What is Disclosure When Selling my Home?
"You are required by law to disclose material latent defects. These are known defects in the property that are not discoverable through a reasonable inspection and that may make the property dangerous or potentially dangerous to occupants or unfit for habitation.
You may also be required to disclose defects that would be expensive to fix, government and local authority notices and lack of development permits."
The above is a direct copy and paste from section 14 of the Exclusive Seller Representation Agreement provided to Alberta Realtors through the Alberta Real Estate Association.
This is only part of the disclosure statement, the other part of section 14 asks 4 questions of the seller:
- Are you aware of material latent defects in the property? Yes No
- Do you know of any defects that would be expensive to fix? Yes No
- Have you received any government or local authority notices? Yes No
- Do you know of any lack of permits for any development on the property? Yes No
I get a lot of quesitons from buyer clients what the seller is required to disclose, when I mention material latent defects, the next question typically is: "What is considered a material latent defect?"
Right back to the original statement, a material latent defect is something that could render the property dangerous or potentially dangerouts to occupants or unfit for habitation.
Some examples of that would be:
- Mold, Lead, Radon, Asbestos
- Cracks in the foundation
- Faulty electrical wiring
- Plumbing issues (leaks)
- Former unremediated grow op
Most of these issues are likely not discoverable through visible home inspection, these issues would be required to be disclosed by the seller.
The Real Estate Council of Alberta (RECA) also suggests that lack of permits for development on the property is also a defect. Keep in mind, a lot of properties have finished basements in Calgary and the seller may not know if there were permits pulled for the development because they may not have been the ones to do the work.
My Rights as a Buyer
So you buy a home and you find out there is a leak or a crack in the foundation.
This has happened to my buyer clients in the past, the unfortunate part was they didn't find the crack until a couple of years later. The basement was drywalled with no carpet, we inquired about that anolomy and were told that the seller was replacing the carpet and left it for the buyer to decide the colour and type.
Two years later it all came together, big rain happens, leak in the basement occurs. THAT was the reason for no carpet.
What does the buyer do in this case?
You have to make the decision if you want to litigate or not, if you want to take the seller to task you will have to take them to court. The onus at this point is on you, the buyer, to show that the seller knew about the crack (leak) and didn't disclose it.
Doesn't seem fair does it?
My advice? Don't just take the seller at their word, the example above was an instance where it seemed reasonable, the sellers were a little older and we thought they were trustworthy. Ask questions. If you feel there is something nefarious happening then make sure to provide some kind of a hold back into the contract, or, just walk away.
Following your gut and the advice of your Realtor will likely save you tens of thousands in the long run.
Section 7 talks about Warranties and Representations, here's the list:
- you have authority to sell the property as described, including attached and unattached goods.
- no one else has a legal right to the attached and unattached goods.
- you have told us about all third party rights to the property that you know about.
- all information you give us is true to the best of your knowledge. 7.2 You warrant, to the best of your knowledge, the following are true:
- The land and buildings are currently being used according to municipal bylaws.
- The buildings and land improvements are entirely on the land and not on any easement, right-of-way, or neighbouring lands (unless there is a registered agreement on title).
- The location of the buildings or improvements meet municipal bylaws or regulations or the buildings and improvements are “nonconforming buildings” as defined in the Municipal Government Act (Alberta).
- The land and buildings are currently being used according to, and the location of the buildings and land improvements meet, the restrictive covenants on title (if any).
- You are not a non-resident of Canada under the Income Tax Act (Canada).
Another story....a client purchased a home and the seller disclosed that the fence that was built was bult within the easement that the city allows. It was a corner lot and the fence was within the 1 meter from the sidewalk that the city allows for easement.
The buyer had the choice to either accept the fence where it was, apply for and purchase title insurance or to ask the seller to move the fence.
The buyer accepted the Real Property Report 'as-is' so that he could enjoy the yard space. When he goes to sell the home, the same disclosure will be required.
The RPR will show all of the outbuildings on the property, fence lines, patios, decks etc. If there is something in the yard that isn't on the RPR, the seller has the obligation to supply a new and updated RPR or to offer title insurance.
If I'm the buyer, unless I am looking to remove or alter the oubuilding or the fences or the deck/patio, I am asking for the updated RPR.
At the end of the day, disclosure is very important, the seller is signing off on the listing agreement that they are going to let you know if there are any issues in the home. The purchase contract is getting them to verify the disclosures that they agreed to when they listed the home.
This doesn't take the onus off of the buyer to ask questions, to do their due diligence, do a google search on the home and make sure to attend the home inspection, ask questions and only waive that condition when you are comfortable to do so.