8. What is a Latent Defect?

The complexity of Purchase and Sale of the real property is increasing in Canada. One of the difficult decisions on the sale of the property that a vendor must make is how much to say to the purchaser about the house to a new buyer? Should one make the best presentation and tell the agent the least number of problems so that the house may sell with the highest possible price or announce problems that would make sale more difficult?

Most Real Estate Agents when listing the property for sale will tell you how to upgrade the house, make it look lived in, make improvements and make the best show of the house when the prospective purchaser comes to see the house. This is good advice but this does not eliminate the obligation of the vendor to tell the real estate agent if there are defects which require disclosure. Those defects which you can see with naked eye called ‘Patent Defects’ do not create a problem. The buyer must see them recognize them and accept them or ask for reduced price or rectification in the agreement.

The general principle in the common law developed through cases previously determined in courts is that that of ‘buyer be aware’ or in the legal language ‘Caveat Emptor’. You buy what you see and the purchaser has the primary obligation to check out what he is buying. A typical Canadian home is a complicated and technical structure with block foundation made for the winter weather and roof that deteriorates with extreme climate and many technical devices including the heating system and air conditioning, garage door openers etc.

In showing of the house to the purchaser there is an obligation in the common law to point out ‘latent defects’ which are the defects that are not obvious to the eyes and cannot be seen easily. An example of this is the over grown weeds in the sewage system which blocks the effluence when you flush. This blockage cannot be easily detected on the normal inspection of the house. The obligation to disclose it is an exception to the general rule on sale or real property of ‘buyer be aware’ principle.

It is not only the vendor who must take the responsibility for disclosure of the latent defect but also must notify the agent who must in turn advise the purchaser. This is not an easy task for the agent because their main concern is to sell the house and not point out problems with the house which can make the sale more difficult. The other problem is understanding what constitutes a latent defect in the law? Would the roof which is 20 years old and which is beginning to wear out a latent defect or can one climb on top and check it out which makes it a patent defect? In a difficult situation it would be advisable to check with a lawyer and get his advice in drafting the agreement of purchase and sale.

When the house is sold with a ‘latent defect’ the purchaser has a right to bring an action against the seller for compensation which would be equal to the amount the purchaser has to spent to rectify the deficiency. The litigation to resolve the issue can be a messy problem and can take much more time and resources in court than solving this type of a problem before hand by either disclosure to the purchaser or by having the problem fixed before selling the house.

This problem is becoming more frequent and many buyers are now resorting to the professional inspectors who are knowledgeable in construction and can identify this type of a problem. At the present time it is not still normal in each transaction to have an inspector, but in drafting of the offer of purchase and sale it is becoming quite common to write a clause which allows the purchaser to have access to the property for inspection if he decides to check it out with a qualified inspector. A professional inspector is very advisable in checking out a house which is used