Medicine Hat and the surrounding area continues to see a “seller’s market” in residential real estate. There are not enough homes listed on the market for all the interested buyers. This means residential properties are selling quickly and often at or above the listed prices. We are also seeing situations where potential buyers are submitting unconditional offers to make their bids more appealing and increasing their chances of being accepted.

As a buyer, it is very important to be aware of the legal concept: Caveat Emptor.

Caveat emptor is Latin for the phrase Let the Buyer Beware.  In property law, the phrase implies that it is the buyers who take the majority of the risk in a real estate transaction. While most purchase contracts put obligations on the seller to disclose defects of a property, a buyer needs to be proactive and prudent to ensure they obtain important information about the property.

There are two types of defects that we may encounter in real estate transactions: latent defects and patent defects.

Patent defects are those defects that are visible to the naked eye, or which can be identified on reasonable inspection of the property.  Latent defects are those defects that are not reasonably discoverable upon a visual inspection of the property. Latent defects are usually discovered through testing, specialized tools or homeowner knowledge.

In Alberta’s standard Residential Purchase Contracts, there is often no specific representation or warranty as to the fitness or quality of a property. As a result, there is no obligation on the seller to disclose patent defects to the buyer. This means it is crucial for the buyer to perform their owndue diligence, which may include a thorough inspection of the property – Caveat Emptor.

When it comes to latent defects, those that are not discoverable by mere observation, different rules may apply. In general, latent defects must be disclosed by the seller (ex: hidden foundation crack or basement water leaks). A seller who actively conceals a defect or makes fraudulent misrepresentation to the buyer, may be liable for breach of contract and subsequent damages.

To protect against patent and latent defects, we recommend buyers:

1.  Ask questions about the property (its history, past repairs, etc.);
2. Obtain a home inspection by a qualified inspector;
3. Consult or retain a real estate lawyer; and
4. Review the purchase contract and all disclosure documents provided by the seller.

Whether you’re buying or selling, our real estate team at Pritchard & Co. Law Firm, LLP can help you navigate the transaction and ensure your investment is protected.