Patent vs. Latent Defects and Caveat Emptor

With multiple offers being common place in the real estate market, many buyers are being forced to submit firm offers on properties that they barely have seen and not had the opportunity to inspect. Some sellers are taking advantage of this opportunity and are offloading themselves of properties that have had defects and deficiencies.  Thus, it is important that buyers understand the maxim, “buyer beware” (or caveat emptor), applies when purchasing real estate.

I am often contacted by purchasers, after the fact, about a defect that only came to be discovered after closing. In such instances, it is important to understand what the law states about defects. Defects are regarded as being of two kinds, latent or patent.

Patent defects are those that can be discovered by a reasonable inspection and ordinary vigilance on the part of the purchaser. With respect to these kinds of defects, the ordinary rule is caveat emptor.

A vendor has no obligation to disclose a patent defect because a purchaser should have discovered the defect or deficiency, regardless of whether or not the purchaser had an inspection completed. However, if the vendor attempted to hide or conceal a patent defect then such action may be considered fraudulent and the purchaser may have a claim against the vendor, which they could pursue in the courts.

Latent defects are those which could not be discovered by a reasonable thorough inspection before completing the purchase. A vendor has a duty to disclose latent defects and if they fail to disclose such hidden defects they may be construed as misrepresenting the state of the property and such action may give rise to the purchaser having a claim against the vendor.

It is important to note that if a seller takes steps to make an inspection impossible, not including multiple offers, or misrepresents the condition of the property, if asked, the buyer will have a claim against the vendor which could be pursed in the courts.

However, if the buyer became aware of a latent or patent defect before closing and decided to complete the purchase, regardless, they will have lost their ability to pursue their claims in the courts.

CMHC Study – Examining Escalating House Prices in Large Canadian Metropolitan Centres.

CMHC, Canada Mortgage and Housing Corporation, just released a new study analyzing rising home prices in Canada, titled Examining Escalating House Prices in Large Canadian Metropolitan Centres.

CMHC posted about this report, stating “The report represents one of the most thorough examination of house price patterns ever completed in Canada and is the result of advanced, data-driven analyses and engagement with stakeholders and government partners.”

To review the document yourself, download it below:

Examining Escalating House Prices in Large Canadian Metropolitan Centres