The Implications of "Megan's Law" for Real Estate Practitioners

Seven year old Megan Kanka of Hamilton, New Jersey was raped and murdered in July, 1994 by a convicted sex offender who, unknown to Megan's parents, resided in Megan's neighborhood. By October, 1994, the New Jersey legislature enacted the first so-called "Megan's Law," which requires convicted sex offenders after their release from prison to register with police departments in the communities in which they live. The police departments in turn notify other agencies, organizations, or the "community at large" depending upon the severity of the offender's crime.

The Federal "Megan's Law"

In 1996 the United States Congress enacted a federal version of Megan's Law as an additional section of the federal Violent Crime Control and Law Enforcement Act of 1994, 42 U.S.C. 1407(d). The federal Megan's Law directs the Attorney General to issue guidelines that require states to enact registration programs for convicted sex offenders as a condition of continued receipt of federal funding.

The federal Megan's Law obligates states to require prison officials or courts to inform convicted sex offenders of their obligation to register with state law enforcement authorities and to re-register if they move to another state. The state agencies in turn are to inform local law enforcement authorities, typically the local police department, of convicted sex offenders who reside in their jurisdiction. The state law enforcement agencies are also required to inform the FBI about the whereabouts of convicted sex offenders.

The federal Megan's Law also authorizes local law enforcement agencies to release information collected about convicted sex offenders as necessary to protect the public or "for any purpose permitted under the laws of the State." The latter authorization clearly can include release of the information to the community at large, as does the original New Jersey Megan's Law.

What Does "Megan's Law" Mean To Real Estate Practitioners?

In every state, real estate brokers are required to disclose to potential buyers known material adverse facts about property for sale. In many states, a "material" adverse fact can include facts about the surrounding neighborhood, as well as the particular property for sale. An example of a material adverse fact about a surrounding neighborhood would be the property's proximity to a hazardous waste site.

The proliferation of state Megan's Laws as a result of the federal legislation raises the issue of whether a real estate broker has a duty to warn potential home buyers about the potential presence of a convicted sex offender in the neighborhood. The answer will depend in large part upon the broker's actual knowledge about the presence of a convicted sex offender, the particular provisions of the applicable state Megan's Law, and whether the potential buyer affirmatively questions the broker about the presence of convicted sex offenders.

In the first scenario, it is presumed that the applicable state law does not require local law enforcement agencies to affirmatively publish the names and addresses of convicted sex offenders to the community at large, that the real estate broker does not have actual knowledge of the presence of a sex offender, and the buyer does not make an affirmative inquiry about the presence of a sex offender in the neighborhood. Under these facts, most states would not impose any duty upon a real estate broker to investigate the presence of a sex offender, and disclose the results of the investigation to a buyer who does not make any actual inquiry about the subject.

In the second scenario, the facts are the same, but the buyer makes an actual inquiry about the presence of any sex offenders in the neighborhood. In this case, the broker should disclaim any personal knowledge about presence of sex offenders (assuming the broker does not have any such knowledge) and should refer the buyer to the local agency that maintains the required registry pursuant to the applicable state Megan's Law.

In the third scenario, the applicable state Megan's Law requires the local law enforcement agency to disseminate information about the presence of sex offenders, and the broker has actual knowledge of the presence of an offender based upon this required information dissemination. In this case, the broker should disclose this known information to a potential buyer because it will almost certainly be deemed to be a "material" adverse fact relating to the property. This disclosure should be made whether or not the buyer makes actual inquiry about the presence of any sex offenders, provided that the broker has actual knowledge that a sex offender is indeed present. The disclosure should include the identification of the source of the broker's information, and the buyer should be directed to make further inquiry at the local law enforcement agency.

If a broker is in a state where the presence of sex offenders is publicly disseminated, but the broker does not have actual knowledge that an offender is in the neighborhood, the broker generally need not further investigate the matter. If a buyer makes an actual inquiry about whether a sex offender is present, the broker should refer the buyer to the local law enforcement agency for further information.

As legislatures adopt Megan's Laws pursuant to the federal mandate, some state associations of REALTORS¨ have been successful in persuading state legislatures to adopt specific exemptions from liability for real estate licensees with respect to disclosure of information about the presence of sex offenders. It is likely that state legislatures will increasingly respond to the practical problems faced by real estate licensees who must balance their duty to maximize the value of the seller's property while, at the same time, fully disclosing all known material adverse facts about a property for sale.

The most practical approach is to establish a central registry (usually the local police department) that interested persons may contact to determine if a convicted sex offender resides in a specific neighborhood. Real estate practitioners who are asked by a potential buyer about the presence of a sex offender may then refer that buyer to the agency that maintains the registry. The state law should specifically exempt real estate practitioners from any liability for failure to discover or disclose the presence of a sex offender.

Constitutional Challenges

Megan's Laws have been challenged as unconstitutional under federal and state constitutions. These challenges have asserted that the retroactive application of the public notification requirement to persons convicted of sex offenses before the Megan's Law was adopted is a deprivation of due process of law. Additional constitutional issues are whether a sex offender has a right to appeal a determination that he or she is in a category of offender who must register under the Law, and whether the determination can properly be made by prosecuting attorneys who participated in the original trial of the offender. Thus far, these constitutional challenges have not invalidated any state Megan's Law.

Conclusion

Every real estate practitioner should become familiar with the Megan's Law enacted in his or her state. If a potential buyer asks about the presence of a sex offender in the neighborhood, the practitioner should refer the buyer to the local agency that maintains the control registry of offenders, or if the practitioner has actual knowledge that an offender is present, the practitioner should disclose that fact and specifically cite the source of their information.

Please note that the comments and opinions contained herein are not to be construed to be legal advice by the author, Victor O. Schinnerer & Company, Inc., or the CNA/Schinnerer errors and omissions insurance program.

This information is made available to you for your risk management program. No action should be based on this information without appropriate advice from legal counsel and a review of currently applicable statutory and case law.

This article from the Risk Management Reporter, November 1997, was written by Robert D. Butters of the law firm of Arnstein & Lehr, which concentrates in the representation and defense of real estate brokers and agents