Real Estate Woes

LATENT DEFECTS & CAVEAT EMPTOR

What happens when you purchase a house or condominium that has latent defects

What happens if you have purchased a house or a condominium that you later discover has defects? How does the law approach this issue and what are your legal options? There are certain things every purchaser should be aware of when making the decision to purchase a property, such as who carries the risk if that property is later discovered to have certain deficiencies and defects? Who is liable? What can be done? This article provides a brief overview on property defects and what options a purchaser may have available to them.

First and foremost, it is important to understand that there are two categories of undisclosed defects: Patent Defects (Obvious Defects) and Latent Defects (Hidden Defects).

Patent Defect:

A patent defect can be easily discovered by the purchaser by conducting a reasonable inspection and making reasonable inquiries about the property. The onus is on the purchaser to inspect and discover these defects. A defect not easily observable through a casual inspection may be considered patent if it would have been discoverable on a reasonable inspection by a qualified person.

Latent Defect:

Unlike a Patent Defect, a Latent Defect is one that was unknown to either the vendor or the purchaser, or concealed by the vendor in such a way as it was not discoverable by the purchaser, at the time of the sale, and as a result was not disclosed. In this situation, if one cannot gather evidence to demonstrate that the vendor knew of the latent defect and deliberately failed to disclose it, then the vendor is not liable for the resulting costs of repairs.

Liability of the vendor may be raised as an issue where it can be demonstrated that the latent defect was known to the vendor but could not have been discovered by the purchaser upon reasonable inspection of the property. One may also raise the argument that the vendor attempted to conceal the defect from the purchaser. An example of this is putting a picture over the hole in the wall. Where this occurs, the purchaser may commence action against the vendor for negligent misrepresentation for damages as a result of non-disclosure.

WHAT HAPPENS WHEN YOU PURCHASE A HOME THAT HAS A DEFECT? WHAT ARE YOUR RIGHTS?

Caveat Emptor

Caveat Emptor is the common law doctrine that a purchaser takes existing property as he finds it. This is also known as the “Buyer Beware” principle. It's a nice way of saying buyers assume the risks for any problems that come with a property. Essentially, what this means is that absent any fraud or misrepresentation on the part of the Vendor, a buyer accepts physical defects in a resale home purchase. In addition, a seller is not required to disclose a patent defect to a buyer and the buyer takes the home subject to patent defects. The seller is not required to disclose a latent defect of which he or she is unaware. However, generally speaking, this does not mean that the Vendor can conceal a latent defect, or fail to disclose a latent defect which would make the home dangerous or uninhabitable. Further, omitting to reveal information about the defect that the Vendor is aware of may also subject the Vendor to liability.

On the surface, it may sound like buyer of the property is left without any recourse, should a latent defect be discovered after closing. However, this is not the case. While a vendor is under no obligation to disclose a patent defect, or a latent defect not known to the vendor, there are certain situations in which the Vendor may be held liable.

Exceptions to “Caveat Emptor”

  • Negligent Misrepresentation/ Fraudulent Misrepresentation
  • Where the Vendor knows of a latent defect that renders the house unfit for habitation
  • Where the vendor is reckless or ignorant as to the correctness of statements relating to the fitness of the house for habitation
  • Where the vendors breached his or her duty to disclose a latent defect that renders the premises dangerous.

Although there are exceptions to Caveat Emptor, the law and its application can be very complicated and it is not always clear when exactly these exceptions can be said to apply. The question of what actually amounts to a latent defect has been the subject of rigorous legal discourse. For example, does a convicted pedophile living down the street amount to a defect rendering the property unfit for habitation, or, does the existence of dug wells on neighbouring properties, impacting on the ability of a buyer to install a septic weeping bed amount to a defect on that property?  What is meant by negligent misrepresentation? Does the misrepresentation have to be detrimental to the purchaser in the sense that damages resulted, or is it sufficient that negligent misrepresentation was made?

HOW WE CAN HELP

The answers to these questions vary from case to case, and it is best to consult with a lawyer to determine what your options are, and what the best means of recourse may be for your particular case.

At Murray Ralston Lawyers, we possess the requisite expertise to help you navigate through a situation where you have been wronged by the vendor. We do our very best to ensure you are well informed about the law as it applies to your particular case and its unique set of circumstance, and to ensure that your legal rights are protected.

Generally speaking however, it is best practice for a purchase to hire an inspector to examine the property prior to buying it, despite the requirement of the Vendor to disclose latent defects. Conversely, it is best practice for the Vendor to be cautious in ensuring that they are disclosing latent defects.

INFORMATION TO BE RETAINED ABOUT THE DEFECT:

In order to allow Murray Ralston to successfully enforce your rights against a vendor in a claim, it is important for you as a buyer to collect and preserve documents and information that will assist us in strengthening your claim. Such documents and information include, but are not limited to:

  • Building permits
  • Photographs of the permit
  • Any estimates obtained to repair the latent defect
  • Documents of damage caused by the latent defect
  • Any inspection reports
  • The Agreement of Purchase and Sale
  • Any written communication between you and the Vendor

Have you discovered Latent Defects?

If you are a purchaser who has bought a property which you have discovered had existing defects at the time of your purchase, legal action is available. Murray Ralston can assist you in ensuring you are well informed about your various options, and assist you in determining which option is best for you.

*** The information above is not intended to be legal advice. Each situation is different and the information provided above may not provide you with all law applicable to your facts. To ensure you are properly protected under the law applicable to your facts, please contact Murray Ralston Law for a free consultation.