Encyclopedia
Material latent defect
A defect not easily seen that makes a property dangerous or unfit, which sellers' licensees must disclose.
For example: Hypothetical: a seller knows about a structural issue and must disclose it. (Illustration only, not a real deal.)
The BC Financial Services Authority (BCFSA) regulates real estate services in BC. Official source: BCFSA: material latent defects
Example only, not a real client. Say you are selling a building and know that the foundation leaks into the basement during heavy rain, though it is not visible now. You disclose it in writing so the buyer can factor it in, and avoid a dispute later.
What I’d tell a friend
As a seller, disclose known hidden defects. As a buyer, inspect and ask direct questions.
Why it matters to you
A seller who knows about a serious hidden problem generally has to disclose it, and failing to can lead to a claim. But disclosure only covers what the seller knows, so buyers still need inspections and good subject clauses.
How to use it in your deal
Sellers should disclose what you know, in writing; hiding a known latent defect can lead to claims after closing. Buyers should still inspect carefully, since sellers only have to disclose what they know, and BC law generally expects buyers to look for visible (patent) defects themselves.
Ask direct questions about permits, water ingress, structural repairs, environmental issues and past insurance claims, and get answers in writing. Commercial buyers usually sign contracts with little seller warranty, so your own inspection and reports are your main protection. Licensees must disclose known material latent defects to buyers even if the seller doesn't want them to.
Mistakes I see
Buyers relying on the seller to disclose everything. Sellers hiding known problems. Not asking about permits.
In BC and Vancouver
BC courts have developed the law on latent defects; BCFSA rules require licensee disclosure. Decisions are on CanLII.
Official sources: CanLII (court decisions) · Real Estate Services Rules (BC Laws) · BC Financial Services Authority
What it means
A material latent defect is a hidden problem that a reasonable inspection would not reveal and that affects the property’s value or safety.
In BC, agents have duties to disclose known material latent defects to buyers.
What to do
Sellers should tell their agent about known issues and get legal advice on disclosure.
Buyers should still inspect, review documents and ask direct questions in writing.
Check with a BC lawyer on your rights and obligations.
Questions to ask before you sign
- What do you know about the building's condition?
- Were all repairs permitted?
- Any water or structural issues?
- Any insurance claims?
- What did my inspector find?
Keep reading
Related terms: Due diligence, Building condition assessment, Disclosure of representation
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.