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They say that it’s a buyer’s market and that there are lots of opportunities in the Medicine Hat housing market today. If you are looking to buy a new home, you should be aware of two important words: Caveat Emptor.
Caveat emptor is Latin for the phrase Let the Buyer Beware. The law tells us that based upon this principle it is important, as a prudent purchaser, to make a careful inspection of the property you are considering buying. No home will be perfect and you will discover problems or defects, most usually of a cosmetic nature. There are two types of defects that you may encounter from a legal perspective – latent defects or patent defects.
Patent defects are defects that are visible to the naked eye, or which can be identified on reasonable inspection. Latent defects, on the other hand, are defects that are not visible or discoverable by mere observation.
Pursuant to the Standard Real Estate Purchase Contract, there generally is no specific representation or warranty as to fitness or quality of any home. As a result, when it comes to patent defects there is no obligation on the part of the seller to bring to the attention of the purchaser these matters, so long as the purchaser has had an opportunity to inspect the premises. Caveat emptor – Let the Buyer Beware!
When it comes to so-called latent defects, those that are not discoverable by mere observation, different rules may apply. It would appear that, in the case of latent defects of quality, where the problem is unknown to the seller, a purchaser has no remedy or claim against the seller, either by way of damages or cancellation of the contract, unless the purchaser is able to prove fraud or some specific breach of warranty.
Therefore, if the defect is patent, it is the purchaser’s problem for not inspecting the property carefully, while if it is latent, the seller must actually know about the defect and not inform the purchaser. In other words, it is incumbent upon the purchaser to establish some form of fraud or negligence by the seller. With a latent defect, there is no presumption that the seller knew about it – the seller’s knowledge of the existing problem or defect must be proven.
As a result, it is not uncommon for prospective purchasers, as a condition or term of the sale, to obtain the services of a qualified home inspector.
Most home inspection companies have their own form of contract and a prudent purchaser would be wise to examine the contract carefully, as most contracts endeavour to limit liability of the inspector, particularly when it comes to latent defects.
You may find wording in the contract similar to the following: “The inspector is neither responsible nor liable for the non-discovery of any patent or latent defects in materials, workmanship or other conditions of the property, or any other problems which may occur or may become evident after the inspection time and date.”
You may also find that the inspector is not required to inspect inaccessible or concealed areas, or they may not be required to inspect under floor crawl spaces or attics or areas that are not otherwise easily accessible. Paint, carpeting or central-vac systems may also be excluded from inspection. Other excluded items may include water softening systems, security systems, telephone and cable TV lines, timing systems, swimming pools and spas, underground or concealed pipes, sewer lines and septic systems, electrical lines and circuits, central air conditioning (when the outside temperature is below 18 degrees Celsius), and anything else which would be difficult to examine by the nature of its location. Thus, if someone is buying a house with a swimming pool or spa, they might be advised to find someone who is qualified to inspect such equipment or improvement.
Even detectible deficiencies may go unreported, as the inspector may only inspect a sample of things found in different places throughout the house, i.e. electrical outlets, shingles or bricks.
Finally, some contracts provide that even if the inspector was negligent and failed to identify or discover a problem or defect, there is a limit to their liability, regardless of how serious the defect or problem may be, or the consequential damages that might result or occur in order to correct the problem. Often, the liability of the home inspection company is limited to the cost of the inspection report.
It is interesting to think that if a patent defect is missed because of a faulty inspection, the purchaser has no recourse against the seller due to caveat emptor, and no recourse against the inspector (at least for anything over the cost of the report) and, even then, in very narrow situations, due to the limitation of liability clauses in the inspection contract.
If the defect is latent, the purchaser has no recourse against the inspector, due to many exclusions of liability for latent defects in the contract, nor the seller, unless the seller knew about the problem.
Before engaging the services of a home inspector, ask to review their standard contract. This is another example of caveat emptor – Let the Buyer Beware!