When you buy a house, you must be aware of any defects in a house. And when you sell a house, you have to disclose defects in your house. It is important for both parties (buyers and sellers) to know the difference between material latent and patent defects. What is the difference and when do defects have to be disclosed?
The difference between material latent defects and patent defects
Material latent defects are those that can turn a property into a dangerous or a potentially dangerous situation. It could be of the size that the property is unfit for habitation. Most often, those material latent defects are expensive to fix, if they can be fixed at all. A few examples are mold or previous flooding in the house that could have affected the structure. Or the home could have been a grow op in the past. Even when this grow op has been remediated, a seller must still disclose. Material latent defects could also be a lack of appropriate building permits.
These material latent defects are hidden and would not, or could not, be seen through a reasonably thorough inspection.
A patent defect is still a defect but could have been seen with the naked eye. If there is a leakage spot on the ceiling of a home and it became visible, then that leakage is a patent defect. But also the scratch on the floor, which is covered by a rug and a coffee table, is considered a patent defect. Because you could have discovered it with your own eyes.
What defects does the seller needs to disclose?
Sellers must disclose any material latent defects known. In the listing contract issued by the Alberta Real Estate Association (AREA), a seller must sign of on the following four points. For sellers there is one tip: If you are in doubt whether you should disclose a certain defect, contact your real estate lawyer. Don’t take any risk, because you can be sued.You are required by law to disclose material latent defects. These are known defects in the property that are not discoverable through a reasonable inspection and that may make the property dangerous or potentially dangerous to occupants or unfit for habitation. You may also be required to disclose defects that would be expensive to fix, government and local authority notices and lack of development permits. If yes to any of the below, complete the Defect Disclosure Instruction Schedule.
- Are you aware of material latent defects in the property? _Yes _No
- Do you know of any hidden defects that would be expensive to fix? _Yes _No
- Have you received any government or local authority notices? _Yes _No
- Do you know of any lack of permits for any development on the property? _Yes _No
A Defect Disclosure, a separate form to the listing contract, must be signed if a seller must tick any of these boxes ‘yes.’
If you are buying a home, do a home inspection!
If you are a buyer, any realtor will tell you to do a home inspection prior to buying. It is one of the conditions that are written in the standard contracts issued by AREA and are used in Calgary real estate transactions.
During the home inspection as a buyer, you can give yourself some time to find any patent defects. Not one house in Calgary is perfect. People live in homes, and yes, that creates wear and tear. That is a given. Unless it is a brand new house, but that is a subject by itself. A good home inspector is crucial in finding those defects you cannot see that easily or you couldn’t know, because you don’t have any knowledge about those type of defects. Think electrical, plumbing, roof and a long list of things that a home inspector checks.
If you, as a buyer, are in doubt about anything, let your realtor ask that question. Preferably by email, and hang on to that email. You are allowed to ask everything and anything. It may be the only way to protect yourself as a home buyer.
If you, as a buyer, are in doubt about the extent of a defect and the home inspector can not give you a conclusive answer, call in a professional in that field. There is an expert for anything!
If you, as a buyer, want certain things repaired by the seller, make that a term in the contract. (Not a condition) A term in your contract states what needs to be fixed, how it needs to be fixed, that it needs fixing by a professional. To avoid that the repair gets done by a friend of his cousin’s old neighbour, who used to be married to his mother-in-law your term also needs mention that you want to see the invoice of a professional company. And obviously, it needs to be repaired before you receive the keys, unless the repair cannot be done within that time frame by reasonable expectations.
The content of your term needs the correct wording to get it all done correctly. Your realtor will know how. And if in doubt, contact your real estate lawyer.
So material latent defects and patent defects are two different things. Know the difference and if you have any doubt, call your real estate lawyer.