999 that a gated community had the right to exclude high-risk sex offenders from living there. The court explained that the Association’s interest in preserving home values and protecting the safety of its residents outweighed any possible impact on an owner’s ability to sell a home.
Should a licensee disclose a rumor about a nearby sex offender? Is the licensee liable for defamation if the person is found not to be a sex offender?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.