Patent and Latent Defects

For anyone buying or selling a home, it is important to know about the obligations of a vendor. One issue that is particularly rich in case law is whether or not a vendor has a duty to disclose particular defects with property. The courts have established that the duty to disclose or not depends on how a defect is characterized: whether it is patent or latent.

Patent defects are those that are discoverable by inspection and ordinary vigilance on the part of a purchaser, such as visible cracks or water damage, whereas latent defects are those that would not be revealed by such inquiry, such as those which are structural in nature.

The general principle is caveat emptor, or “buyer beware.” This puts an important onus on the purchaser to arrange a home inspection and to ask plenty of questions about the property before entering into an agreement of purchase and sale. Outside of fraud or misrepresentation by the vendor, a purchaser will be required to complete a sale despite the presence of any patent defects. However, the principle of “buyer beware” is subject to an exception: a vendor is under a duty to disclose to the purchaser any known latent defects that will render the premises unfit for habitation or dangerous.

The distinction seems clear enough in theory, but the line can often be blurred in practice. On March 2, 2011, Madam Justice Hoy heard a motion to dismiss a lawsuit on the basis that the plaintiffs had no cause of action.

The plaintiffs had purchased a house from the defendant and brought a legal action when they discovered that a person convicted of child pornography lived across the street. The plaintiffs based their claim on the fact that this was a latent defect that the vendor had an obligation to disclose. The defendant argued that the conviction was public knowledge that could have been obtained by the plaintiffs through reasonable inquiry and, therefore, was not latent. Ultimately, the court dismissed the motion on the basis that it was not plain and obvious that the plaintiff’s action was certain to fail, suggesting that there is a possibility the plaintiffs will succeed at trial.

The case raises interesting questions about the scope of what constitutes a latent defect. Against the principle of “buyer beware,” should a seller be obligated to disclose everything he or she knows about neighbours that could be perceived as negative? Might disclosure lead to a libel or slander action against a seller who discloses to a buyer his or her understanding of a neighbour’s criminal convictions?

Where does one draw the line, particularly in light of the objective of re-integrating criminals into law-abiding society?