Number 415, January 2008
Buyer Beware of Patent Defects
A seller has a duty to disclose material latent defects, but not patent defects, and the doctrine of caveat emptor (buyer beware) continues to apply to real estate transactions in BC.
A seller spent four years renovating their residence, including constructing several retaining walls, relocating the kitchen, adding a bathroom and bar, moving an interior wall, adding a beam to the dining room and enclosing an outdoor patio. Upon completion of the renovations, the buyers agreed to purchase the property, which they viewed twice. The Contract of Purchase and Sale was an all-cash offer, not made subject to the buyers completing an inspection.
Before moving in, the buyers discovered numerous problems including leaking, the presence of mould and deficiencies in the retaining walls. They hired an engineering firm to inspect the property. The resulting report strongly condemned the construction quality of practically the entire residence, every outbuilding and the retaining walls. It painted a picture of a flawed residence with massive leaking or potential for significant water ingress, mould, structural defects and settlement concerns. The buyers never moved in and sold the property on an “as is, where is” basis at a loss of more than $700,000.
In considering the buyers’ claim against the seller, the trial judge distinguished between patent defects—for which the buyers were not compensated—and latent defects—for which they were. The judge articulated the following test for distinguishing between the two:
Patent defects are those that can be discovered by conducting a reasonable inspection and making reasonable inquiries about the property . . . In general, there is a fairly high onus on the purchaser to inspect and discover patent defects. This means that a defect which might not be observable on a casual inspection may nonetheless be patent if it would have been discoverable upon a reasonable inspection by a qualified person. In some cases, it necessitates a purchaser retaining the appropriate experts to inspect the property.(1)
The trial judge concluded some problems arising from the construction of the subfloors and a small leak in the living room were latent defects, which couldn’t have been discovered by a reasonable inspection. The seller was found to have known about them and, as such, was bound to disclose. The remaining problems were found to be patent defects, which would have been discoverable upon inspection by a qualified person. The court awarded the buyers less than $40,000 for the seller’s failure to disclose the material latent defects.
The buyers appealed and argued that the trial judge shouldn’t have imposed the standard of “an inspection by a qualified professional.” The BC Court of Appeal dismissed the appeal and stated:
. . . a purchaser who has no knowledge of house construction may not recognize that he or she has observed evidence of defects or deficiencies. In that case, the purchaser’s obligation is to make reasonable inquiries of someone who is capable of providing the necessary information and answers. A purchaser who does not see defects that are obvious, visible, and readily observable, or does not understand the implications of what he or she sees, cannot impose the responsibility—and liability—on the vendor to bring those things to his or her attention.(2)
The principle of caveat emptor requires buyers to satisfy themselves as to the condition of the property they acquire. The only exception is the requirement that sellers disclose material latent defects of which they are aware. Buyers can best protect themselves by engaging qualified professionals to inspect and advise them on the condition of the property.
Bull, Housser & Tupper LLP
| ||1. ||Cardwell et al v. Perthen et al, 2006 BCSC 333. |
| ||2. ||Cardwell v. Perthen, 2007 BCCA 313. |
|Back issues of Legally Speaking are available to REALTORS® on BCREA's REALTOR Link® homepage. Subscribers who are not REALTORS®, and who wish to see back issues, should contact BCREA by email at [email protected], or by phone at 604.742.2784. |
|Legally Speaking is published monthly by email and bimonthly in print by the British Columbia Real Estate Association, and funded in part by The Real Estate Foundation of British Columbia. Real estate boards, real estate associations and REALTORS® may reprint this content, provided that credit is given to BCREA by including the following statement: "Copyright British Columbia Real Estate Association. Reprinted with permission." BCREA makes no guarantees as to the accuracy or completeness of this information. |
© British Columbia Real Estate Association |
1420 – 701 Georgia Street West
PO Box 10123, Pacific Centre
Vancouver, BC V7Y 1C6
This message is intended for the designated recipient only and
may contain privileged or confidential information. If you have
received it in error,
please notify the sender immediately and delete the original.
To change your email address or subscribe to more BCREA publications, click here.