For real estate commerce to thrive, there must be certainty and finality in the purchase and sale of land. Caveat emptor, or buyer beware, has been the legal doctrine applied for centuries to achieve this goal. The basic tenet is that the onus is on the purchaser to ensure that the property to be acquired is in a satisfactory state for the purchaser’s needs. In certain circumstances, courts have recognized that the finality of a purchase may be questioned when there are defects affecting property. The debate centres on whether the defects are patent or latent.
Patent defects are defects which are visible to the eye or which may be considered defects by necessary implication from something which is visible to the eye. For example, a crack in a basement wall tells a purchaser about the immediate condition of the wall itself but it may also speak of a larger structural support issue in the building. The test is whether the patent defect is readily discoverable by ordinary inspection before the closing of the transaction. If the purchaser fails to observe a patent defect on inspection or fails to make reasonable enquiries about the patent defect observed, he or she cannot complain about such a defect later. Caveat emptor applies. A vendor is under no duty to draw attention to a patent defect.
Latent defects are defects not visible to the eye or not readily apparent to the purchaser during ordinary inspection of the property. A vendor may rely upon caveat emptor provided the latent defect is unknown to the vendor at the time of sale. However, if the latent defect is actively concealed by the vendor or if the vendor is reckless in failing to disclose knowledge of it to the purchaser, the vendor may be liable. In these circumstances, caveat emptor does not apply to the purchaser and the purchaser may seek redress in court for rescission of the agreement of purchase and sale or for damages resulting from the latent defect.