What is a latent defect in real estate?

The problem of a latent defect is prevalent in any kind of property – real property as well as personal property. In the real estate industry, it pertains to any flaw that was not immediately noticeable during the first property assessment. Such damage is usually revealed when the property or the construction project is transferred to the new home buyers. This is in contrast to a patent defect that one can identify through a cursory inspection.

But what exactly is a latent defect and how can the new homeowners deal with this hassle? Let’s find out. 

What is a latent defect?

Any concealed or hidden defect in a piece of real estate can be a latent defect. Such a flaw is usually not discovered by a customary home inspection or passing observation. For example, you may find a problem in the title of a piece of land after having bought it. Or, the presence of asbestos in the popcorn ceiling. 

It’s comparatively easier to deal with a defect in personal property. It could be a problem with a lawn mower or sprinkler system. The injured party or the new owner may be able to recover damages from the seller for a latent defect. They may be entitled to a refund or replacement.

However, when there are issues with real estate – damaged construction materials, faulty home design, or poor workmanship – latent defects may become problematic for the new owner. And, a serious factor in homeowners insurance coverage and liabilities. 

Explaining latent defect with an example

After purchasing a new house, the new property owner finds out that a bedroom window leaks water whenever it rains. The defective window was not noticed before closing on the deal because it never rained during their visits, home inspection, or final walk-through. They realize that the window was not installed correctly, leading to the leak. They contact the contractor, who agrees to fix the problem as it falls within the timeframe specified in their contract.

Read more: Everything you need to know about correct window installation.

What are some common types of latent defects?

Often, a property inspection may miss certain latent defects. These could be: 

• Structural issues such as problems with the foundation, load-bearing walls, roof, or other structural components of a building. They were not immediately apparent but could cause serious problems over time.
• Faulty plumbing and faulty electrical problems such as old wiring, plumbing leaks, HVAC design flaws, or inadequate installations. All these can lead to major disruptions and potential safety hazards.
• Water infiltration in the form of leaks, moisture problems, and inadequate waterproofing. These can result in hidden water damage, mold growth, and deterioration of building materials.
• Improper insulation and ventilation issues lead to energy inefficiency, poor indoor air quality, and mold growth in the basement walls.
• Hidden pest infestations such as termites or rodents. They can cause significant damage to the structure and require expensive solutions.
• Usage of defective materials, substandard materials, poor workmanship, or improper installations.
• Undisclosed environmental hazards such as asbestos, lead paint, or radon. These can pose health risks to occupants and require costly remediation.

Latent defect and the homeowners’ insurance

An undisclosed flaw or issue in the property might lead to legal action against the contractor due to a breach of contract or negligence. The sad part is that many homeowners unknowingly fall into the latent defect trap when purchasing a property.

While these defects are typically not covered by property insurance, certain insurance providers offer policies or add-ons specifically designed to safeguard homeowners in such situations.

In many states, homeowners insurance may include a certain level of protection for hidden defects, although it might require an additional policy. To ensure you’re covered for latent defects that may be found, it’s advisable to review your home insurance policy or consult a licensed real estate agent at the time of buying a home.

Latent defect vs patent defect: understanding the difference

The difference between latent defects and patent defects lies in their visibility or discoverability.

A latent defect refers to a flaw or issue in a property that is not immediately noticeable or visible upon reasonable inspection. These defects are hidden or concealed and may not become apparent until some time after the purchase or occupancy of the property. Latent defects are not easily detectable by a regular inspection and require a more in-depth investigation to discover them.

A patent defect, on the other hand, is a defect or issue in a property that is readily visible or apparent upon reasonable inspection. These defects are open, obvious, and can be identified without the need for extensive investigation. They are typically noticeable to a person with average observation skills. For example, the absence of pool fencing around a swimming pool, an outdoor patio with uneven paving stones, or a low staircase banister.

So, who’s responsible for a latent defect?

Unfortunately, new homebuyers bear the responsibility for latent defects. Unless they are smart enough to include the clause in the sale agreement. Ultimately, the seller’s liability to address such issues depends on the real estate contract. But, in most purchase agreements, home sellers are exempted from responsibility if they have provided a seller’s disclosure.

How do you deal with latent defects?

Courts typically adhere to the caveat emptor doctrine when it comes to selling real estate. This means buyers are responsible for inspecting the property and assuming accountability for its condition (the buyer beware principle). 

Fortunately, some legal protection against latent defects does exist, especially if the seller knew of the issues. If there is a hidden defect that has been concealed or not disclosed, courts do not apply caveat emptor and may allow a claim against a seller or contractor.

Parties can safeguard themselves by including provisions concerning latent defects in sales agreements. Therefore, it’s crucial that a prospective buyer hires an experienced real estate litigator or an attorney right at the onset of the home-buying process. 

How long does the buyer have to fix a latent defect?

The defects liability period is a designated timeframe after a property is transferred to a new owner, during which any apparent or hidden flaws must be communicated to the contractor. The contractor should then be granted sufficient time and opportunity to rectify the damage. Or, cover the entire cost of repairs, as agreed upon by both parties. This is crucial because otherwise, the owner bears the responsibility for property maintenance, regardless of their awareness of the initial construction problems.

Keep in mind that the time limit for rectifying a hidden flaw in a purchased house or recovering repair expenses depends on the specific problem and when it is discovered. If the buyer fails to address the defect within the designated timeframe, they may have no option but to bear the cost and repairs of the home improvement on their own. Additionally, buyers may be accountable for any additional damages caused by the defect.

Last thoughts

A latent defect is a structural or physical defect in the property that isn’t easy to find through an inspection prior to a home sale. Therefore, as a real estate buyer, it’s important to have a qualified home inspector conduct a thorough inspection to assess the condition of the property before buying it. Buyers can also safeguard themselves by including provisions regarding latent defects in sale agreements or contracts with contractors.

Read more: What is a property assessment

Written by Ramona Sinha. July 29, 2023

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.