Is a Haunting a Material Latent Defect?
Is a Haunting a Material Latent Defect?
So many horror movies start the same way: a death occurs in a home and the new family moving in is now haunted. At some point, someone must have thought "Can you sue for that?" and the answer is no, as long as everyone was honest about the death before the purchase.
Something else that's horrifying is a defect to a home that can end up costing thousands in repairs.
Before we go any further, it's important that we all know what we're talking about when we use the word defect. First, let's make clear the difference between a patent defect and a material latent defect.
What is a patent defect?
A patent defect is something that's clearly visible upon inspection, like a crack in the foundation or wet rot. You'll generally find these problems listed in the Inspection Report.
Patent defects are easy to understand because they're usually defined.
Do you have to disclose a patent defect?
No. Since a patent defect is easily visible, it is up to the buyer and their real estate agent to make note of the defect during their visits to the property. Patent defects will also be taken note of during a home inspection.
As they are readily observable they are by definition not hidden (latent).
What is a material latent defect?
A material latent defect is a problem that the seller knows about that is not visible despite the due diligence of a home inspector and real estate professionals. The rule of thumb is that if a real estate professional, after a reasonable inspection, would not be able to see the material defect then it is classified as a material latent defect.
Examples of material latent defects.
This is not an exhaustive list but the following qualify as material latent defects. Structural damage, seepage problems, hazardous chemical use on the property, faulty foundations as a result of tree roots or environmental damage, former use as a grow-op leading to material damage to the home.
It's important to note that these defects have to do with physical objects like a basement wall, flooring or electrical systems. They are usually potentially dangerous to the health of the buyers or would require extensive repairs.
Permits and material latent defects.
According to the British Columbia Real Estate Association, "any renovation or modification made to a home for which the appropriate municipal building or other permits were not obtained" can be considered material latent defects.
Why doesn't a haunting qualify as a material latent defect or patent defect?
Hauntings and things like the occupation of the former resident are considered things that affect the home psychologically.
A psychologically impacted property may or may not have patent or material latent defects.
For example, imagine a house that was formerly used as a base of operation for a criminal organization and it also had material latent defects that affect the electrical system. Only the issues affecting the electrical system can be used as a basis to sue a lack of required disclosure under common law.
Potential buyers are within their rights to back out of a sale because of those reasons but they do not have grounds to sue either the seller or the real estate agents involved in the transaction.
When representing the seller or the buyer, real estate agents need to follow real estate rules that outline how to deal with both patent and material latent defects.
If there are no material damages to the property that can involve a great expense to fix, there is no obligation for the sellers to disclose a fact about a property. Secrecy will turn away people from the home, buyers can be skittish.
What about Caveat Emptor?
Buyer beware, by a common-law definition, means that the buyer needs to be aware that they are purchasing a property as it is. The liability of material latent defects kicks in when the seller fails to disclose defects that, as mentioned previously, can be costly to fix or endanger the people living in the home.
Disclosure requirements are not always clear and that grey area can make a piece of real estate dangerous. It's in your best interest to get in touch with your real estate professional should you feel something is amiss.
Suing is complicated.
One important part when it comes to material latent defects is proving that the issues arising in the new house are because of known material latent defects.
It is impossible for a seller to disclose latent defects that they were not aware of, as such it is up to the buyer and their lawyers to a local authority that the seller knew about a large crack in the basement and that they took steps to hide that from the home inspection or real estate agents.
What is the obligation to disclose?
When it comes to a material latent defect, a seller is obligated to disclose. Real estate professionals are bound by local government and their local real estate service rules to disclose issues that fall under the definition of material latent defects.
As a client of real estate professionals, they need to give sellers a definition of material latent defects and ensure that everything is above board.
If a seller is unsure of what needs to be disclosed, they should discuss it with their agent a long time before buyers come into the picture.
A standard of reasonable care is expected from all parties involved but a known material latent defect discovered after a real estate transaction can spell legal trouble and involve great expense for the seller and their real estate agent.
What is the difference between a latent defect and a material latent defect?
The addition of the word "material" before "latent defect" is important when it comes to legal action taken by a buyer.
However, it is a rather small nuance in most cases. It comes down to a difference in how the defects are seen by common law and the Real Estate Council of British Columbia but, in general, following the definition of a material latent defect established by the Council ensures a safer transaction for everyone involved.
How to resolve the situation before a sale.
Should a seller discover a latent defect, such as something relating to the physical property or appropriate permits respecting real estate, they should first contact their agent.
The cost of a repair might be troubling but not as much as the damage made by a broken contract.
Agents will usually tell sellers to disclose all the information possible to them. From that point on they can give advice with respect to what needs to be disclosed to potential buyers.
Some sellers do not understand the distinction between what would constitute a psychologically impacted home and a material latent defect, for example.
As clients of their agents, sellers should be properly informed and do their best to tell their agents about everything they can about the property. When sellers disclose, they can save themselves a whole world of problems.
The quick version.
Material latent defects cannot be discovered by a reasonable inspection. A seller is responsible for disclosing the defects to their agents and buyers. Real estate agents have an obligation to disclose defects and inform everyone involved about the fine details of material latent defects.
It's best to err on the side of caution and honesty.
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