Aug 15, 2023
When it comes to real estate transactions, the terms “patent” and “latent” defects might sound complex, but they hold vital significance in your buying or selling journey. Understanding the difference between these two types of defects can save you from potential pitfalls and ensure a smoother transaction. In this article, we’ll explore what patent and latent defects are, how they impact real estate transactions, and why it’s crucial to be well-informed as both a buyer and a seller.
A patent defect is essentially a visible defect that is apparent upon observation. These could be glaring issues like cracks in walls, broken windows, or holes in the structure. On the other hand, a latent defect is not immediately noticeable and requires further investigation to uncover. These could include hidden problems like a leaky foundation, roof issues, or electrical malfunctions.
Contrary to popular belief, sellers are not obligated to disclose patent defects in the Agreement of Purchase and Sale (APS). The underlying principle is that if a defect is visible, the buyer should notice it during their inspection. However, intentionally hiding patent defects could lead to legal consequences for the seller. The situation is more complex with latent defects, as sellers are required to inform buyers about them if they render the property unsafe or uninhabitable. For instance, potential fire hazards due to electrical issues must be disclosed.
If a seller fails to disclose a latent defect that they were aware of, the buyer could take legal action to claim damages resulting from this nondisclosure. Similarly, misrepresenting the property’s condition or obstructing an inspection could also land the seller in legal trouble. However, if a buyer discovers a defect before the transaction’s completion and chooses to proceed with the deal, their legal recourse might be limited.
In today’s competitive real estate market, buyers often make offers without physically viewing the property. This practice heightens the importance of conducting thorough due diligence. The Latin phrase “caveat emptor,” meaning “buyer beware,” holds true. To safeguard your interests, consider these steps:
1. Online Research: Utilize tools like Google to search the property address for news articles, images, and satellite imagery that might reveal any hidden issues.
2. MLS Listing Analysis: Review previous MLS listings to gain insights into what information was disclosed in the past.
3. Online Forums: Websites like housecreep.com offer information about the property’s historical and potentially negative events.
4. Community Interaction: Engage with neighbors to gather firsthand insights about the property and the neighborhood’s character.
5. Thorough Exploration: Visit the neighborhood at various times of day to assess noise levels, traffic patterns, and overall ambiance.
Buyers who suspect latent defects can protect themselves by including a carefully worded representation in the APS. This clause could state that the seller confirms the absence of the suspected defect, and if found incorrect, the buyer has the option to terminate the agreement and receive a full deposit refund.
Whether you’re a buyer or a seller, understanding the difference between patent and latent defects is essential for a successful real estate transaction. Sellers must be transparent about latent defects that could affect the property’s habitability, while buyers should conduct thorough research and due diligence to make informed decisions. By following these guidelines, you can navigate the real estate market with confidence and make the best choices for your investment. Remember, knowledge is the key to a smooth and secure transaction in the dynamic world of real estate.
Hi! I’m Erin Crocker. I’m a real estate lawyer with over 10 years of experience in Alberta and British Columbia real estate law. I love technology and efficiency. I’m on a mission to create a modern, digital closing experience for buyers and sellers through technology, transparency and sharing knowledge.
