When purchasing a home in Ontario, clients will often ask about broken windows, or a hole in the ceiling or any other perceived defect that was observed during the purchaser’s final inspection shortly before closing. Most purchasers have this misconception that they can refuse to complete the closing until the broken window or broken appliance is repaired and this is simply false.
It’s crucial to understand the different types of defects that may be present in the property. These defects can significantly impact your investment and your future living conditions. As an experienced real estate lawyer, I often encounter two primary types of defects in residential transactions: latent defects and patent defects. Knowing the difference between these two can help you make informed decisions and better understand your rights and obligations.
What Are Patent Defects?
Patent defects are visible flaws or damages that can be easily identified during a standard property inspection. These defects are typically obvious to the naked eye and do not require specialized knowledge or equipment to detect.
Examples of Patent Defects:
- Cracks in walls or ceilings
- Broken windows or doors
- Visible water damage or mold
- Missing roof shingles
- Damaged flooring or tiles
Buyer’s Responsibility: It is the buyer’s responsibility to identify and address patent defects before finalizing the purchase. During a home inspection, these defects should be noted, and the buyer can negotiate with the seller for repairs, price adjustments, or other remedies prior to signing the agreement of purchase and sale or prior to waiving the inspection condition in the agreement of purchase and sale.
What Are Latent Defects?
Latent defects are hidden flaws or damages that are not immediately apparent and may not be discovered during a standard property inspection. These defects often require more in-depth investigation or expertise to uncover and can be significantly more challenging to detect.
Examples of Latent Defects:
- Structural issues with the foundation
- Hidden plumbing or electrical problems
- Defects in the building materials that could lead to future damage
- Concealed mold or pest infestations
- Faulty insulation or hidden asbestos
Seller’s Responsibility: Sellers are generally obligated to disclose any known latent defects that could make the home dangerous or unfit for habitation. Failure to disclose such defects can result in legal liability for the seller. However, if the seller is unaware of the latent defect, they may not be held liable unless it can be proven that they intentionally concealed the defect.
Legal Implications in Ontario
In Ontario, the legal implications of patent and latent defects can significantly impact both buyers and sellers. Here are some key points to consider:
1. Caveat Emptor (Buyer Beware)
Application: Ontario real estate transactions are generally governed by the principle of caveat emptor, meaning the buyer assumes the risk for any defects in the property, except in cases of fraudulent misrepresentation by the seller.
Patent Defects: Buyers are expected to conduct due diligence, including hiring a professional home inspector, to identify any patent or latent defects. Sellers are not legally required to disclose patent defects unless explicitly asked.
Latent Defects: Sellers must disclose known latent defects that pose a significant risk to health or safety. Failure to do so can lead to legal action for misrepresentation or breach of contract.
2. Home Inspections
Importance: A thorough home inspection is crucial for identifying patent defects and assessing the overall condition of the property. While home inspectors may not always detect latent defects, their expertise can help identify potential red flags that warrant further investigation.
Recommendations: Buyers should accompany the inspector during the inspection and ask questions about any concerns. Requesting additional specialized inspections (e.g., structural, electrical, or plumbing) can help uncover latent defects.
3. Seller Disclosure
Obligations: Sellers are required to provide honest answers to any direct questions about the condition of the property. Completing a Seller Property Information Statement (SPIS) can help clarify the property’s condition, although it is not mandatory.
Best Practices: Even if not legally required, it is in the seller’s best interest to disclose any known defects to avoid potential legal disputes. Full transparency can also build trust and facilitate a smoother transaction.
4. Legal Recourse
For Buyers: If a buyer discovers a latent defect after purchasing the property that was not disclosed by the seller, they may have legal recourse. This could include seeking compensation for repairs or, in severe cases, rescinding the purchase agreement as long as the buyer can prove that the Seller was aware of the latent defect.
For Sellers: To protect themselves, sellers should disclose any known defects and consider obtaining a pre-listing inspection to identify and address potential issues before putting the property on the market.
Conclusion
Understanding the difference between latent and patent defects is essential for anyone involved in a residential real estate transaction in Ontario. As a buyer, conducting thorough due diligence and investing in professional inspections can help you identify and address potential issues before finalizing your purchase. As a seller, disclosing any known defects can protect you from legal liability and facilitate a transparent and smooth transaction.
If you have questions or need assistance with a real estate transaction, consulting with an experienced real estate lawyer can provide valuable guidance and ensure your interests are protected throughout the process.
The lawyers at Vakili Law Group have been advising individuals, development companies, real estate investment corporations, private lenders and small businesses for more than a decade and will be happy to assist you with your matter as well. For more information feel free to schedule a free 15-minute consultation with one of our lawyers by clicking on the following calendar link: https://calendly.com/vlglaw/book-a-call-meeting
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