Latent Defects

When buying or selling you should know about latent defects, also known as hidden defects. In fact, in Quebec the hidden defects is a very important issue in real estate transactions, that all home sellers and buyers should be aware of, as the inventory of homes for sale in the most desirable neighborhoods in the province is aging. That’s why it is so important to understand what are and what aren’t hidden or latent defects, as they can have a huge impact on the time and money it takes to buy or sell a property and, obviously, to own it, and let’s admit it, many sellers benefit from knowing the defects but hiding them from the homebuyers.

Unless specified otherwise in the promise or contract to purchase, all real estate in Quebec is sold with a legal warranty from the seller. This warranty is given at the time of sale in order to protect the buyer against these defects. Thus, the buyer can seek financial compensation from the seller should he discover a defect in the home that meets the criteria above.
Under the Civil Code of Quebec, in order for a defect to be considered latent, it must: not be apparent to a prudent buyer or his inspector doing a non-destructive inspection, have existed at the time of the sale, be sufficiently serious that the property cannot be used as intended, or it reduces the usefulness of the property so much that the buyer would not have paid as high a price or would not have purchased it at all.

Many buyers and sellers believe that hidden defects are defects that the seller consciously hid from the buyer for his own financial gain.

In fact, while latent defects do include those that the seller knew about and didn’t disclose, they also include all the defects that the seller did not know about at the time of the sale, but which were discovered by the buyer after purchasing  (in case these defects meet the criteria of the Civil Code of Quebec).

Thus, even if you sell your property and you knew nothing about a hidden defect, you can be held financially responsible as a seller, If the buyer finds out while redoing his basement that there is a significant foundation issue after tearing down the walls.
Developers and other professional sellers cannot sell their properties without the legal warranty, but even in the case where a home is sold without the legal warranty, the seller can be held responsible for the latent defect had he known about it and failed to notify the buyer before the sale.

Many sellers believe that because most buyers will have a home inspection before purchasing, the responsibility for finding defects falls on the inspector’s shoulders. In fact, while the inspector could be held responsible in a court of law, for defects that he found but failed to disclose, it is important to know that most home inspections are visual and non-destructive in nature. The inspector makes it clear that he will not be opening up walls and tearing down ceilings in order to find what could be hidden behind them and it’s the seller who bears the burden of warranting against the latent defects to the buyer.

It is important to know that a latent defect that can be accurately identified to have been present, while meeting all the criteria in the Civil Code of Quebec at the time the seller purchased the home, even the previous owners can be held financially responsible. Meaning the buyer can pursue the last seller, and the last seller can pursue the previous seller he purchased the home from.

In Quebec, the real estate brokers are required to have their seller clients fill out what is called a “Declarations by the Seller of the Immovable” legal form. This requirement offers some protection to the seller in terms of notifying the buyer of all known defects in the home so that the buyer can determine whether they will indeed purchase and what price they wish to pay with a good understanding of what they are buying.

The seller must answer a series of questions about his knowledge of the home, its repairs, defects, renovations and history. The buyer cannot then claim that the seller did not disclose a particular defect that they knew about. In addition, a competent home inspector will know what to look for (beyond what a typical buyer is aware of) and can advise the buyer if they should seek further evaluations by an electrician, a plumber, an architect, an engineer, etc. before taking a decision on the purchase.

Anyway, if a buyer discovers what he believes to be a hidden defect, he has six months post-discovery to notify the seller in writing and allow the seller time to determine if the defect was hidden.

In this case, any repairs that may be necessary can be undertaken by the buyer if they are urgent. Otherwise, the seller must be allowed to evaluate before work can proceed. Should the buyer and seller not agree on a satisfactory solution within a prescribed deadline, the buyer can seek legal remedies in order to be compensated financially from the seller or inspector, or can attempt to annul the sale if the defect is serious.

Finally, if you are a new homeowner and you discover a hidden defect, it is import to document it accurately - bring in an expert if needed, and to notify the seller in writing, allowing him the time to assess the situation. If you cannot find a satisfactory solution between buyer and seller speak to a lawyer who can also advise you on how to proceed.

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