Patent vs Latent Defect: Real Estate Transactions in Ontario

Buying or selling a home is one of the most significant transactions most Ontarians will ever undertake. While price, location, and condition are top concerns for many, one critical legal concept often goes overlooked — the difference between patent and latent defects in a property.

These defects are very significant in the rules of real estate law in Ontario. They affect both the buyer’s right to know what they are purchasing and the seller’s legal obligations. Being aware of how these issues are handled under Ontario law will help you remain protected in the real estate market.

What Is a Defect in Real Estate?

A defect, in legal terms, refers to a physical issue with a property that could affect its value, functionality, or safety. Not all defects are equal in the eyes of the law. Ontario courts differentiate between two main categories.

• Patent defects, which are visible or discoverable through a reasonable inspection
• Latent defects, which are hidden and not reasonably discoverable

Let’s discuss each in detail.

What Are Patent Defects?

A property defect is something that can easily be found by either a careful buyer or a professional home inspector. These problems are typically identified without requiring any specialized skills or equipment.

Examples of patent defects include

• Busted or torn window or screen
• Obvious cracks on the foundation walls
• Paint peeling from the ceiling or marks on it from water damage
• Not having handrails or stairs that are unstable

Who Is Responsible for Patent Defects?

Under the principle of caveat emptor—or “buyer beware”—buyers are expected to do their due diligence and inspect the property for any visible issues. Sellers are not generally required by Ontario law to disclose patent defects unless they willfully try to hide them.

If the buyer misses a hidden defect before the sale, they typically have no recourse for legal action afterward. The idea is that the buyer had a chance to notice the issue before the purchase was completed.

What Are Latent Defects?

Latent defects are more problematic. They cannot be spotted during a normal inspection before the house is sold. Defects are commonly concealed in walls, foundations or plumbing parts and may not be noticed until long after the buyer has moved in.

Examples of latent defects include

• Connections and wiring are faulty in the walls
• Possible drywall damage hiding behind water or mould
• The problem with a leaking roof may not be visible when the weather is dry
• Finished basements can hide cracks in the foundation

These defects are unique in that they cannot be detected through basic inspection and are only revealed after prolonged use of the premises or after the damage has occurred.

Seller’s Duty to Disclose Latent Defects in Ontario

If a house has latent defects that make it unfit to live in, dangerous, or structurally weak, the seller must disclose them to the buyer. If a seller does not disclose a known defect, they may find themselves responsible for any damages or could lose the right to the sale.

This may include examples such as:

• Willfully hiding a major issue
• Providing inaccurate details about the property’s state
• Making efforts to hide the defect, like painting over the water damage

How Can Buyers Protect Themselves?

Ontario law generally provides buyers with an opportunity to conduct the necessary inspections. Buyers should take these important actions before finishing the property deal:

Hire a Qualified Home Inspector

Although the law holds buyers accountable for patent defects, having a good home inspector provides additional protection. They know what to look for that would be missed by most buyers.

Include Conditions in the Offer

Buyers can ask for a home inspection in the Agreement of Purchase and Sale. This allows buyers to walk away or renegotiate the purchase price if serious defects are found.

Get Advice From a Lawyer for Real Estate Matters

A Toronto real estate lawyer can review your agreement, explain your legal rights, and assist in handling disclosure issues that may occur. Our team at Insight Law Professional Corporation helps buyers navigate these complex issues, ensuring their investment is safe.

What Happens If a Latent Defect Is Discovered After Closing?

If a latent defect is found by a buyer after the sale, the decision made by law depends on whether the seller knew about it.

• Concealed the defect intentionally
• Hid the problem on purpose
• Made statements that were misleading or false

Applying these regulations may give the buyer the right to get compensation for:

• The amount needed to fix the damage
• Diminished value of the property
• Legal fees

What If a Real Estate Agent Knew About a Latent Defect?

Agents in the real estate industry in Ontario have legal obligations to their clients, as well as to buyers and other parties, at times. For latent defects, those responsibilities may be vital.

Under REBBA 2002 and RECO’s Code of Ethics, a real estate agent should act with honesty, integrity and fairness. They need to report all facts that could influence a party’s choice to purchase or sell.

How Does This Affect Us in Real Life?

Suppose a listing agent becomes aware of a latent defect, such as prior basement flooding, structural issues, or concealed mould, and does not disclose it to potential buyers. In that case, they may be liable for misrepresentation or negligence.

This rule is true even when the seller only informed the agent about the defect. It is not allowed for agents to stay silent if they are aware that the condition of a property could significantly change its value or safety.

RECO Guideline Example

According to RECO, agents must disclose material latent defects, whether or not the seller agrees to disclose them. If you do not comply, you could be disciplined, fined or owe money as a result of legal action.

Legal Implications

• If an agent gives false or misleading information, a buyer may decide to sue both the agent and the brokerage.
• Courts may hold the agent partially liable for damages arising from the defect.
• Agents have the possibility of being penalized by RECO, such as by having their licence suspended or being charged a fine.

What If the Seller Genuinely Did Not Know?

In case the seller did not know about the problem and didn’t hide the actual state of the property, they might not have to accept liability.

It is up to the buyers to address these problems unless the agreement protects them.

Should Sellers Provide a Property Disclosure Statement?

The Seller Property Information Statement (SPIS) is one that Ontario sellers may decide to complete. Although it is not a requirement, many real estate agents recommend using a home inspection.

Sellers should consult with their lawyer regarding the SPIS before making any decisions to avoid confusion.

Role of a Real Estate Lawyer in Defect Disputes

Whether damage occurs that you didn’t expect or allegations of concealment are made against you, hiring a real estate lawyer is necessary. They are unique to each situation and depend on having precise knowledge of:

• Common law principles like caveat emptor
• Seller disclosure obligations
• Contractual warranties and representations

Remedies under Ontario law

At Insight Law Professional Corporation, our services begin with helping clients negotiate real estate purchase agreements and extend to addressing problems that arise even after a deal is closed. We ensure that your rights are respected and that you fulfill your responsibilities properly.

Conclusion

Knowing the law regarding patent and latent defects is necessary for any real estate deal in Ontario. Although buyers need to check everything carefully, sellers are not allowed to cover up major issues. Both buyers and sellers are guided by the law to be truthful and careful.

Hiring professionals, such as home inspectors and real estate lawyers, will help protect your asset from potential issues later.

Insight Law Professional Corporation is ready to guide you, whether you are involved in buying or selling a home, with sincerity, clarity and confidence.

The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.