Material Latent Defects & Latent Defects & Patent Defects in Real Estate
The terms “Material latent defect,” “Latent defect,” and “Patent defect” are distinctions in real estate that relate to the condition of a property.
The distinction lies in the visibility and discoverability of the defects. Patent Defects are apparent and can be easily discovered through a reasonable inspection. Latent Defects are not readily apparent and might not be discovered through a typical inspection. Material Latent Defects are significant hidden issues that may not be easily found and can have a substantial impact on the property.
Latent Defects – Common Law
A Latent Defect is a defect that cannot be identified through a standard inspection and has the potential to render a property hazardous for occupants or unsuitable for habitation.
According to common law, sellers are required to disclose any latent defects they are aware of.
Examples of latent defects encompass, but are not restricted to:
- notably high radon levels within a residence
- concealed mold infestations
- hidden structural damage affecting the home’s integrity
Sellers can fulfill their common law duty by disclosing latent defects on the Property Disclosure Statement, and they also have the option to provide a separate disclosure for added transparency.
Material Latent Defect
Material Latent Defect are defined in the rules made under the Real Estate Service Act. The definition is broader, coverings circumstances corresponding to a common law latent defect and more.
Realtors ® have an obligation to disclose Material Latent Defects. Unlike the common law, the Rule also demands written disclosure before entering an agreement.
As per the definition by BCREA, a material latent defect refers to:
Material defect that cannot be discerned through a reasonable inspection of the property, including any of the following:
- a defect that renders the real estate
- (i) dangerous or potentially dangerous to the occupants
- (ii) unfit for habitation, or
- (iii) unfit for the purpose for which a party is acquiring it, if
- (A) the party has made this purpose known to the licensee, or
- (B) the licensee has otherwise become aware of this purpose
- a defect that would involve great expense to remedy
- a circumstance that affects the real estate in respect of which a local government or other local authority has given a notice to the client or the licensee, indicating that the circumstance must or should be remedied
- a lack of appropriate municipal building and other permits respecting the real estate
Examples of Material Latent Defects encompass, but are not restricted to:
- high levels of radon
- the fact that the basement leaks when it rains
- structural damage to the property
- failure of the building’s envelope (water ingress)
- underground storage tanks located on the property
- problems with the potability/quantity of drinking water
- Un-remediated damage caused by the illegal use of the property, e.g. marijuana grow operation
- new installations or renovations of electrical or gas systems completed without appropriate permits and inspections
- mice or termites infestation
- unauthorized suites constructed without appropriate permits
- notices from the local municipal government regarding remediation that has not been done
The legislation is unequivocal in stating that any known Material Latent Defects in a property must be disclosed to a potential buyer. Should the Seller refuse such disclosure, the seller’s Realtor ® is obligated to cease further services.