Buyer Beware! Caveat Emptor and Real Estate Transactions

Most of us have heard the expression, “let the buyer beware,” which is also known as a legal doctrine, “caveat emptor.”  In this post, we will look at the doctrine of buyer beware in real estate transactions.

What is the doctrine of caveat emptor?

In any sale, the law generally states that the person who buys something, whether it is a small purchase like a pair of socks, or a large purchase like a home, is responsible for ensuring that the item is in good working order. The logic goes that if the buyer identifies any defects or issues at the time of sale, they may protect themselves by inserting terms into the contract that reflect those issues, and adjust the agreement accordingly.

Generally speaking then, in a real estate purchase, any problems that arise after the sale has been completed must be handled by the purchaser. Defects that were apparent, or “patent” at the time of sale are expected to be discovered by the buyer during a reasonable inspection, and handled through the terms of the contract.

Exceptions to buyer beware and patent vs latent defects

Although a patent defect cannot give rise to an exception to caveat emptor, the rule may not apply where the vendor has concealed a latent defect, or otherwise misled the purchaser as to the fitness of the property. A latent defect is something that would not be readily apparent to the purchaser or their home inspector upon a reasonable inspection.

In order to succeed in a claim against a vendor arising from a latent defect that arose after the sale was complete, the purchaser must show:

  • The vendor made a representation of fact about the property;
  • The representation they made was false;
  • They knew, or ought to have known, that the representation was false; and
  • The purchaser relied on the false representation when entering into the agreement of purchase and sale.

If these elements can be proven, the vendor may be liable to cover any damages and losses that were caused by the concealed defect.

Legal advice for real estate transactions in Kitchener-Waterloo

Buying property involves large amounts of money, but does not need to involve unnecessary risks. At Duncan Linton LLP, our commercial and residential real estate lawyers advise clients about their legal rights and obligations with respect to the purchase or sale of a property, and how to protect themselves against potential claims down the road. Speaking with a qualified and experienced lawyer at the outset of any property transaction is the best way to ensure that your risks are minimized at every stage of the transaction.

If you have concerns about a potential legal claim arising from a latent defect, or would like to discuss an upcoming purchase or sale, our team of experienced lawyers can help. Contact us online or call 519-886-3340 to make an appointment.