Latent and Patent Defects

Local Inspection Issues Canadian Home Inspectors
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Found an article in Nov 6-Nov19 Issue of Resale Home Magazine written by
John Poletes B.A.S., LL.B

Just Moved In and Your Roof Begins to Leak-Know your Rights!
you finally relax in your old armchair after an exhausting move to your newhome. Just as you start channel surfing you hear a plop, then another from the ceiling above.You reassure yourself that the roof is in good condition as your agent wisely insisted on a thorough home inspection. After some investigation,the plumber tells you that the upstairs shower floor must have a small leak, but to be sure he has to rip out half the living room ceiling and the new marble tiled bathroom.

What can you do now? You took all the precautions. You call the Inspector and complain. The Inspector politely reminds you that the inspection is limited to what can be discovered with a visual inspection in readily accessible areas. since there was no evidence of moisture when the house was inspected, they cannot be responsible or expected to inspect inside walls and under floors, so tough luck. But are you out of luck?

The legal term for your problem is a “latent defect”, as can be distinguished by a “patent defect”. Patent defects are discoverable upon examination, for example a roof leak, foundation crack, or bat infestation. These defects follow the age old law of Caveat Emptor. When you purchase a property, you undertake some risk, and if the defect is evident and discoverable, you may be out of luck. The only exception is if the vendor has given specific warranty in the agreement.

The agreement usually includes standard clauses relating to warranties and defects. The most common clause #12 states that as a purchaser you have had the opportunity to inspect the property and that the agreement is binding. Clause 21 provides limited protection to the purchaser against UFFI and clause 24 states that there are no warranties or agreements except those contained in the offer.These clauses in combination mean that the purchaser takes the property as found. Therefore, in the case of a patent defect, you are out of luck.

Latent defects however are another matter. This is an exception to the Caveat Emptor rule, and is in an area of law that can have surprising results. A latent defect is by definition something that is not easily discovered. With latent defects the courts will award monetary damages. Patent defects that have been covered up by the vendor, will often be interpreted as latent defects by the courts, in order to award some kind of relief. Whether a defect is classified latent or patent is up to the judge and the outcome is sometimes surprising.

Whether a court views a defect as patent or latent will determine if it will award a remedy after the purchase.

This may leave you wondering what the role and responsibilities of the Home Inspector are. The Inspector assumes some responsibility in finding patent defects, at least as much as the disclaimer allows. However with latent defects the Home Inspector is off the hook.

It is important to stress however a professional Home inspection will dramatically reduce the risk and surprises. An inspection is still your best bet in avoiding problems,but does not eliminate all your risk.If you do encounter a problem after closing, be sure to call your lawyer. In certain circumstances, there is a grey area between a patent defect and a latent defect and you may have a legal remedy.

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Good Post thanks Gerry.
Roy Cooke

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http://www.lawyers.com/Ontario/Toronto/Law-Office-of-John-Poletes-3950970-f.html

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Gerry

Good article!! This guy practices just down the street from where I live.

Caveat Emptor= Latin, let the buyer beware.

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Hi Joesph,

What is the signifigance of your link? Have I missed something?

Thanks.

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Heres another one …

**Buyers get no help from ancient rule **

The Dotted Line Alan Silverstein
Saturday February 15,1997 New Homes Section Toronto Star

While the world prepares to welcome the 21st century, much of real estate is still governed by a 13th century doctrine — caveat emptor, or buyer beware. Although sellers have intimate knowledge about an existing property, the law only imposes a narrow duty on them to disclose defects in its physical condition. (New home buyers are protected by the Ontario New Home Warranty Program.)

Property defects fall into two categories, patent and latent. Patent defects are obvious flaws buyers should detect inspecting a property with ordinary care. Example: a crumbling chimney. Latent defects are not as apparent. They would not be revealed by any inquiry a buyer could make before closing a deal.

Different disclosure rules apply to each type of defect. Sellers do not have to draw alert buyers to patent defects; caveat emptor prevails. The onus is on buyers to ascertain the physical condition of what they are buying.

The law on latent defects is much more complex. Vendors have a duty to disclose latent defects that render the premises dangerous. Similarly, any latent defects which vendors know (or ought to know) would render the premises unfit for habitation must be disclosed.

However, sellers have no Iegal obligation to volunteer information about latent defects that only affect the value of a property, provided they do not pose a health or safety risk. Once again caveat emptor applies, although the latent detect might be a material factor which could have a negative effect on a property’s value. The presence of methane gas in well water is an example).

All this assumes the vendor makes no attempt to deliberately conceal patent or latent defect. Fraud, mistake and misrepresentation are exceptions to the rule of caveat emptor.

To fully protect themselves, home buyers must ask pertinent questions about specific areas of concern, add the appropriate clauses to their agreement of purchase and sale, and conduct a proper inspection (usually involving a home inspector).

In the U.S., the heyday of caveat emptor has passed. In most states, either “seller disclosure” Iaws force sellers to reveal defects to prospective buyers, or the real estate industry itself has made a standard disclosure form mandatory when listing a home.

What must be divulged? The U.S test is relatively clear-cut— “known hidden defects,” that is, latent defects.

Unfortunately, the Canadian real estate industry hasn’t embraced the concept of “seller disclosure” as warmly. The B.C. Real Estate Association was the first to make a property condition disclosure statement mandatory for all MLS listings in 1993. More than three years later, only a handful of boards in Ontario have done the same. While OREA’s vendor property information statement is voluntarily used by some boards and realtors, its acceptance is far from widespread.

Seller disclosure is not meant to replace a home inspection. The OREA form states. “Purchasers still must make their own enquiries.” Rightly so, since purchasers are to assume patent defects with a resale home, unless clauses to the contrary appear in an offer.

While buyers directly benefit from seller disclosure, realtors have been spearheading the reform movement in the U.S. Why? Self-interest. Seller disclosure helps insulate agents from potential liability to purchasers, by shifting the blame for undisclosed defects from realtor to vendor.

Later this year the real estate industry will be given the power to “self-manage.” One of its first moves should be the mandatory use of seller disclosure, at least in residential real estate transactions. The public demands it.