Whether you're a buyer discovering a hidden defect or a seller facing responsibility for issues in a previous property sale, encountering such problems is always challenging. In both scenarios, understanding the implications and options for recourse is essential.
Hidden defects can be complex, and it's essential to take all possible precautions to prevent them. However, if a significant issue arises despite precautions, here are a few steps you can take. Let's delve into this further.
What is a hidden defect?
A hidden defect refers to a significant issue with a property that is not easily noticeable upon a superficial inspection.
Unlike cosmetic imperfections, hidden defects stem from underlying flaws in design, construction, or deterioration that existed before the property was sold.
What qualifies as a hidden defect?
Defining what qualifies as a hidden defect can be complex, as it's not strictly defined by law and must be evaluated on a case-by-case basis. According to the Civil Code of Quebec, a hidden defect is typically considered to be a flaw in the property that:
- Renders it unfits for its intended use
- Significantly diminishes its usefulness to the extent that the buyer would not have purchased it or would have paid a lower price had they been aware of the defect.
Pre-purchase home inspection: a crucial step in the buying process
A pre-purchase home inspection holds significant importance, legally requiring buyers to exercise due diligence before finalizing a real estate transaction. It is crucial for buyers to be vigilant and conduct a thorough visual assessment of the property.
If issues arise after the purchase, the buyer may be held accountable for associated costs if negligence is determined. Therefore, opting for a pre-purchase inspection is strongly advised.
A detailed report prepared by a qualified building inspector can serve as evidence that necessary measures were taken to uncover potential defects before completing the sale.
Buyer: what are your recourses?
Despite taking all necessary precautions before purchasing a property, buyers may still uncover defects after becoming the owner, some of which may only become apparent years later and qualify as hidden defects.
How can I prove a hidden defect?
- Document the defect with photos or videos to clearly illustrate its impact.
- Contact a qualified expert such as an architect, engineer, or electrician to evaluate the defect’s characteristics and seriousness.
- Gather extensive information, including repair estimates, certificates, and statements from neighbors, to substantiate the defect’s presence and indicate that the seller should have known about it.
Notice of defect
After discovering a defect, the next step is to formally notify the seller. This notice should be sent using registered mail or delivered by a bailiff to ensure proof of receipt.
According to legal standards, you are required to inform the seller in writing about the defect within a reasonable timeframe upon its discovery. Although the exact period is not specified in the Quebec Civil Code, it generally amounts to around six months.
It's important to avoid initiating any repair work until the seller has responded to your notification or until your case has been resolved in court.
Legal proceedings
Before proceeding with legal action, it's crucial to consider the potential costs relative to the compensation sought. If the anticipated legal expenses are likely to exceed the amount you are claiming, pursuing the matter in court may not be financially wise.
It's also important to recognize that the compensation awarded may not fully cover all costs claimed for repairs. The court's assessment of the property's condition and the impact of the defect could result in partial reimbursement rather than full coverage of expenses related to addressing the hidden defect.
Which court to go to for a hidden defect?
The court where you should file a case for a hidden defect depends on the value of the dispute:
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Small Claims Court: For "minor" hidden defects valued at less than $7,000, you can file your case in the Small Claims Court.
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Court of Quebec: If the dispute involves an amount exceeding $7,000 but is less than $70,000, it will be adjudicated by the Court of Quebec.
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Superior Court: Disputes exceeding $70,000 will be handled by the Superior Court.
Hidden defects: what happens if you are the seller?
If you receive a notification from the buyer after selling your property, claiming responsibility for an issue that you were unaware of during the sale, it's essential not to immediately dismiss their claim as unfounded.
Instead, it's important to treat the matter seriously and take proactive steps to address it.
Responding to the buyer
Upon receiving the notice from the buyer, it's advisable not to rush into taking a formal position. Instead, it's crucial to acknowledge the buyer's claims carefully and respond via registered mail. If clarification is necessary, consider requesting additional information regarding the nature and origin of the issue. This might involve asking for a detailed expert report or additional photographs if not already provided.
Creating an environment that encourages open communication, dialogue, and negotiation is advantageous. Strive to work towards a mutually acceptable resolution with the buyer, as litigation can be considerably more expensive and time-consuming than resolving the matter amicably.
Start negotiations
To start negotiations, you may want to request access to the property from the buyer to conduct an inspection with an expert of your choice. This approach enables you to personally assess the issue and obtain an independent evaluation and estimate of the defect. This information will form the basis for your negotiations with the buyer.
If you intend to dispute the buyer's claims, it's crucial to notify them via registered mail. This communication serves to clarify your stance, providing the buyer with the opportunity to determine whether to address the matter independently or pursue legal action if they maintain that you bear responsibility.
What are the grounds for defense?
In defending against claims of hidden defects, there are typically four grounds that can be used to argue that the issue is not a latent defect:
- You can assert that the defect was visible or known to the buyer at the time of sale.
- You can argue that the defect is the result of normal aging or wear and tear rather than a structural or inherent flaw.
- You can contend that the defect arose due to improper use or neglect by the buyer after acquiring the property
- You can show that the sales contract explicitly states that the property is sold "as is" or "at the buyer's risk" without any legal warranty.
In any legal dispute over hidden defects, it is the buyer's responsibility to prove that the defect existed prior to the sale to prevail in their claim.
What can the buyer ask for?
Typically, buyers can request either compensation equivalent to repair costs or a price reduction if a significant issue with hidden defects arises. The reduction should generally align with repair costs, adjusted for any property depreciation.
In severe cases where repair expenses exceed the property's purchase price, a court may order the sale's cancellation.
Both buyers and sellers must grasp the concept of hidden defects accurately. It's advisable for parties involved in disputes over hidden defects to seek counsel from a real estate law expert, such as a notary, before taking legal action.
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