Did you recently move into a house and come across defects in the quality of the property that you weren’t aware of before the closing date?

Note: a defect is generally understood to mean something that constitutes a failing, shortcoming, fault, or imperfection.

Unfortunately, this is a common occurrence. If you find yourself in this position, you might be questioning whether the seller had a disclosure obligation and if you have grounds to take legal action. The extent of the seller’s obligations to disclose defects depends largely on the nature of the defect and the circumstances surrounding the property sale.

Your legal recourse will generally depend on whether the defect is ‘patent’ or ‘latent’.

Patent Defects:

A patent defect is a defect that is discoverable by conducting a reasonable inspection and making reasonable inquiries about the property.

Examples include:

• • Visible cracks

• • Wall holes

• • Broken windows

• • A door that doesn’t close

• • Stains on walls or carpets

• • Scratched kitchen countertop

• • Dented tiles

For patent defects, the principle of caveat emptor applies and does not give rise to a claim even if a patent defect was not discovered on inspection.  

Caveat Emptor or Buyer Beware: At law, the longstanding rule regarding residential agreements of purchase and sale is caveat emptor or “buyer beware”. In other words, the buyer takes the existing property as he or she finds it. This legal doctrine puts the responsibility on the buyer, before making the purchase, to ensure the property is fit for habitation by examining, judging, and testing the property to identify any potential problems.

Because the buyer’s responsibility to inspect and discover patent defects is so high, it is advisable for buyers to retain the appropriate experts to inspect the property.

A seller does not have an obligation to disclose a patent defect that is visible or discoverable through a reasonable inspection. However, a seller cannot make misrepresentations about a patent defect (i.e., actively conceal or cover up a patent defect). In the event of such a misrepresentation, the rule of caveat emptor no longer applies, and the buyer may be entitled to rescind the agreement of purchase and sale or seek compensation for damages.

Latent Defects:

In contrast, a latent defect, is not easily discoverable through reasonable inspection methods and may include serious structural problems.

Examples include:

• • Foundation issues

• • Leaks / Seepage

• • Ice damming

• • Mold / Mould

• • Prior use issues

• • Non-compliance with building codes

• • Underground storage tanks

• • Gas leak

Unlike the patent defects, latent defects are an exception to caveat emptor (buyer takes the property as he or she finds it). If the seller is aware of a latent defect but the buyer has no reasonable means of discovering it, the seller may be held liable. If the latent defect was not known to the seller, the seller cannot be held liable for the defect. However, if it can be proven that the seller knew of the defect and either deliberately failed to disclose it, made negligent misrepresentations, or concealed the latent defect, the seller may be held liable.[1]  

Note, if the buyer becomes aware of a latent or patent defect before the closing date and decides to complete the purchase, they will lose their ability to pursue their claim.

Proving negligent misrepresentation:

To establish a case of negligent misrepresentation, the buyer needs to demonstrate five key elements:

1. 1. Existence of a duty of care arising from a “special relationship” between the seller and buyer;
   2. A representation made by the seller that is untrue, inaccurate or misleading;
   3. That the seller acted negligently in making the representation;
   4. Reasonable reliance by the buyer on the negligent misrepresentation; and
   5. That reliance was placed by the buyer on the representation and that damages resulted.[2]

Proving concealment:

The courts define concealing a latent defect as an intentional act of hiding the defect from view, which the seller is either aware of or willfully blind;[3] and further silence about a known major latent defect is the equivalent of an intention to deceive.[4]

Conclusion

As a buyer, you are responsible for identifying patent defects before the purchase, and the seller may only be held accountable if they purposefully obscured such issues. For latent defects, however, the seller can be held liable if they were aware of the problem and did not disclose it. Remember caveat emptor places the burden of discovery on the buyer except in cases of fraud, negligent misrepresentation, or deliberate concealment by the seller.

Contact Us

If you have questions about a defect in your property or need legal guidance regarding your rights, we encourage you to contact leigh.law. We can provide the assistance and advice you need to navigate your situation effectively. Understanding these distinctions can help clarify your rights and options in addressing defects encountered after a real estate transaction.

[1]  Cotton v. Monahan, 2011 ONCA 697, para 3.

[2] Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at 643.

[3] Cotton v. Monahan, 2011 ONCA 697, para 6.

[4] Jung v Ip, [1988] OJ No 1038, para 18.