Hidden defects: How to identify and prevent them and what to do about them
Published on June 13, 2023
Buying a property is an achievement. It’s a time to dream and to invest in the future. No one ever expects that this happy event might come with unpleasant surprises. However, that’s what some owners experience when they find a hidden defect in their new property.
Éducaloi defines a hidden defect as a flaw that decreases a building’s quality. Unlike an apparent defect, a hidden one is not known to the buyer at the time of purchase and could not have been detected by a cautious and diligent buyer, without requiring a professional opinion. A defect that meets these criteria could potentially lead to the seller being sued.
So, to avoid trouble down the line, it’s important to identify, prevent and respond to hidden defects when you decide to buy real estate.
Contents:
- The most common hidden defects in real estate
- How to detect hidden defects during a home visit
- What to do if you find a hidden defect after the purchase
- The pre-purchase inspection: Protection to consider
The most common hidden defects in real estate
Many people wonder, “What’s considered a hidden defect?”
According to paragraph 1726 of the Civil Code of Quebec, “the seller is bound to warrant the buyer that the property and its accessories are, at the time of the sale, free of latent defects which render it unfit for the use for which it was intended or which so diminish its usefulness that the buyer would not have bought it or paid so high price if he had been aware of them.” Therefore, the owner selling off the property is responsible for a hidden defect—whether or not its existence was known at the time of the sale.
To qualify as a hidden defect, the flaw in question must:
- Be serious (a significant reduction in the property’s normal usage)
- Not have been detectable by a reasonably cautious buyer
- Not have been known by the buyer at time of purchase (or was known but was downplayed by the seller)
- Predate the sale of the property
Caution! Even if a defect meets these criteria, it is possible for it not to be considered a hidden defect or not allow for legal recourse if:
- The problem is a result of obsolescence (normal lifespan of materials)
- The problem results from ill use by the buyer
- The sale was done “at the buyer’s risk and peril”
- The sale is under judicial control (mortgage foreclosures)
Here are a few examples of hidden defects that may be present in a house or building:
Foundation problems
Foundations are buried in the ground, and their job is to bear the load of the structure. They must therefore be designed according to the type of build and the type of soil. Since soil is in constant motion, foundation issues can arise.
In fact, cracking in the cement is practically inevitable over the lifespan of a house. Some of these cracks are caused by normal wear caused by vibration or the climate. Others may be caused by the presence of pyrite or radon, insufficient drainage or other reasons.
A building expert can determine the cause of foundation problems. If these problems persist however, they can lead to soil subsidence, horizontal displacement of the building, and doors and windows that no longer close properly. Interior damage like water infiltration or damaged flooring can also result from cracks in the foundation.
There are several solutions available to repair a house foundation. Real estate expertise is needed to choose the most appropriate among the following options:
- Fortify the foundations
- Inject liquid resin
- Install micropiles
- Install a French drain
Plumbing problems
A property’s plumbing can also have significant issues that may qualify as hidden defects. Since most pipes, joints and connections are not visible to the naked eye, it may be difficult to notice defects in terms of materials, corrosion or other problems.
These may include:
- A non-functional drain
- Non-compliant pipes
- Pipe breaks
- Damage caused by water behind the shower or bath
- Hidden leaks
- Water tanks that are quick to burst
- And more
If not taken in hand, these defects can cause aesthetic and structural damage, along with unexpected expenses and a likely increase in insurance premiums.
Electrical problems
Electrical problems are among the most frequent hidden defects. Electrical circuits must meet certain standards to be compliant. These include the electrical panel, wires, voltage, sockets, etc. Since wiring is often located behind insulation, walls or other obstructions, it is a real challenge to check a property's entire circuitry.
Hidden defects are often due to work that wasn’t done by a professional, to dated or defective wiring, or to poorly protected outlets. These can lead to fire and safety risks, potential repair or update costs, and the possibility that an insurer will refuse to offer home insurance.
