Ever heard of the term “latent defect” and unsure what it means? This article breaks down what latent defects are and how they will affect you should they be present in your home during a real estate transaction.
Caveat Emptor Principle
This is the Latin term for “buyer beware”. Most real estate transactions operate under this principle of “buyer beware,” meaning buyers are responsible for inspecting the property and accepting its condition. That includes hiring a home inspector and possibly trade experts to uncover potential issues.
However, this rule is not absolute. Even with proper due diligence, some problems remain hidden, and that is where latent defects come in.
What Counts as a Latent Defect?
A latent defect is a problem that meets two conditions:
1. It is hidden and not something a reasonable inspection would uncover.
2. The seller knew about it and chose not to disclose it.
Examples include chronic roof leaks not properly repaired, foundation leaks or faulty or outdated electrical wiring concealed behind finished walls. These would not be noticeable upon inspection unless the drywall was removed. In contrast, visible issues such as black mold on the rooftop, or crooked light fixtures are not considered to be latent defects and the purchaser is responsible for identifying these issues.
Therefore, you can now understand that latent defects cannot be found through normal inspection, and as such, sellers have a duty to disclose them. If they fail to do so, they may be held liable.
If You Are the Purchaser: What to Do When a Hidden Problem Appears
Discovering a latent defect after closing is stressful, but there are steps you can take:
• Document everything: photos, inspection findings, and communication with the seller.
• Gather proof the seller knew: repair records, emails, or information from neighbors.
• Get legal advice to understand your options, which may include compensation or, rarely, reversing the sale.
• Explore mediation as a faster and less costly alternative to litigation.
Do not jump at the thought of litigating against the seller. You must understand that the onus to prove that the seller was aware of the latent defects is on the purchaser. Pursuing litigation may seem reasonable, however, it can become very expensive, very fast, and it may be more cost-effective to just repair the issues instead.
If You Are the Seller: Disclosure and Protection
For sellers, transparency is often the best defense. Disclosing known hidden issues, even if they may concern buyers, helps prevent disputes and expensive legal claims down the road. You can always have transparent discussions with the realtors or lawyers to ensure that you are doing your part and have not concealed any issues that may come to the forefront later on.
Even for issues a buyer might reasonably discover, upfront disclosure can reduce the risk of accusations later, especially when the issue could pose a safety concern. Laws in this area can evolve, and leaning toward disclosure provides added protection.
Final Thoughts
Overall, purchasers should arrange a thorough inspection, ask clear and direct questions, and, when uncertain, have their realtor or legal counsel follow up on specific concerns. Sellers, on the other hand, should prepare a detailed list of any known issues and disclose problems that are not visible to the naked eye.
Latent defects can complicate a real estate transaction, but understanding them helps avoid unnecessary disputes. Although “buyer beware” still guides most deals, hidden issues require extra diligence from both sides. With open communication, proper documentation, and the right professional support, buyers and sellers can move forward with greater confidence and fewer surprises.
And as the title suggests, if you are a seller, disclose, because if you choose not to, then be prepared to defend yourself when the buyer seeks compensation for your failure to do so.
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.
