Material Latent Defects Information

• Information
  
  BCFSA’s information is clear, concise, easy-to-read explanations of the requirements for real estate professionals under the Real Estate Services Act (“RESA”), Real Estate Services Regulation (“Regulation”), Real Estate Services Rules (“Rules”), and other applicable legislation.

  This information is intended for use by real estate professionals, to support their understanding of the standards they must meet in the delivery of real estate services.

Obligation to DisclosePermanent link to this section

When representing a client in a trade in real estate, you have an obligation to disclose any material latent defects known to you. If the client instructs you not to disclose the defect, you must refuse to provide further real estate services on behalf of that client.

Material latent defects are defined both under common law as well as under the Real Estate Services Rules. Under the Real Estate Services Rules, you are required to disclose a greater number of defects than under common law. Your clients must be aware of what they must disclose under common law and should seek legal advice if they have questions about it.

(a) Explanation to Sellers and Landlords

As a listing real estate professional, you must explain the concept of latent defects to your seller at the time the listing or management agreement is taken. Because material latent defects are not visible upon ordinary inspection, sellers may believe that the concept of buyer beware applies, and as long as the buyer does not discover the defect before closing, it becomes their problem to deal with after closing. Sellers and landlords should understand that any material latent defect, as defined in the Real Estate Services Rules or common law, known to you, must be disclosed by you to a potential buyer or tenant.

While the concept of material latent defects in a detached home is easy to define, material latent defects can also exist in strata complexes outside of the unit being listed or rented. Building deficiencies can affect a unit’s value especially when the deficiency can lead to a special levy being assessed. This may include issues that exist in other strata lots such as a leak in a neighbour’s unit. If the issue rises to the level of a material latent defect, it must be disclosed.

(b) When to Disclose

Once a seller has disclosed a material latent defect to you, your obligation is to share that information with all other parties to the trade. For a potential buyer, this disclosure must be made prior to entering into any agreement for the purchase and sale of real estate.

If the property is a rental, then the written disclosure must be made by the landlord, or landlord’s real estate professional before any agreement, such as a lease or tenancy agreement, is entered into.

(c) Not All Defects Must be Disclosed

There is a difference between a patent and material latent defect. A patent defect is one that is readily visible or discoverable upon ordinary inspection. While patent defects such as broken windows, cracked walkways or sloping floors may affect a property’s value, they do not need to be disclosed by the seller, or the listing agent.

When it comes to a patent defect, it is up to a buyer and/or the buyer’s agent to conduct their due diligence to discover the defect. RESA states that a buyer’s real estate professional is obligated to discover all relevant facts which may affect their client’s interest in purchasing or renting a property.

How to Make the Appropriate DisclosurePermanent link to this section

There are specific circumstances where the Real Estate Services Rules mandate that a disclosure must be made. All disclosure documents should be retained in the brokerage file.

(a) Disclosure Must Be in Writing

Disclosure must be in writing and cannot form part of any service agreement, or agreement giving rise to a trade in real estate (including the rental of a property). This means that the disclosure must be on a separate form which can include correspondence such as an email.

(b) Exemptions to Disclose

A real estate professional is not required to provide a separate disclosure if the seller has already disclosed any material latent defects to the buyer in writing. One of the most common ways this is done during the sale of a property is through the Property Disclosure Statement (“PDS”).

Because the PDS is signed by both seller and buyer, it is an ideal way to confirm that the appropriate disclosure has been made.

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