One of the worst scenarios that can happen to a buyer is to buy a property and then notice, a few weeks or a few months later, that there was a serious problem with the house that the seller had not informed you about. The famous hidden defects, it worries many buyers! The pre-purchase inspection carried out by your inspector does not completely protect you against the risk of hidden defects. Of course, a pre-purchase inspection is essential, and it will allow you to drastically increase the chances that everything is beautiful and in good working order, but it may still be that the problem is located in a place that the inspector cannot see. When can you really say that you are dealing with a hidden defect? In fact, even simpler, what is a hidden defect? What are the remedies? What are your rights as a new owner? In order to get a better handle on this situation, let’s see everything you need to know and what you do not know about hidden defects!
A hidden defect is a serious imperfection, or an inapparent defect, connected to the ground or building and renders the latter unusable. The problem identified is so important that it significantly diminishes the value of the property purchased, and this defect is only perceived through a thorough examination of the building. When a defect is detected, it is so important that the buyer, if he had been aware of it at the time of the sale, would have questioned the acquisition of the property or would have asked for a price reduction. Here are 3 classic examples of hidden defects:
- Rotten roof
- Crack in the foundations
- Mould in wall partitions
Currently in Australia, hidden defects rank in the Top 5 most common lawsuits. A hidden defect can be discovered 1 month, 1 year, 10 years or even 20 years after the purchase of a property. But how do we know if we are really dealing with a hidden defect? Let’s see the conditions to fulfil!
We do not shout hidden defect as soon as we notice a problem in his house! There are several criteria to check if a defect is a hidden defect or simply a problem that has developed since the purchase of the house. Here is a presentation of the 9 cumulative conditions to be fulfilled to determine if a hidden defect is really one. If these conditions are met.
# 1: There is a defect
Obviously, the first criterion is that a defect must be identified. The term “defect” is defined as a defect that renders the immovable property unsuitable for its intended use or that greatly diminishes its usefulness. This is often the case of a workmanship or construction that has not been done by industry standards.
# 2: The defect must be serious
The defect must be a major problem affecting the building and would have called into question the buyer’s desire to buy the building in question. It cannot simply be a minor flaw like a bad sink plumbing connection, but truly a problem affecting the value of the building.
# 3: The defect must be unknown to the buyer at the time of sale
It speaks for itself! The defect which is mentioned to the buyer and which is expressly mentioned during a visit or in any other way cannot be declared as “hidden defect”. The buyer should not be aware of the existence of the defect at the time of sale.
# 4: The defect must be “not apparent”
The hidden defect must be unobvious, that is, it cannot be ascertained by a prudent and diligent buyer. The apparent defect, for its part, can be found by a prudent and diligent buyer without the need to resort to an expert. The apparent defect cannot be compensated and cannot be considered a hidden defect. The defect must therefore be not apparent in order to be able to be compensated.
# 5: The defect must be prior to the sale
A buyer can not declare a defect that has developed following the sale of the building. To be considered a hidden defect, the buyer will have to prove that the defect was prior to the sale of the building. According to this logic, the seller is only responsible for existing defects when he was the owner. So, it is possible that the buyer will have to sue the seller for a problem having appeared 10 or 20 years earlier.
# 6: The defect is not simply due to a normal deterioration of the property
A hidden defect cannot be one if it is due to the obsolescence of a building, to the normal use and the progressive deterioration of a physical component. For example, a roof with a life of 20 years and 20 years at the time of sale will have to be replaced. This is not a hidden defect. The hidden defect must therefore be a defect that is not due to the normal deterioration of the property.
# 7: A written complaint has been made to the seller
The buyer who wishes to sue a seller for hidden defects must form a written denunciation to the seller within the appropriate time period following the finding of the hidden defect. This formality is mandatory and if the notice is not sent in time, there will be no possible recourse for the buyer.
# 8: Send a letter of formal notice to the seller
The buyer must subsequently send a letter of formal notice to the seller asking him to come and repair the defects found within 10 days, except emergencies where the delay may be shorter. This is another mandatory legal formality for an appeal to take place.
# 9: Initiate a lawsuit within 3 years from the discovery of the defect
The date you bought the building is irrelevant. You can own for 2 weeks or 20 years and still sue a seller who sold you a property with a hidden defect. The law states that within 3 years, from the date of discovery of the defect, to initiate a lawsuit against the seller. Once this period has passed, you will not be able to continue, and your entitlement will expire.
NOTE: If these 9 conditions are met, you have an excellent chance of winning your hidden defects lawsuit and getting compensation. If your salesman claims that he had no knowledge of the defect and that it appeared when the former owner owned the property, then it is he who will have to sue for compensation against the sums he paid you.
A recourse in hidden defect can be undertaken at any moment from the moment when you notice the presence of a defect. As mentioned earlier, the date of purchase does not matter. So, you have a period of 3 years, from the date of discovery, to sue the seller to obtain compensation. Always refer to the 9 conditions presented above to check if your case is a case of hidden defect before taking legal action.
Houses sold without legal guarantees: no recourse possible!
Increasingly popular in Australia, sales without legal warranties mean that a buyer cannot sue a seller for hidden defects unknown to the seller. Thus, the seller is protected against possible lawsuits in case of defects that were unknown to him. However, if a seller knew of a hidden defect and did not mention it to the buyer, he could still be sued. This is not an invincible clause that protects the seller against all odds. It cannot be repeated enough: if a seller knows a defect and does not mention it to the buyer, he can still be sued even if the buyer had agreed to buy the house without legal warranty.
Why buy a house sold without legal warranty? Well, it’s simple! The seller often gives a discount of 10% on the sale price of the property when he asks the buyer to waive the legal warranty. It’s a big amount! For a $300,000 house, we are talking about a $30,000 discount, which is not nothing. It is also interesting to note that real estate agents and brokers generally cannot sell properties without legal warranties, unless they are repossessed.
For a buyer, the stress of buying a house that contains hidden defects is often important, and everyone wonders what the best way is to prevent such a situation from happening. In fact, it is very difficult to be certain that your home is free from hidden defects, however, there is an easy way to proceed to be immune from hidden (and apparent) defects and to ensure that you will be compensated if you find any. In fact, it’s just a matter of hiring a home inspector to do a pre-purchase inspection of your property. If your inspector misses a detail in his pre-purchase inspection and an apparent defect is detected after the purchase, he will be responsible for compensating you. If you discover a hidden defect, then it will be the responsibility of the seller to compensate you. In both cases, you will not have a penny to pay and you will have possible recourse.
As a buyer, you are never responsible for a hidden defect or apparent defect, and there are remedies that allow you to be compensated.