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Patent Defects vs. Latent Defects in House Purchase

In Purdy v. Russell, 2022 ONSC 4692, the plaintiff commenced a lawsuit over the purchase of a house. The house had a rotting foundation which required reconstruction. The plaintiff sued the vendors of the house. The defendants brought a summary judgment motion.

Justice Aston went over the test of when a vendor can be liable for defects of a house. There is a distinction between patent defects and latent defects.

A patent defect is one which can be discovered by a reasonable examination and reasonable diligence on the part of the purchaser. The principle of “buyer beware” applies to defects of this kind. A vendor is under no obligation to disclose a patent defect. However, a vendor cannot actively conceal or cover up a patent defect.

A latent defect is not readily discoverable during a routine inspection. When there is a latent defect, the purchaser must establish that either the defect was known to the vendor and the vendor was guilty of active concealment, or the vendor made a false representation about the defect in reckless disregard for the truth or falsity of that representation.

In the case at bar, the defendants took the position that the issues with the foundation were patent defects, which were actually discovered or reasonable discoverable by the plaintiff and her home inspector. The defendants argued that the plaintiff assumed the risks of a defective foundation when she waived the condition in the agreement of purchase and sale regarding a satisfactory home inspection.

Prior to completing the purchase, the plaintiff’s home inspector found major concerns regarding the overall condition of the basement and foundation. There were moisture and possible mold issues. The home inspector stated that the risk of hidden damage, mold, and wood rot could be a major expense to repair.

Some areas of the foundation were covered with drywall and insulation. As a result, the extent of any problems with the foundation were not apparent. However, as noted, the home inspector identified signs that there could be a major problem. The home inspector recommended removal of the drywall and vapour barrier to allow for a full inspection by a wood foundation expert.

On cross-examination, the plaintiff acknowledged that she knew the foundation was a significant “unknown” which “could pose a major concern”.  She said that she did not take any steps regarding these concerns because the underlying structure could not be seen.

Justice Aston held that the defects to the foundation were readily discoverable to the plaintiff had she exercised reasonable diligence.

Justice Aston further held that the defendants did not know about a foundation defect. The repair work conducted on behalf of the defendants to replace installation and install drywall was to fix a leak and to reduce heat loss. It was not to cover up any problem with the foundation.

As a result, Justice Aston granted the defendants’ summary judgment motion and dismissed the action.