Property condition disclosure

If you’re a fan of “The Colbert Report” you may recall a recent installment of “The Word,” a regular feature on the show where Steven, in talking about the James Frey’s book, A Million Little Pieces defined the Latin term caveat emptor as “Tough Titty.”

All kidding aside the literal translation of the term means “let the buyer beware” and in general, it’s the position that the Canadian courts typically take when dealing with actions that arise over property condition disputes between real estate buyers and sellers.

It’s important to note that the law sees certain types of defects in different ways. The first type of defect is known as a “patent defect.” A patent defect is one which would be discovered through a reasonably prudent inspection of the property by the buyer or anyone else who inspects it on behalf of the buyer. The law is very clear that a seller has no duty to disclose such defects. It is assumed that the buyer conducts a reasonable amount of due diligence on their own behalf and would, therefore, be aware of these defects.

The second category of defects is known as latent defects. A latent defect is one that may not be so obvious to a buyer who is conducting a reasonable prudent inspection of the property. Now, the courts generally see latent defects in two separate categories, some of which require disclosure by the seller, some of which may not require disclosure. A buyer is always entitled to disclosure of “material latent defects.” Of course, this is where shades of gray come into play but generally, the courts consider a defect to be a material latent defect if it meets one of the following criteria.

• Renders the property dangerous or potentially dangerous to the occupants;
• Renders the property unfit for habitation;
• Renders the property unfit for the purpose for which the buyer is acquiring it where the buyer has made this purpose known to the seller or broker;
• Concerns local authority and similar notices received by the seller that affect the property; or
• Concerns the lack of appropriate municipal building and other permits.

Finally, the law does not expect a seller to disclose problems which he or she is unaware of and the burden of proof is upon the buyer to prove that the seller had knowledge, or ought to have had knowledge of existing material latent defects.

The most prudent course of action for any buyer is to make inquiries of the seller on issues of property condition. A seller has a legal duty to not misrepresent and can be held liable for blatant attempts to mislead a buyer. Secondly; a professional inspection of the property by a qualified inspector is a must.

Sellers who have property condition issues with a property they wish to sell should be forthright with their real estate broker and their lawyer seeking advice on their duty to disclose. My experience suggests that most condition issues can be dealt with in a reasonable manner if they are brought forward in a timely fashion before the seller has accepted the buyer's offer. If a buyer discovers material defects after possession they are far less amiable at working towards a solution. No wonder.

Norm Fisher

Royal LePage Vidorra