Real Estate – Caveat Emptor – Beware of Hidden Defects

As a buyer of real estate in BC, you should know about the common law requirement that sellers disclose known latent defects. This is called caveat emptor or “buyer beware”.

A latent defect is a defect that is not discoverable through a reasonable inspection or inquiry. It makes a property dangerous or unfit for human habitation.

What is a Latent Defect?

A Latent Defect is a physical defect that cannot be easily discovered through ordinary observation, sometimes without the aid of a third party. A latent defect can occur as the result of poor design, workmanship or the use of inferior materials.

These flaws can cause problems for years before the problems are discovered and corrected, and may affect the value of a property significantly. This can be very frustrating for the property owner or investor, especially if the defects are expensive to fix and repair.

In some jurisdictions, buyers have a right to claim against a seller for a latent defect if they did not discover it before closing. These claims can be brought in either a negligent or fraudulent misrepresentation claim.

Typically, the buyer needs to show that the seller knew about the defect and did not disclose it. This could be a difficult task if the defect was not discovered until many years after the sale, and it is important to have legal representation.

The law of latent defects is important for all parties involved in the real estate transaction, including buyers and sellers. It ensures that defects are properly disclosed and that buyers are protected against potential damage and loss. It also provides security to financiers that if they are involved in the mortgage/financing of a property, it will not lose its value due to flaws in the quality of the building.

What is a Patent Defect?

If you are buying or selling a property, then there are many things that you must pay attention to. One of the most important is your legal responsibilities to discover any defects that may derail a transaction.

In BC, there are two main types of problems that you must be aware of – patent defects and latent defects. These are both very common issues that arise in real estate transactions.

A patent defect is a flaw that a capable home inspector would be able to spot. This could include a door that doesn’t close, stains on the walls and a leaky roof.

These defects are typically discovered by a casual walk through the property and an inspection of the premises. The law is based on the principle of “buyer beware” or caveat emptor which places a high onus on the buyer to satisfy themselves about the condition of the property.

Despite this, there are instances where it is not clear whether a seller should be required to disclose a patent defect or latent defect to a buyer. In these circumstances, the courts have carved out exceptions to this general principle.

What is a Hidden Defect?

A hidden defect is a deficiency that you didn’t notice upon a pre-purchase inspection. This can range from something as mundane as a leaky faucet to something more sinister like a hidden asbestos abatement project or a child pornography offence.

In the real estate world, it’s a given that sellers are required to disclose latent or “hidden” defects in their properties if they have any intention of selling them. This is often referred to as caveat emptor and it’s a concept that’s well worth understanding if you’re in the market for a new home or considering a property purchase.

Despite this, there’s no denying that a hidden defect can make or break a real estate transaction. A latent defect can result in a significant price reduction, cancelation of the sale, or even a repair bill. If you are a buyer in this situation, it’s important to consult a lawyer who specializes in real estate law as soon as possible.

The best way to tell if you have a potential hidden defect is to conduct a proper home inspection, and to seek legal advice before signing anything. You’ll want to be certain that the home inspector is qualified as a legal expert, and that you are not just buying into a sales pitch or an overpriced property. Having a competent lawyer on your side will help you get the compensation you deserve.

What is a Material Defect?

A material defect is an issue with a system or component that negatively alters the way a home system works, puts a homeowner at risk or requires immediate repair. These defects are major and impact the value of a property, are unreasonable risks to people or may even cause injury or death.

Some examples of commonly reported material defects are a leaky roof, water damage to decks and floors, and problems with the foundation (e.g., sloped or bowed walls, horizontal cracks). Other defects that require an evaluation by a structural engineer include worn out studs, beams and columns, settling in walls, and problems with exterior spaces that could be open to animals or the elements.

Whether or not an inspector calls a defect out as material is entirely up to the individual inspector’s judgment and experience. Some defects are minor and insignificant and don’t have a serious impact on the home’s function. Others, however, affect the way a home system works or put a homeowner at risk in a manner that’s unreasonable.

What is a Material Defect without a Proper Legal Description?

A Material Defect is a specific problem with a system or component in a residential property that may have a significant adverse impact on the value of the property, or poses a direct risk to the health and safety of people. This is a relatively broad definition and can cover a variety of problems from very serious to those that are merely not readily apparent. Typically, a seller will use a Property Disclosure Statement (PDS) to disclose any material latent defect and a landlord will usually provide a written confirmation that they are aware of the defect.

Both common law and the Council’s Material Latent Defect Rule have strict requirements regarding what needs to be disclosed in a PDS or a written confirmation by the landlord. Both require that the listing Realtor be aware of known latent defects, and that they proactively disclose those defects to buyers and tenants.

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