Latent defect숨은 하자 (잠재 하자)

What is it?

A latent defect is a problem with a home that a reasonable look would not reveal, and that makes the home unfit to live in, dangerous or potentially dangerous. This is how RECO (the Real Estate Council of Ontario, which regulates real estate agents) describes it in Bulletin 7.4.

The opposite is a patent defect: one that a buyer or their home inspector can find with reasonable observation and questions. The difference matters because it decides whether the seller has to tell you about it.

RECO notes that "unfit for habitation" does not always mean no one can live there; a court looks at other factors too. Whether a given problem is a latent defect is decided case by case by the courts. This page is general information, and you should ask a lawyer about your own situation.

Patent defects and latent defects

Which box a problem falls into depends on the case, and the final call belongs to a court. Ask a real estate lawyer about your own situation.

The "buyer beware" rule

The starting rule for resale homes in Ontario is "buyer beware" (caveat emptor). RECO explains that a seller does not have to disclose a patent defect, and the buyer is expected to do their own inspections and due diligence before fulfilling or waiving conditions.

But if the seller tries to hide or cover up a patent defect, buyer beware may not apply. A fresh coat of paint over a water stain to hide it is the classic example.

That is why a buyer should put a home inspection condition in the offer, look carefully during the condition period and ask questions in writing. When you drop conditions in a bidding war, you also drop this protection.

What a seller must disclose

• A seller must disclose latent defects they know about. RECO says the law of latent defects is complicated and tells seller’s agents to advise the seller to get a legal opinion if there is any doubt about whether a defect must be disclosed.
• Failing to disclose a latent defect can be treated as misrepresenting the state of the home and lead to a lawsuit. Even a seller without direct knowledge may be liable if they were willfully blind, and a seller who hides or covers up a defect faces extra liability.
• If the seller’s agent knows such a fact, the agent must disclose it to every buyer who shows interest and make best efforts to get a written acknowledgement. RECO Bulletin 7.4 explains this duty.
• The scope of what a seller must disclose comes from court decisions (case law), not from TRESA (the real estate law). This page does not quote case law; ask a lawyer about your own case.
• Separately, agents must tell their clients about "material facts". Under section 22.1 of the TRESA General regulation (O. Reg. 567/05), an agent must take reasonable steps to find the facts that would affect the client’s decision, disclose them as soon as possible, and advise the client to consider whether they affect the decision. RECO lists things like knob-and-tube wiring, lead plumbing, flooding or fire history and renovations without permits as facts that are often material.

The SPIS (Seller Property Information Statement) is voluntary

An SPIS is a form where the seller writes down what they know about defects, renovations and other details of the property. RECO says some sellers make such a statement available to interested buyers. It is not required by law; the seller decides whether to complete one.

If the seller has prepared a statement meant for buyers, the agent must tell every interested buyer that it exists and show it on request. This is a duty under section 22.3 of the TRESA General regulation (O. Reg. 567/05).

RECO warns buyers that even with an SPIS, the seller may not be aware of defects and the statement is based only on their personal knowledge. An SPIS does not replace a home inspection. For sellers, a wrong answer on an SPIS can create liability, so talk to your agent and, if needed, a lawyer before filling one out.

What a buyer can do beforehand

• Include a home inspection condition and attend the inspection. Remember that even an inspector may not find a latent defect.
• Ask about your concerns in writing. For example: has the basement ever leaked? When was the roof replaced? Were permits obtained for the renovation? Keep the answers on record.
• Ask your lawyer whether the seller’s answers or promises about the condition should go into the contract as a representation and warranty clause, and whether it survives closing.
• Tell your agent what matters to you. A "stigma" such as a death or criminal use is not a physical defect, so you may need to ask separately and add a clause.
• For an older home, ask about the wiring, plumbing and insulation types, and check early whether an insurer will cover the home.

If you find a defect after closing

1. Record the condition with photos and video, and unless it is an urgent safety issue, keep the evidence before repairing.
2. Tell your agent and your real estate lawyer right away. The key questions are whether the seller knew, whether they hid it, and whether the contract has a warranty clause.
3. Review your options with the lawyer. You may claim your loss from the seller or sue (depending on the amount, this may be in Small Claims Court). Claims have time limits, so do not wait.
4. If the home inspector missed it, check the inspection contract and report. If you suspect your agent did something wrong, you can complain to RECO.
5. For a new home, first check whether the Tarion warranty (1, 2 and 7 years) covers the problem.

Stigmas are different

RECO Bulletin 7.5 describes a stigma as a non-physical attribute of a property that does not affect how it looks or works but may make it less desirable to some people. Examples include a death at the property, use in a crime, or reports that the home is haunted.

The law does not define stigma, and people react differently. RECO advises buyers to tell their agent about such concerns early and, if needed, put a protective clause in the offer. Sellers are advised to get legal advice about whether to disclose a stigma and to give written instructions.

New homes and condos

When you buy a new home from a builder, the Tarion warranty comes before the latent-defect rules. The Ontario government explains that new homes have 1-year, 2-year and 7-year warranties covering bad workmanship, water penetration and major structural defects. Record visible problems at the pre-delivery inspection (PDI).

For a resale condo, the rules above apply inside the unit. The condition and finances of the whole building (the common elements) are checked through the status certificate and the reserve fund study.