“[S]tigmatized property” … has been defined as “property psychologically impacted by an event which occurred or was suspected to have occurred on the property, such event being one that has no physical impact of any kind.” …When can a buyer complain that the property is stigmatized and rescind a contract or state a cause of action on that basis? How would a buyer react upon discovering the house he or she had agreed to buy had been the site of a gruesome murder or suicide? What if the previous occupant suffered from HIV or AIDS? What if the house were haunted?These are serious questions — even the last one. At least one court recognized that a purchaser stated a cause of action to rescind the contract when she discovered that a woman and her four children were murdered in the house. Reed v. King, 193 Cal. Rptr. 130 (Cal. Ct. App. 1983). In another case, buyers tried to rescind the purchase contract when they learned that the previous owner died of AIDS. Kleinfield v. McNally (N.Y. Co. Sup. Ct., July 15, 1988). In addition, a New York appellate court allowed a purchaser to rescind his contract on a property when he ascertained that his new house was widely reputed to be possessed by poltergeists. …At least 21 states have adopted statutes speaking to stigmatizing issues in one way or another.
As you might gather, courts and legislatures are concerned not only about the emotional distress a particular buyer may or may not feel when he learns of the house’s “stigma,” but also about the lower resale value stemming from future prospective buyers’ reactions, rational or not. In any case, an interesting article.