The status of your home when you buy it is extremely important!

Defects are an unpleasant aspect of real estate, but with almost all common types of real estate contract including clauses to deal with them, dealing with one shouldn’t be too difficult, right?

Managing  real estate contractual provisions in the condition of the buyer is most effective when both parties acknowledge that a defect has occurred, and one party has acknowledged liability or possession. However, responsibility can be difficult to delegate exclusively to one party, as is often the case, which can lead to litigation.

Assessment of the property’s status and early detection is often preferable during the construction of a property since all resources are available and present, and errors can be detected more easily. When a defect is found outside of the real estate defect’s liability era, however, corrective action becomes more difficult.

If you’re not a professional real estate arbitrator, don’t worry as we’ve prepared a guide to material latent defects and hidden damage and how you can best combat these issues!

What is a latent defect in real estate?

Essentially material latent defects refer to defects that are not visible.

It’s the nature of real estate that flaws, and defects caused by design, workmanship, or material deficiencies are sometimes not visible or readily observable until several years after the construction is completed, long after the defects liability period has expired. Latent defects are the name for such flaws (as opposed to patent defects which are apparent).

Types of Latent Defects

In  real estate, material latent defects are more difficult to remedy because they are not discovered during construction or during the defect liability era, so the building owner is unlikely to have a contractual right requiring the contractor to correct them.

The following are some examples of common latent defects in  real estate. It’s useful to know these if litigation is required:

• Water seeps into the basement due to faulty tanking.
• Inadequate wind-posts or wall links are causing wall movement.
• Movement damage to the foundation due to under-strength concrete or misplaced reinforcement.
• Poor foundations causing building subsidence.

Patent Defects vs. Latent Defects: What’s the difference? 

A patent defect is one that is discovered during construction or during the  real estate defect liability period, while a material latent defect is one that is hidden and may not be discovered for several years, such as a building cracking due to poor foundation design.

To clarify the distinction between the two groups, consider the following:

• Latent defects are characterized as existing but not yet formed or manifest; secret or concealed, and therefore construction projects that cannot be discovered by a reasonable inspection are considered latent.
• Patent defects are described as something that is “easily recognisable; obvious” and can be identified with a fair amount of effort.

Because of the routine home status inspections that take place during building, the status of patent defects are more commonly dealt with. Although the real estate contractor is generally responsible for identifying the status of defects and correcting them as it progresses, the client is contractually obliged to inform the contractor of any defects in the status of your home, and the  real estate contractor must correct them within a reasonable period once informed.

If the client suspects a fault has occurred in the status of your home, but it is not visible, the  real estate contractor may be instructed to open the works and look for it. If a fault is proven, the  real estate contractor’s duty to repair it may take effect. If no fault is discovered, the client must reimburse the contractor, typically by issuing a variation to cover the opening and make good costs. If difficulties occur, then litigation is a step that could be taken.

If, on the other hand, a defect is obvious and the  real estate contractor does not take the opportunity to correct it, you as a client will consider this a breach of contract and can pursue litigation by hiring someone to correct the job, with the  real estate contractor responsible for the client’s costs.

As a customer, keep in mind that litigation is important if you want to effectively recover all your expenses. If the contractor is able to show that you did not give them a chance to fix the defect or that you did not inform them of the possible costs of bringing in a third party, they could claim that they are only responsible for the costs they would have incurred if they had completed the work themselves.

Don’t feel bullied or pressured by  real estate contractors over defects, if you feel out of your depth, just contact a latent defects lawyer, and pursue litigation and avoid due diligence.

What is a legal warranty?

This is useful to understand in the event of litigation. A seller of movable or immovable property must warrant that the property is free of all defects in title and latent defects, except those that are disclosed prior to the sale. It’s what is commonly referred to as “legal warranty,” which consists of two parts: a guarantee of ownership and an insurance of quality.

These warranties are implied by law and don’t need to be stated in the contract. The home buyer is assured by the guarantee of ownership that:

• Except for those declared by the seller, the status of your home is free of all rights.
• Except for those believed by the buyer, the seller has discharged the property of all hypothecs.
• There is no encroachment on the property by either the seller or a third party; and
• Except for those declared by the seller or those that the buyer may have found, the property does not breach any public law restrictions and does not require litigation.

The warranty of quality

The seller guarantees the buyer that the status of the property is free of defects that would make it unfit for the purpose for which it is intended or would reduce its usefulness to the point where the buyer would not have purchased it or charged such a high price if he had known about them at the time of the sale. 

However, the seller is not obligated to include a warranty against defects that the buyer is aware of or that a cautious and attentive buyer may detect. This is why it’s important for a customer to have a potential purchase inspected by a professional. 

