Defects and Post-Closing Rights
By Lorne Shuman:
When buying a resale home it is always advisable to make your offer conditional upon the buyer obtaining a satisfactory home inspection to determine if there are any deficiencies in the property.
Because the current market is seeing multiple offers on many properties, some buyers may be reluctant to make their offer conditional on a home inspection. This is a risky decision, however, a lack of housing inventory is pushing some buyers to do this. Buyers may ask what would happen if they buy a property without having an inspection and later find a defect in the property. Could they sue the seller for damages?
If you are contemplating the purchase of a resale property, you should be aware that the responsibility for identifying defects has customarily been placed on the buyer. It is the buyer’s responsibility to inspect the property being purchased and to evaluate the state of the property. Buyers generally do not have a claim against a seller for any defects which could have been detected by an inspection of the property. This basic rule is known as the doctrine of caveat emptor which means “let the buyer beware” and stands for the principle that the buyer is purchasing the property in an “as is” condition.
However, the courts have made a distinction between patent defects and latent defects. Patent defects are defects that are discoverable upon on an inspection of the property. The seller does not have a duty to draw to the buyer’s attention patent defects. If a buyer fails to notice a patent defect, it cannot later complain about it as the doctrine of caveat emptor would apply in this situation. Latent defects are defects which an ordinary buyer would not be expected to discover from a normal inspection of the property.
If the seller knows of latent defects, but does not disclose them to the buyer, or actively conceals such defects, the doctrine of caveat emptor may not apply. However, In situations where a latent defect is known to both the seller and buyer, but is discovered after the signing of the agreement of purchase and sale, courts will generally decide in favor of the seller. The buyer must take the property as is without compensation for damages occurring as a result of the defect.
After closing, the rights of the buyer with respect to defects are limited. The buyer’s best protection will come from the terms of the Agreement of Purchase and Sale which should include a condition on inspection done prior to closing. This condition affords the buyer the option of terminating the Agreement, requesting an Amendment to the Agreement requiring the seller to repair any deficiencies prior to closing or negotiating an abatement of the purchase price.
When faced with disputes over who is responsible to repair defects to the property both before and after closing, it is important to remember that each situation is different and the parties are encouraged to seek legal advice from their lawyer.
Courtesy: Shuman Law