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Liability of Vendors For Latent Defects in Real Estate Transactions in Alberta

What is the liability for a vendor for latent defects in the property? As a general rule the common law rule of Caveat Emptor (Buyer Beware) means sellers will not have liability for these defects with real estate. However, there are a number of exceptions. The Court in the case of Lewis v Plourde, 2017 ABQB 235 had the following to say:

[193] The British Columbia Supreme Court in its decision in McCluskie v Reynolds 1998 BCLR (3d) 191 at paras 53-54, 1998 CanLII 5384 (BC SC), 19 RPR (3d) 218 [McCluskie] succinctly summarized the exceptions to caveat emptor as follows:

In conclusion on this point, the authorities with which I have been presented suggest that the doctrine of caveat emptor will not operate to deny the plaintiff's recovery in the following situations:

1. where the vendor fraudulently misrepresents or conceals;

2. where the vendor knows of a latent defect rendering the house unfit for human habitation

3. where the vendor is reckless as to the truth or falsity of statements relating to the fitness of the house for habitation;

4. where the vendor has breached his duty to disclose a latent defect which renders the premises dangerous.

Numbers 3 and 4 are less common, but 1 and 2 are more common.

Patent and latent defects are key to number 2. Patent defects are those (in the words of the court in Cardwell v Perthen2006 BCSC 333 at 122 :

Patent defects are those that can be discovered by conducting a reasonable inspection and making reasonable inquiries about the property.

Latent defects are considered at paragraph 127 of Cardwell:

Latent defects - being ones which are not discoverable by observation and reasonable inquiry – are treated differently.

The Court in Lewis v Plourde went on to say:

[208] In summary, the case law provides that for a vendor to be held liable for failing to disclose a latent defect in improvements made to the real property purchased, the purchaser must prove that:

1. there is a defect;

2. the defect is a latent defect because it could not have been identified by an ordinary purchaser’s reasonable inspection;

3. the vendor knew of the latent defect or concealed the latent defect or was reckless as to knowing of the existence of the latent defect;

4. the latent defect renders the property dangerous or potentially dangerous or unfit for inhabitation;

5. the purchaser relied on the misrepresentation or concealment when purchasing the property.

(Gibb at para 44).

[209] The Plaintiff has the onus of proving of the vendor’s degree of knowledge or recklessness of a latent defect: McCluskie at para 54.

If you have purchased a home and believe you have discovered a Latent Defect, please feel free to contact us.

The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.

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