Regardless of whether it’s a commercial property or a residential home, defects in said property can have significant legal and financial implications. These defects typically fall into two categories: latent and patent defects. They have implications for both buyers and sellers, as it can affect everything from pricing negotiations to future liabilities. In this post, we’ll break down these two types of defects, how they impact real estate transactions, and what steps you can take to protect yourself from unexpected issues.

Latent vs. Patent Defects in Real Estate Transactions

When dealing with real estate specifically, the terms “latent” and “patent” defects are used to describe problems that can affect the property in different ways.

  • Patent Defects: These are the defects that are easily visible or discoverable through a reasonable inspection. Think of patent defects as problems you could spot during a standard walkthrough, such as cracks in the walls, broken windows, or missing roof shingles. Since they are obvious, buyers are expected to recognize these issues and account for them when making an offer. A seller is generally not liable for patent defects after the sale because the buyer has had the opportunity to inspect the property and identify these issues before closing.
  • Latent Defects: On the other hand, latent defects are hidden problems that aren’t immediately obvious or discoverable through a standard inspection. These are issues that may not become apparent until after the buyer has taken possession of the property. Examples of latent defects include faulty wiring inside walls, foundation problems, or mold hidden beneath flooring. Unlike patent defects, latent defects are often discovered months or years after the sale, which can lead to disputes between the buyer and the seller if they weren’t disclosed upfront. In many states, including Florida, sellers are legally required to disclose known latent defects, even if the property is sold “as-is.”

What Can You Do to Protect Yourself from Defects?

Whether you’re a buyer or seller, there are practical steps you can take to mitigate risks associated with latent and patent defects in real estate transactions.

For Buyers:

  • Conduct a Thorough Inspection: Go beyond the basic home inspection. Hire specialized experts, such as structural engineers or roofers, depending on the property’s age and condition. These professionals can help identify potential latent defects that a standard inspector might miss.
  • Request Full Disclosure: Even in “as-is” transactions, demand detailed disclosure statements from the seller. In many states, including Florida, sellers must disclose known latent defects, so ensure that these disclosures are in writing to protect yourself legally.
  • Consider Title Insurance: Title insurance can offer some protection against hidden issues like undisclosed defects that might affect the property’s value. While it won’t cover everything, it can be a safeguard against specific problems.

For Sellers:

  • Full Disclosure: Disclose all known latent defects, even if they are not visible or likely to be discovered through a typical inspection. This protects you from future liability and ensures the buyer is aware of potential issues.
  • Repair or Credit Negotiations: Address patent defects upfront by either repairing them or offering a price credit during negotiations. Handling these problems before closing minimizes the risk of disputes post-sale.
  • Consult an Attorney: Ensure that the contract clearly outlines your responsibilities and liabilities regarding defects. A well-drafted contract can protect you from future claims related to both patent and latent defects.

These steps can help both buyers and sellers manage the risks of property defects and avoid disputes that could lead to costly legal battles.

Contractual Recourse for Latent and Patent Defects

The real estate contract plays a big role in determining your rights and responsibilities regarding defects, whether they’re patent or latent. For patent defects, buyers generally have limited recourse after closing since these issues are considered discoverable upon inspection. However, when it comes to latent defects—those hidden problems not visible during an inspection—there’s more potential for legal action if the seller failed to disclose known defects.

In most states, including Florida, real estate contracts typically include provisions that allow buyers to inspect the property and request repairs for any issues they find. If the seller knowingly conceals latent defects, the buyer may have grounds for a claim of misrepresentation or fraud. Even with “as-is” clauses, sellers are still legally obligated to disclose any known latent defects that materially affect the property’s value. Failing to do so can open the door for buyers to seek damages or even void the contract.

Buyers should make sure the contract includes language that protects them if latent defects are discovered later. This might involve adding specific inspection clauses or requiring the seller to warrant certain aspects of the property’s condition. Sellers, on the other hand, should ensure they have fully disclosed any known issues to avoid post-sale litigation.

Conclusion

Dealing with latent and patent defects in real estate transactions requires careful attention from both buyers and sellers. Buyers need to be diligent about inspections and legal protections, while sellers must ensure full disclosure to avoid future liability.

Real estate contracts, disclosure statements, and expert inspections all play important roles in protecting both parties from potential disputes and financial losses after a transaction. When in doubt, consulting a legal professional can help you ensure you’re covered, no matter which side of the transaction you’re on.