Home » CAVEAT EMPTOR – The two Latin words that could end up costing you…

CAVEAT EMPTOR – The two Latin words that could end up costing you…

By: Matt Leask

Purchasing a home is often a much more emotionally driven experience than a lot of other daily transactions. People tend to fall in love with that “perfect home” which can cause even the most pragmatic of purchasers to jump in feet first and potentially overlook certain realities. For that reason, it’s helpful to have professional advice throughout the process from your agent, lawyer, or both.

Caveat emptor, better known as “buyer beware” remains a very important consideration in real estate transactions. Particularly when dealing with the resale of real property. Purchasers in Ontario are protected by the Ontario New Home Warranties Plan Act when purchasing a newly constructed home from most builder, and even many consumer transactions are protected under the Consumer Protections Act, but if you are buying a home on the resale market it is up to you as the buyer (in most cases) to exercise proper caution and protect their own interests. Purchasers worry that they will inherit costly, and potentially dangerous issues in their new home. Vendors are more concerned with being held liable post-closing for issues that they are not even aware of. A good real estate lawyer will protect you from issues related to title to the property, but once the agreement of purchase and sale has made it to our desks, it is often too late to address defects in the physical quality of your new home.

Let’s explore the law around defects, how purchasers can protect themselves, and when the seller can be held responsible. It may be helpful to begin with a brief overview of the “legalese” you may encounter in these types of situations. The main thing buyers and sellers need to understand is the difference between a latent defect and a patent defect. A patent physical defect is one that can readily be discovered upon proper inspection. A latent physical defect is a hidden issue that would not be discoverable on a reasonably thorough inspection.

A purchaser is responsible for contracting for protection from patent defects. These are the situations where the doctrine of caveat emptor has a lot of force. The best advice that lawyers and realtors can give to potential purchasers is to include a condition in the agreement of purchase and sale allowing the purchaser to hire a qualified home inspector. If defects are discovered on an inspection, purchasers have several options to protect themselves, such as walking away, requiring the vendor to remedy the problem, or seeking a reduction in the purchase price.

A true latent defect is one which neither the buyer or seller knew about when the contract for sale was entered into. In this case, unless the buyer can prove that the seller knew about the issue and failed to disclose it, or actively concealed the problem, then the seller will not be held liable for the resulting repair costs.

From a vendor’s perspective, caveat emptor provides a lot of comfort. The only way a vendor will be held liable for a defect in quality is if it is a latent defect that was intentionally, or negligently concealed from the purchaser. Vendors should remember that they are not obligated to disclose anything to the purchaser prior to signing an offer, but it is important not to misrepresent anything regarding the physical condition of the home.

The best advice for potential purchasers is to heed the old adage of buyer beware, exercise caution and do your due diligence before signing on the dotted line. Make sure you’re getting what you bargained for and you will love your new home for years to come.

Matt Leask is an Associate within the corporate and real estate departments at Lancaster Brooks & Welch LLP. You may reach out to connect with him on your real estate matter by calling 905-641-1551.

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