Bet you never thought New York contract law could be scary. While real estate, contracts, and title law can all be very complicated, sometimes law deals with the downright spooky. The Hudson Valley has a long and storied history of creepy folklore and tales of ghosts in its aging buildings and misty forests. And the home at 1 LaVeta Place in Nyack, New York, they learned the price of having a home rumored to be one of the many invested with spirits of those who have passed on.

The Background

When Helen and George Ackley moved into the 5,000 square foot, 18 bedroom Queen Anne style home overlooking the Hudson, they claimed some neighborhood kids told them it was rumored to be haunted. At the very least, it was dilapidated and long-abandoned from its days as a boarding house. The Ackleys reveled in fixing it up. But as they put up new walls, cleaned up the floors, and applied new coats of paint, they couldn’t help but feel they weren’t alone. In fact, as Helen Ackley would later write in a 1977 piece for Reader’s Digest, the ghosts were active participants in the remodel with Helen at one point asking a ghost for his approval on a color choice (to which she wrote “he smiled and nodded his head”).

But by the late 80s, George had passed away, Helen’s children were grown, and property value in Nyack was rising faster than Helen could keep up with the tax hikes. She decided to sell the home and head for the warmth and palm trees of Florida. The buyers who took a bite on the house were Jeffrey and Patrice Stambovksy, a couple from Manhattan’s Upper East Side and among the many wealthy city-dwellers looking to snap up newly valued property in the Hudson Valley.

The Stambovskys made their down payment and agreed to the final price but, upon spending some time in the village of Nyack, they started hearing odd rumors about their new home. They learned not only did Helen Ackley write to a national publication about it being haunted, but it was included on two different local walking tours of haunted houses in the area. The Stambovskys weren’t impressed and became concerned with the property value and potential for diminished quality of living. So, they took it to court.

Changes to New York Contract Law

There is a term in real estate law called stigmatized property. This is a property that has been “psychologically damaged” by an event that either occurred or is at least believed to have occurred. Up until this case, hauntings didn’t really apply, or at least no one thought about it before. But the Stambovskys claimed they were duped–the “victims of ectoplasmic fraud”. They wanted their down payment back and to be let out of the contract to purchase the house. Helen Ackley fought back.

The case’s first round in trial court found in Helen’s favor. The judge found the precedent of caveat emptor applied–that is, buyer beware. The Stambovskys were liable to do their own due diligence on the house. They appealed, and sent the case to the second-highest court in New York State where the decision would become known as “The Ghostbusters Ruling.”

Justice Israel Rubin, in a colorful opinion full of tongue-in-cheek references to famous ghost stories and horror films, ruled that because Helen Ackley had not only told others the house was haunted, but had been paid $3,000 from Reader’s Digest for a piece claiming as such, as a matter of law the house was haunted, a stigmatized property. This is something no amount of home inspectors could have uncovered so Helen Ackley was obligated to disclose it to prospective buyers who, while looking for water leaks and peeling paint, would likely not find evidence of poltergeists.

Contract Law in New York Today

This became one of the most widely studied cases in the history of contract law. It had far-reaching implications for the exchange of goods and the sale of property. And if you live in New York State today, you are legally obligated to disclose if your house is believed to be haunted. In further contract law, it stipulates that sellers are required to disclose things that a buyer may never know or find out, what’s known as information asymmetry.

While you may not live in a state that requires such strange laws around potential poltergeists in your home, this was one of the most influential cases when it comes to contract law and is still widely taught in law schools today. If you’re in need of a lawyer, knowing the odd and obscure parts of the law can help prepare you

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