The warranty is not diminished by the fact that the seller is unaware of the defect or that the defect does not show until after the sale. If the seller were aware of the flaw, his responsibility would be increased to include all other damages suffered by the buyer in addition to the decrease in value of the immovable.

What is the role of a professional seller in the context of latent defects?

A licenced, or professional arbitrator (such as a  real estate broker or a self-builder) is required to take fair steps to ensure that the status of the property they sell is free of hidden flaws. It’s worth noting that when a buyer discovers a latent flaw, the competent seller is legally believed to have known about it at the time of the  real estate transaction.

If you’ve disclosed the defect to the seller, a latent defect litigation lawyer will advise you on how to proceed.

What are the buyer’s remedies?

Through litigation, the buyer has the option of requesting a reduction in the property’s purchase price equal to the costs of repairing the damage. The buyer and seller may both agree to get the work done at the buyer’s expense. Finally, the customer has the right to ask for the sale to be cancelled if:

• The cost of corrective work is more than half the cost of purchasing the land.
• When there is no fair way to fix the problem.
• When acquiring the sale is impossible under the terms of the contract.

The seller must refund the purchase price in this situation, and the buyer must return the property to the seller. If an agreement cannot be reached, litigation can be pursued, and the buyer has three years from the date of disclosure of the latent defect to file a complaint against the seller.

Tips to avoid latent defects when buying a property 

Without expertise in  construction, architecture, or engineering, latent defects are normally impossible to detect. Consider asbestos-containing ceiling tiles, carbon monoxide overflowing into the atmosphere, or rusted basement pipes on the verge of bursting.

These are not the types of critical issues that you would be able to see in the status of the home. How do you spot secret flaws, and what do they mean for your sale?

Home Sellers’ Requirements to Disclose

This is the most important aspect when pursuing litigation, as the status of the home and the status described by the seller must parallel.

Many laws require sellers to report material flaws in the status of the property prior to closing. A few people believe in the principle which states that investors are largely responsible for finding issues with a property before purchasing it.

However, the majority of laws take a more controlled approach, requiring sellers to provide buyers with a formal written report detailing the status of the home and all reported material defects and previous repairs made on the premises.

Sellers are usually forbidden by law from lying to customers about the status of a house. In other words, if the seller fails their obligation to disclose that the septic tank and plumbing have not been inspected in a decade, this may be considered fraud. In such a case, consumers will be able to pursue litigation against their seller if they later discover the deception.

If you’re unsure about this, then contact an arbitrator to help investigate the property because once the latent period is over, the seller cannot be held accountable.

Contact a specialized inspector 

The majority of sellers aren’t trying to deceive you (even if they do want to make their property look as nice as possible). The majority of the time, sellers are totally unaware of any secret flaws in the status of the house.

In other words, they may be unaware of any of these issues, particularly if they do not use those areas of the house (for example, a leak in the pool or mould in the garage).

It’s customary for buyers to conduct a thorough real estate inspection of the status of the home during the escrow period. An arbitrator, such as a home inspector, (usually a construction, architectural, or engineering professional) may inspect the property as an arbitrator and issue a written report to the buyer. For issues like mould, a seemingly unstable large tree near the building, or an odd structure such as a boat dock, the inspector may recommend bringing in a specialised arbitrator.

If you discover flaws in the status of the home that you were previously unaware of, you might be able to back out of the purchase (which is permitted under the language of most purchase contracts). It may also be an opportunity to hammer out a deal with the seller, in which the seller offers to do or pay for any of the remediation work before the property is transferred to you.

Hire a real estate broker

Hiring real estate brokers to negotiate and close a deal on a property is much easier for real estate buyers and less of a headache for the buyer and seller. This way, the arbitrator will negotiate a discount in a straightforward and objective manner to get a better deal on your investment property.

If you live in Montreal, Équipe Tardif is a highly regarded real estate broker company which can relieve the stress of real estate. During the buying or selling process, Équipe Tardif strives to keep unpleasant surprises to a minimum through a strategy that maximizes the time of all parties involved. This helps Équipe Tardif concentrate on the important things, such as negotiating a reasonable price or finding the property that satisfies a client’s particular requirements.

If you’re selling your property, Équipe Tardif provides a property evaluation service which incorporates the scale of land, as well as the property’s general state and location. On the other hand, if you’re a buyer, Équipe Tardif has a vast list of properties you can view in the Montreal area ranging from apartments and bungalows to two or more storey homes and vacant lots.

Contact us if you’re interested in hiring a real estate agent and realtor who can provide you with high quality guidance, take care of identifying patent defects, and can recommend an inspector to ensure you avoid any difficult circumstances.