Latent and Patent defects in Real Estate

Cotton v. Monahan,  2011 ONCA 697 is a useful decision that applies the doctrine of latent and patent defect in the context of the sale of real estate.  To succeed in a claim for damages on purchasing a house, absent some contrary contractual agreement, a purchaser must establish that the vendor knew of latent defects and concealed the latent defects or made representations with reckless disregard for the truth.  The Court held:

[3]              The trial judge dismissed the claim by applying the decision of this court in McGrath v. McLean (1979), 22 O.R. (2d) 784, which held that to be successful in such a claim, a purchaser must establish that the vendor knew of the latent defects, concealed the latent defects or made representations with reckless disregard for the truth.

[4]              The respondent husband was a handyman who had no formal training. He was not fully aware of building codes or standards and did not consult with professionals when undertaking the repairs. The trial judge found that the respondents did not know that any of the workmanship was defective when they covered it with dry-wall in the normal course of completing the improvements. The trial judge found that the respondents lived in the house for several years after the renovations with no problem. The trial judge further found that the respondent husband was a prudent and careful person who would not have knowingly exposed his family to risk.

[5]              In our view, the trial judge’s finding that the respondents were simply unaware that the workmanship was defective is fatal to the argument that they concealed the defects in order to sell the property or that they were wilfully blind with regard to the defects.

[6]              We do not accept the submission that the trial judge erred in failing to find that the actions of the respondents amounted to “concealment” as that term is used in McGrath v. McLean. In our view, “concealment” in this context connotes an act done with an intention to hide from view some defect of which the vendor is either aware or wilfully blind. The trial judge did not err in holding that “active concealment” was required as that formulation of the test is well established: see Gumbmann v. Cornwall (1986), 44 R.P.R. 114 (Ont. H.C.J.) at para. 63; Guglielmi v. Russo, 2010 ONSC 833, 92 R.P.R. (4^th) 117 (Ont. Div. Ct); J. Victor Di Castri, The Law of Vendor and Purchaser, 3^rd ed., looseleaf (Toronto: Carswell, 1988), vol. 1 at para. 239.

[7]              On the facts as found by the trial judge, the respondents merely completed their renovations in the ordinary course without any knowledge or wilful blindness as to any defects in the work. The appellants were aware of the fact that the respondents had done extensive renovations on their own without a permit and without inspection. If the appellants wanted a guarantee that the work had been done to their desired standard, they were obliged to bargain for an express warranty to that effect to replace the presumptive rule of caveat emptor.