With respect to transactions in real estate, New York adheres to the doctrine of caveat emptor and imposes no duty upon the vendor to disclose any information concerning the premises unless there is a confidential or fiduciary relationship between the parties or some conduct on the part of the seller which constitutes active concealment. Normally, some affirmative misrepresentation or partial disclosure is required to impose upon the seller a duty to communicate undisclosed conditions affecting the premises.
Plaintiff contracted to purchase a house from defendant, and after the sale was complete plaintiff learned the house had a reputation as being possessed by poltergeists. Plaintiff filed a complaint to rescind the contract, which was dismissed by the Supreme Court, New York County. The case was appealed to the Supreme Court of New York, Appellate Division.
Is there a ground to rescind the contract?
Noting that reports of hauntings lowered the resale value of the house, the court held that while caveat emptor prevented an action for damages, it did not prevent the equitable remedy of recission. Here, recission was appropriate since defendant not only took unfair advantage of plaintiff's ignorance as to the house's reputation, but defendant herself also had created and perpetuated that reputation.