Stepping into the world of real estate, whether as a buyer, seller, or investor, is an exciting journey filled with anticipation and potential. Amidst the thrill of envisioning new beginnings, it’s crucial to keep a discerning eye on the intricacies that lie beneath the surface. In the realm of property transactions, two terms hold significant sway: ‘latent defects’ and ‘patent defects.’ These concepts might sound like mere legal jargon, but they wield the power to shape the course of a real estate deal. In this blog post, we embark on a journey to unravel the distinction between these two types of defects, exploring their implications, responsibilities, and the hidden pitfalls they bring to light- including MURDER and GHOSTS! Whether you’re a seasoned investor or a first-time homebuyer, understanding latent and patent defects is an essential compass to navigate the often complex landscape of real estate transactions.
Patent versus Latent Defects
A patent defect and a latent defect are terms often used in the context of real estate and construction, as well as in legal and contractual discussions. Here is a summary of the differences between the two:
- Patent Defect:
- A patent defect is a noticeable flaw, fault, or issue in a property or product that is easily visible and can be observed upon reasonable inspection.
- It is an apparent defect that is readily observable by a person using their senses without any specialized equipment.
- In the context of real estate, a patent defect is one that a diligent buyer or tenant could reasonably discover during a routine inspection.
- Latent Defect:
- A latent defect is a hidden flaw, fault, or issue in a property or product that is not readily noticeable during ordinary inspection.
- It refers to defects that are not immediately apparent and may require specialized expertise or equipment to detect.
- In the context of real estate, a latent defect is one that is not easily discoverable through reasonable inspection and may only become apparent after a period of time or specific conditions.
- The responsibility to address latent defects might depend on the jurisdiction, but generally, sellers or contractors may be held accountable if they were aware of the defect and failed to disclose it.
The key difference between a patent defect and a latent defect lies in their visibility and detectability. Patent defects are obvious and can be discovered through normal inspection, while latent defects are hidden and might not be apparent until after closer scrutiny or under certain circumstances.
In Alberta, the concept of “buyer beware” remains the general rule. In practice, this means that the seller does not need to disclose patent defects to the buyer. Buyers must conduct their own due diligence with respect to the property, which is why a proper home inspection is highly recommended when purchasing a home.
However, it is important to recognize that “buyer beware” does not permit a seller to mislead a prospective buyer and it does not apply to latent defects. A seller has a positive duty to disclose known latent defects. Failure to disclose latent defects may result in liability due to misrepresentation or fraud. Some legal cases in Canada indicate that the requirement of disclosure is limited to latent defects which make the home dangerous or unfit for habitation. Other cases state that all latent defects must be disclosed. This can create confusion, therefore, if you are unsure about whether something may qualify as a latent defect, please reach out to your legal counsel to discuss further.
Are Past Murders or the Presence of Ghosts Considered Latent Defects?
The determination of what qualifies as a “latent defect” is a source of much litigation throughout Canada. Most often litigation related to latent defects relates to construction or structural defects in a home. Interestingly, our Canadian appellate courts have also been tasked with determining whether the occurrence of a murder at the house or the existence of ghosts on the property are considered latent defects which must be disclosed to the purchaser (See Wang v. Shao, 2019 BCCA 130 and 1784773 Ontario Inc. v. K-W Labour Association Inc., 2014 ONCA 288).
With respect to murder, the current law is that murders do not need to be disclosed to purchasers. In the case of Wang v. Shao, the British Columbia Court of Appeal determined that the murder of a past resident on the sidewalk in front of the home was not a defect or imperfection in respect of the property itself, or any measurable condition of the quality of the property. Alternatively, if a murder was to be considered a defect, it would be a patent defect because prospective purchasers can inform themselves of this type of past history through the internet.
Whether the existence of ghosts is a latent defect remains to be determined. In the case of 1784773 Ontario Inc. v. K-W Labour Association Inc noted above, the Court found that there was no evidence proving the existence of a ghost on the property. This could potentially mean that if the facts were different and sufficient evidence could be provided, the Court may determine that the presence of ghosts to be a latent defect.
There are a couple caveats to the previous paragraphs to be aware of. First, a seller is not entitled to mislead buyers about a home’s past history. Therefore, if a buyer specifically asks a seller if a death has occurred on the property or if there are any known “hauntings”, the seller must be truthful when answering any queries directly on point. Second, the law may evolve in this area. In the United States, several states have implemented legislation requiring that sellers disclose whether there have been any murders or suicides at the property. This is not the current law in Alberta, however, the law may change in the future.
Although a history of murder or hauntings at a home is an uncommon scenario, as you embark on any real estate endeavors, remember that knowledge is your strongest ally. Armed with an understanding of latent and patent defects, you are better equipped to make informed decisions that safeguard your interests and investments. To ensure a seamless real estate transaction and to address any lingering questions, we welcome you to contact one of our qualified real estate lawyers at Stillman LLP.
By Erin Vanderveen
Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.