Disclosure of Group Home with Elderly Residents

QUESTION: Increasingly, homes in my area are being purchased and turned into group homes for elderly residents. I have a client who is interested in selling her house. One of those group homes is directly across the street from her house. She has asked me if the presence of that group home is a material fact that either she or I would be required to disclose.

ANSWER: First of all, the disclosure obligations of property owners and licensed real estate agents are not the same. Under North Carolina law, sellers of real property have very limited disclosure obligations to potential buyers. While sellers may not misrepresent facts, or fraudulently conceal a defect in their property, the general rule is caveat emptor, “let the buyer beware.” Your client does not have a duty to disclose the fact that a house in her neighborhood is being used as a group home for the elderly.

The answer may not be the same for you. REALTORS® are required, both by statute and by the REALTOR® Code of Ethics, to disclose all material facts to their own clients and to the other parties involved in a real estate transaction. In its Real Estate Manual, the Real Estate Commission has identified four categories of facts that must be disclosed: (1) facts about the property itself, (2) facts that relate directly to the property, (3) facts that relate directly to the ability of a principal to complete the transaction, and (4) facts that are known to be of special importance to a party.

Agents may wonder whether disclosure of a group home for the elderly might violate the Fair Housing Act (“FHA”). That statute prohibits anyone from making a statement with respect to the sale or rental of a residential dwelling which indicates a preference, limitation or discrimination based on a person’s membership in a protected class. There are seven protected classes (including race and religion) but age is not one of them. Disclosure of the existence of a group home for elderly residents is not prohibited by the FHA.

Is the existence of this type of group home a material fact? To answer that question, listing agents will have to decide whether that type of use is truly a fact that “relates directly to the property.” The Real Estate Commission has described facts relating directly to the property as “external factors that affect the use, desirability or value of a property such as a pending zoning change, the existence of restrictive covenants, plans to widen an adjacent street, and plans to build a shopping center on an adjacent property.” Listing agents should apply a reasonableness standard on a case-by-case basis. They should ask themselves whether the group home in question would affect a reasonable prospective buyer’s decision to buy the listed property. In our view, not all group homes for elderly residents would meet the test. Factors to consider include whether the neighborhood has other non-standard uses, the proximity of the group home to the listed property, the number of residents and caregivers in the home, and any observed impacts such as increased traffic or noise.