Latent vs Patent Defect

Letter from The C.E.O. Andre Hamman to all Agents in the Group

Latent vs Patent Defects

You are bound to be faced with this issue a number of times in your Real Estate career.

Scenario 1

The Buyer has taken transfer of the property he bought through you and the day after moving in he calls you to say that there is a large burn mark on the lounge wooden flooring that had been covered by a rug when he viewed the property.

The burnt floor is known as a Patent Defect as it is easily identifiable by a reasonable person when inspecting the property. In this case the defect was obviously hidden from view by the Seller when he covered the mark with the rug. Broken windows, cracked walls, damp etc all fall into this category.

Does the Buyer have a claim?  Yes, he does. The Seller was obviously aware of the problem and hid it from view. The Seller should have disclosed to the Agent that there was a burn mark on the floor. If he had, then the Agent was bound to tell the Buyer.

What is the Agent’s responsibilty?  The law is becoming more and more onerous on the Agent to take a certain amount of responsibility in these cases. The Agent needs to do a very thorough inspection of the property and properly record the details on a listing. In addition, the Agent must discuss the condition of the home with the Seller and ask the right questions to establish if there are any problems that may have been overlooked.

Problem: You have a fight on your hands and you will need to spend a lot of time communicating with Buyer and Seller. You need to get a quote to fix the damage (always reduce the problem to money) and then get the Seller to pay for the repairs.

Solution: The Agent must get the Seller to fill in a Property Disclosure Document. This form will be shown to the Purchaser who will accept the defects as detailed by signing the bottom of the form.

Scenario 2

The Buyer has taken transfer of the property he bought through you. Two weeks after moving in he calls you to say that the pool pump has burnt out. He got a pool repair company to do a quote and it turns out that the pool motor was old and due for replacement.

The pool pump problem is known as a Latent Defect, one that only an expert would be able to identify, this kind of defect would not be apparent to a reasonable person when inspecting the property. Other examples are leaking roofs, problem geysers, faulty plumbing etc

Does the Buyer have a claim?  No, he does not. It is unlikely the Seller was aware of a problem, and even if the pump was old, it was not the duty of the Seller to replace it if it was working at the time of sale.

What is the Agent’s responsibilty?  The Agent must be able to show that he did a proper inspection, listing and interview with the Seller. In this case the Agent could not have foreseen the problem and would not have been able to notify the Purchaser.

Problem: You have a disgruntled Purchaser who may try and hold the Agent responsible, not that he can in this case. The Purchaser is going to become a Seller one day and you want him to call you to sell his house.

Solution: Again, the Property Disclosure Document will go a long way to diffusing the situation. The Seller will thank you for taking the trouble and the Purchaser will recognise your professionalism and call you to do the same for him one day.

Article by Andre Hamman – CEO Huizemark Franchising Group

www.huizemark.com