Humidity problems
Hidden defects related to humidity can be caused by:
- A malfunctioning drain
- Faulty insulation
Dampness and mould can be a real problem because they can attack the building materials, especially wood. They also impact ambient air quality, which can have adverse health effects for the occupants.
Potential homeowners may be able to detect humidity issues in a building by looking for:
- Ochre-coloured deposits at the bottom of the walls
- Protruding cracks on the exterior plaster or sinking into the ground
- Smell or presence of mould or rot
- Crystal deposits on concrete
- Recurrent condensation
- And more
How to detect hidden defects during a home visit
As mentioned earlier, the law states that any defects that could have been detected by a cautious and diligent buyer are not guaranteed. So it’s important to know how to find them when touring a building and especially before making an offer to purchase without any conditions.
Since it’s not mandatory to hire a building inspector to look at the property before buying it, let’s see how you can detect hidden defects, either by yourself or with help from an expert.
By yourself
Becoming a property owner involves responsibilities even before buying. As a buyer, you must do a careful and diligent inspection of your future property; otherwise you’re agreeing to buy it with all its defects and the resulting expenses. You should also take a close look at the Seller’s declaration.
See the “Declaration of the seller” document
For an inspection to be considered diligent and careful, it must include:
- A careful visual examination of the whole property
- Special attention to apparent signs that could reveal the presence of a defect
- A more in-depth inspection or an expert’s services when a defect is suspected or if the building is old
It’s also important to research the neighbourhood. For instance, some Montréal neighbourhoods are known to have friable or clay soils. If some information is well-known, then the defects related to it may not be considered hidden.
With the help of a professional inspector
Before officially purchasing a home, some people choose to get it inspected by a professional and include an inspection condition in their offer to purchase. The inspection can be performed by architects, technologists or building engineers.
Their inspection will look more in-depth at:
- The structure of the building (foundation, floors, walls, ceilings, etc.)
- The building envelope (doors and windows, balconies, cladding)
- Roof (covering, rain gutters)
- Interior (cupboards, stairs)
- Insulation
- Building mechanics (plumbing, electricity, heating, ventilation, air conditioning)
- Landscaping
- Stoves and fireplaces (where applicable)
After looking at the property, the inspector will provide a detailed, personalized report of their observations of apparent defects, including photos. It may also include advice to help the potential buyers make an informed decision and an estimate of the costs involved in the most important repairs. The report may even open the door to renegotiating the purchase price or even withdrawing the offer to purchase .
To choose someone you can trust to do the inspection, ask them about their skills and training. And make sure the person:
- Is objective (neither the person nor someone close to them should be impacted by the purchase of the property)
- Has training and experience in building inspection
- Is a member of a relevant professional association
- Holds valid professional liability insurance (which covers errors and omissions, and therefore any losses resulting from defects that should have been detected)
- Has recommendations from former clients (at least 10)
- Can deliver their report in a reasonable time frame
- Has had no professional lawsuits or convictions
Talented pre-purchase building inspectors are in demand! Between January and May, it’s a good idea to reserve their services more than 1 week in advance and to ask for a 10-day period in the offer to purchase, rather than the usual 7 or 8 days, for an inspection.
Depending on the building type—condo, single-family house, multiplex—and its characteristics, the cost of an inspection will vary between $400 and $900, plus taxes.
What to do if you find a hidden defect after the purchase
What happens if, despite all your caution and diligence during the inspection, once you're the homeowner, you find a hidden defect that affects your building’s value or use? You should know that there’s no time limit for finding a hidden defect after buying real estate—it can happen 1 month in, or 20 years. In principle, the person who sold you the property is responsible.
To get a situational analysis and make sure the defect meets the criteria of a hidden defect, it’s to your advantage to call on a building expert as soon as the defect is found.
Caution! The law does not cover defects arising after the sale. However, it does cover problems that appear afterwards but are due to a defect that existed beforehand.
Here are the steps to follow to exercise your rights in case of a hidden defect in a building.
