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Consumer Guide to Material Latent Defects

Consumer Guide to Material Latent Defects

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This FAQ outlines the differences between material latent defects and patent defects. It also explains when a defect must be disclosed to a buyer and the obligation of an agent to disclose a defect that is known to them.

When it comes to buying, selling, or renting a home, potential defects that are discovered can derail a transaction. There are two key types of defects to pay attention to. They are known as patent defects and material latent defect.

What are the differences between a patent defect and material latent defect?

A patent defect is any defect in a property that can be discovered upon reasonable inspection. These types of defects include broken windows, damaged floors and anything that a buyer or a property inspector could find through a typical property inspection.

A material latent defect is defined in the Real Estate Services Act, which governs the conduct of real estate professionals, including rental property managers. These defects cannot be discovered upon reasonable inspection of the property and render the property potentially dangerous to occupants and/or can involve great cost to repair. It is important to consult with your real estate professional to determine what type of defects might be present in the home — and if a legal disclosure is required.

What does a seller or landlord have to disclose to a buyer or tenant?

Sellers and landlords must disclose all known material latent defects to any potential buyer or tenant prior to entering into a contract of purchase and sale or lease. When you hire a real estate professional to sell your home, or find a tenant to rent your property, the Real Estate Services Act requires that the real estate professional to disclose any material latent defects known to them. The Real Estate Services Act states that:

  • the disclosure of a material latent defect must be made in writing; and
  • disclosure cannot be made in a purchase contract or lease but must be in a separate document.

Most sellers will use a document called the Property Disclosure Statement. Landlords will typically create a separate document to make the written disclosure. You should ask your real estate professional how to best disclose.

What if I do not want my real estate professional disclosing a defect?

Legislation is quite clear in that all known material latent defects in a property must be disclosed to a potential buyer or tenant. If you advise your real estate professional that you do not wish to disclose these defects, they will be unable to provide you with the services you contracted for.

Should you have any concerns with whether disclosure for a particular defect is required, consult with your real estate professional and/or get an independent legal opinion in writing that you can provide to your real estate professional.

What is a stigma, and does it need to be disclosed?

A stigma occurs when a consumer expresses a concern about a property for reasons that do not affect the structure or land. In fact, most stigmas are related to a person’s beliefs, values and perceptions, ethnic background, religion, gender, age, and other individual concerns.

Examples of stigmas include:

  • specific numbers in the property address that could bring good or bad luck;
  • a criminal living in a neighbourhood;
  • a death on the property; or
  • a haunted property.

While this list is not exhaustive, sellers and landlords are not obligated to disclose the existence of a stigma unless they are specifically asked about it. For instance, if a buyer asks about any known deaths in the home, a seller refuse to answer the question or can answer truthfully with a yes, no, or I don’t know. If a buyer or tenant receives false or misleading information, they may have legal recourse. Speak with your real estate professional or get legal advice if needed.