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home with roof shingles missing

Something’s wrong with my new house now what?

Just because a home may look perfect to you, that doesn’t make it perfect. 

In a hot real estate market, you may see countless homes when you’re focusing intently on the house hunt. From dropping into open houses on weekends to scheduled showings with a real estate agent, you may see so many homes that they quickly start to blend together, and you can lose sight of the small details of each.

The reality though is that once you do decide to place an offer to purchase a home and your offer is accepted, those small details can later result in some major issues, so it’s important to be aware of them ahead of time. No house is perfect – not a new build, and not an older home, but the issues within that house may not always be visible to the naked eye.

What are defects in a property, and whose responsibility is it to make repairs before (and after) you get a hold of the keys?

Patent vs. Latent Defects

There are defects (issues) in practically every home, and they can range in severity from a small issue to a serious one. Effectively defects are split into two major categories – patent defects, which are obviously visible, and latent defects which are not. 

Patent defects are the issues which would be noticeable to the naked eye. These can be simple issues such as a nick in a wall or a missing floor tile, but they may be more severe, such as obvious water damage to a floor, wall, or ceiling. The standard for assessing patent defects is that they would be noticed by a reasonable person without their needing to disrupt the property.

Latent defects are the opposite – these are the defects that are not noticeable to the naked eye at all and might only be noticed by a trained professional or a previous owner with knowledge of the issue. These sorts of issues are not uncommon in older homes – think about asbestos hidden behind walls or in floor tiles, issues with foundation that are hard to detect, etc. Sometimes the current owner may be aware of these issues, and sometimes not. 

Who is responsible for the repairs?

Just because defects exist, that does not mean that they need to go unrepaired. The answer to who is responsible for those repairs generally is decided by the type of defect and the terms of the agreement to purchase the property.

If a prospective buyer notices a patent defect when making an offer, they can include conditions within their offer to purchase that the issues be resolved before closing. These may be issues that they noticed themselves, or buyers can also make their offer to purchase conditional on a home inspection, where a qualified home inspector can review the property for issues (again without disturbing the property). However, in a hot real estate market, many buyers are often forced to ‘roll the dice’ and waive any inspection conditions.

If a purchaser has included conditions related to defects, a seller may choose to conduct the repairs themselves, or can arrange to discount the purchase price by an agreed upon amount if the repairs are extensive and need to be resolved after the closing date. Sometimes buyers will notice a patent defect on their re-visits to the property prior to closing, and their real estate agent can push the selling agent to have the issues corrected prior to closing. 

With latent defects, however, a purchaser may not discover any issues until well after the closing date on the property. In those cases, the responsibility for repairs depends on whether the previous owners knew and failed to disclose, or they simply did not know at all. You as the purchaser may be able to make a legal claim against the seller in certain circumstances. 

The law generally takes the position of ‘caveat emptor,’ or ‘buyer beware,’ however there are significant exceptions when it comes to defects. If the seller made a fraudulent misrepresentation, if they made false or reckless statements, or if they knew about an issue that would render the home uninhabitable, they may be legally liable. Courts can award damages for the expense of correcting the error, or even in some cases undo the entire transaction. 

What about new homes?

For new construction, there may still be issues, however buyers generally have warranties for several years that will cover defects. Buyers are entitled to do a walk-through of the property with the builder, where they can carefully note any defective or incomplete items, and the builder is then responsible for rectifying those issues before the buyer occupies the home. 

In Ontario, all new home purchases are automatically signed up for a Tarion warranty, which covers issues with the property over three different (overlapping) time periods – one year, two years, and seven years. The initial one-year warranty covers most defects, from building code violations to usage of materials that were not agreed upon (such as a lower quality countertop, for example).

The other warranties cover more structural issues – the two-year warranty is intended for plumbing, doors, windows, brick work etc., and the seven-year warranty for structural issues that arise as the property begins to settle. These warranties come at a small fee but can present a significant savings if there are defects with your property (however you as an owner still need to be vigilant and follow the Tarion guidelines to make any claims). 

Final thoughts

Shopping for a new home is exciting, but don’t do it with your blinders on. As a buyer, you’re responsible for doing your due diligence on a property and investigating obvious or potentially obvious issues before closing. As a seller, you’re responsible to disclose any known issues, and can face serious legal consequences for failing to do so. 

If you need to make a claim against a seller or need to defend yourself against a claim from a purchaser, we can help. We’ve assisted in countless real estate transactions throughout the Cambridge, Kitchener, and Waterloo region, and have represented buyers and sellers both in their purchases and sales, and in issues that can arise along the way. Contact us today to set up a consultation.