Home Buyers Protection from Latent Defects
Ontario Law protects Home Buyers from Defects that were not readily apparent to the Home Buyer or Home Inspector. ( Note a Home Inspection is not a legal requirement to be protected against Latent Defects )
The Differences Between Latent and Patent Defects
Material Latent Defect
A material latent defect is defined in the Real Estate Services Act, which governs the conduct of real estate professionals, including rental property managers. These defects cannot be discovered upon reasonable inspection of the property and render the property potentially dangerous to occupants and/or can involve great cost to repair. It is important to consult with your real estate professional to determine what type of defects might be present in the home — and if a legal disclosure is required. An example of a latent defect would be an inadequacy in the foundation which causes subsidence of the building structure itself.
Certain examples (non-exhaustive list) where the courts have recognized latent defects are as follows:
- Issues regarding the foundation
- Absence of vapour barrier in a wall
- Installation of an agricultural drain malfunctioning or inefficient
- Construction of an immovable under a ground water
- Presence of carpenter ants or bats
- Problems with the conception of a roof
- Absence or insufficient insulation
- Contamination or pollution of the immovable
- Condition of the soil
The judge presiding on your case will most likely determine whether a defect is patent of latent based on the balance of probabilities.
The Balance of Probabilities is generally accepted as the standard of proof in civil cases, demanding that the case that is the more probable should succeed. This is the kind of decision represented by the scales of justice. The court weighs up the evidence and decides which version is most probably true. Thus, the actual truth may never be known. All that is done in the Anglo-American system is to choose which of the combatants has presented the most probable version. If both seem equally balanced, then the person pursuing the case loses on the basis of the maxim melior est conditio defendentis, ‘better is the position of the defender’
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 patent defect could be a large, visible crack in a foundation wall, a broken staircase, or missing bathroom fixtures, to give a few examples. Patent defects are visually obvious, so you aren’t required to disclose them to potential buyers. It is their responsibility to inspect the property.
Caveat Emptor: Buyer Beware
Caveat Emptor is a Latin maxim which is defined by Merriam-Webster’s dictionary as follows: “the principle that a person who buys something is responsible for making sure that it is in good condition, works properly, etc.” You may wonder what this has to do with real estate transactions. When dealing in real estate, it is not only the purchaser in a real estate transaction that has to be aware of this maxim but also the seller. The reasoning behind this is the realtors, as well as the sellers, have to be fair and honest when disclosing problems which may not be evident to the purchaser or home inspector.
Legal Precedents for Latent Defects in Ontario Courts
There are two Ontario Court Decisions which are binding on both Small Claims Court and Superior Court in Ontario.
“In our view, “concealment” in this context connotes an act done with an intention to hide from view some defect of which the vendor is either aware or wilfully blind.” and “Silence about a known major latent defect is the equivalent of an intention to deceive.”
This comments from cited cases which are both accepted as law today.
Going to Court
A lawsuit must be instituted within 3 years of the discovery of the latent defect.
Based on consumer protection interests the courts tend to carve out exceptions to this general principle of buyer beware. By example, although a seller has no obligation to disclose a patent (visible) defect, the seller also cannot attempt to hide or conceal such a defect, this is referred to in law as fraudulent concealment.
Most of the exceptions to the general principle of buyer beware relate to latent defects or hidden damage and include:
- Fraudulent misrepresentation;
- Knowledge of a latent defect which renders the home uninhabitable;
- Recklessness as to the truth or falsity of statements relating to fitness of the property for habitation; or
- Breach of a duty to disclose knowledge of a defect.
Proving the seller knew of the latent defect or was willfully blind can be a tough task in today’s world. In most cases you will need expert evidence to support this assertion.
An important thing to keep in mind is that civil proceedings are decided on the balance of probabilities. This makes the onus of showing the seller knew or ought to have known of the alleged latent defect(s) less difficult than it appears at first glance.
Before hiring a lawyer to proceed with a Latent Defect Lawsuit it is recommended that you consult with more than one lawyer and choose a lawyer who has lots of experience in this area of law.
A Realtors Responsibilty to You
- Realtors must take due care information they give you is accurate and not misrepresented. They will protect your personal information and not disclose or sell it to third parties, including marketers, without your permission.
- Realtors are only required to disclose information they already or ought to know about a property to customers. Because you may not get all the material facts on a property, a home inspection is recommended. Clients are owed a higher duty of care. That includes taking reasonable steps to research, investigate or consult before giving you information or advice you rely on to buy or sell property.
- Your realtor must disclose all offers they receive for your home, unless you have a customer service agreement. If you are the buyer, they will disclose if a seller has pending offers or you are part of a bidding war. They must present your offer as written and may make suggestions about how to make your offer more attractive.
- Sellers and buyers are not obligated to accept realtors’ advice, but as long as you have a signed client representation agreement, you cannot ask another realtor to represent you or negotiate a sale directly. If a bidding war occurs, your realtor can’t coerce or unduly influence you to offer more than you want. Your realtor may owe you damages if they breach their contract with you.
Real Estate and Business Brokers Act, 2002 Ontario Regulation 580/05 Code of Ethics
Section 21 – Material Facts
(1) A broker or salesperson who has a client in respect of the acquisition or disposition of a particular interest in real estate shall take reasonable steps to determine the material facts relating to the acquisition or disposition and, at the earliest practicable opportunity, shall disclose the material facts to the client.
(2) A broker or salesperson who has a customer in respect of the acquisition or disposition of a particular interest in real estate shall, at the earliest practicable opportunity, disclose to the customer the material facts relating to the acquisition or disposition that are known by or ought to be known by the broker or salesperson.