Advise the former owner
Because of the legal warranty, the first thing to do if you find a hidden defect in your property is to advise the seller. According to paragraph 1739 of the Civil Code of Quebec, a “buyer who ascertains that the property is defective shall give notice in writing of the defect to the seller within a reasonable time after discovering it.” This amount of time begins as of the gradual apparition of the defect or as soon as it is suspected.
How much time do you have to declare a hidden defect in your home? The “reasonable time” is at the discretion of the court, depending on the circumstances of your situation. According to Éducaloi, a period of 6 months to 1 year is reasonable, but a longer amount of time may be allowable.
The goal of advising the previous owner is to make sure they are aware of the defect and allow them to make the necessary verifications and ascertain the damage. They must be given a minimum of 1 week to 10 days to do so.
Request a repair or refund
You must then send a formal demand letter to the seller to have the repairs of the defect carried out at their expense and by their choice of skilled person. This can be done within the demand letter. The demand letter must contain:
- A description of the hidden defect
- Your demands
- Your conditions
- The response time
Generally, you have the following rights when a hidden defect is found: demanding that the flaw be repaired, asking for the sale to be cancelled, requesting a decrease in the selling price, and claiming damages and interest.
Repairing the defect: Known as “specific performance” this recourse involves the seller taking care of the repair work in cases that allow for it. However, if the situation is urgent or dangerous, or if the seller denies their responsibility or waives the notice, you can proceed with the work yourself.
Cancelling the sale: The seller is forced to repay the selling price and you must give them the property back.
Decreasing the selling price: The reduction generally corresponds to the cost of repairing the defect and the depreciation of the building. If the cost of the work is higher than the purchase price, then the solution is usually to just cancel the sale.
Claiming damages and interest: Unlike the other recourses, this one implies that the seller knew about the defect or could not have overlooked it. In that case, you must prove that the problem was known at the time of sale.
Get legal or mediation services
It is possible to try to resolve the situation amicably using negotiation or mediation. Be it with the seller directly or through the services of a mediator, you may reach an agreement without having to engage a lawsuit. While it’s not compulsory to negotiate the work to be done, it could save you significant time and money. If you manage to agree, be sure to set the terms down in writing. The agreement then serves as a contract.
It’s also recommended to get advice from a lawyer specialized in hidden defects to assert your rights and take steps as soon as you have an expert report in hand. You’ll then know if your legal action has a good chance of succeeding. After all, each case is unique.
Launch a lawsuit if necessary
If it is not possible to reach an amicable agreement, the law sets out a prescriptive period of 3 years from the time the hidden defect was discovered, to launch a suit against the seller. You are then suing the person who owned the real estate before you. That person can then, if they want, sue the person who sold that real estate to them, if the defect already existed when they bought it.
The cost of the work will determine which court will handle your case: If the claim is under $15,000, it will go before the Small Claims Division and you will avoid having to pay a fee to be represented in court by a lawyer. However, a lawyer can help you prepare your proof. If the claim is over $15,000, the case will be presented to the Court of Québec, and for an amount over $85,000, it will go to the Superior Court of Québec. In these cases, the legal fees and the cost of getting expert opinions in court will raise the bill and the case can last over a year.
The pre-purchase inspection: Protection to consider
For these reasons, not doing a pre-purchase inspection is a shortcut to avoid when buying a new property. By relying on professional expertise, you can feel more confident that you’ve done all you can to avoid discovering a hidden defect in the future.
For sellers, it’s possible to avoid legal action due to hidden defects by selling without a legal warranty and by using the “at the buyer’s risks and perils” clause.
Remember that every situation is unique but that there are clear rules to follow if a hidden defect is found, particularly when it comes to the time periods to respect:
When buying and selling, you can avoid problems by having the right information. Even if buyers have recourse, it’s always better to do all you can to avoid the headache of a hidden defect in your dream home.
Want to save thousands of dollars on the sale of your home? You can count on DuProprio’s visibility and support, and keep the commission! Learn more about our services by talking to someone from our team or watching our webinars.
