Irving Mitchell Kalichman LLP
In certain circumstances, a party’s initial reaction is important to the preservation of its legal rights. The discovery of latent defects in a building definitely falls into that category. Indeed, in such cases, the first actions taken by the discovering party are crucial to the safeguard of its legal rights as quick repairs might lead to the loss of the opportunity to be indemnified by the seller. We therefore discuss below best practices to ensure that no such consequence befalls you.
As stated by the Supreme Court of Canada in ABB Inc. v. Domtar Inc. (2007] 3 S.C.R. 461), latent defects, also sometimes called hidden defects, have four characteristics. Such defects must be (a) hidden, (b) sufficiently important, (c) existing at the time of the sale and (d) unknown to the purchaser. Article 1726 of the Civil Code of Quebec makes it an obligation for the seller of a good to warrant that the property is free from these defects, such that a seller that knew or could not have been unaware of the existence of the defects is liable for all damages suffered, including obviously the cost of the repairs.
What to do when discovering a latent defect
When you discover a latent defect, you should immediately take the three following courses of action: (a) document the existence and scope of the defect, (b) call in a contractor to assess the extent of the damage and provide you with an estimate and (c) send a written notice to the seller detailing the existence of the defect and asking him to immediately effect the necessary repairs.
The first step is necessary to preserve evidence of what you initially found. Dated pictures and videotaped images are always very useful evidence down the line to show not only the existence of the defect and its hidden nature, but also the extent of the damage. You may also want to have witnesses that can later testify review the defects. This is also useful for insurance purposes. In that regard, you should immediately advise your homeowner insurers and provide them with copies of your pictures and images.
The second serves a similar purpose, but also provides you with a proper evaluation of the damage suffered to your property. That evaluation will be necessary for you to make the appropriate demands from the seller and convince him of the seriousness of the problem. It will also allow you to determine whether repairs are urgent (more on that below).
The third step is absolutely necessary from a legal perspective. Indeed, Article 1739 of the Civil Code of Quebec states that the buyer who discovers hidden defects must provide notice in writing to the seller within a reasonable time after discovering them. Although, in extraordinary circumstances, verbal notices have sometimes been considered sufficient (see Financement Millénium 2000 inc. v. Constructions Tribo inc., 2010 QCCS 6234), in general Quebec Courts have confirmed that the failure to provide such a notice in writing will cause the buyer to forfeit his claim (see Aviva, compagnie d'assurances du Canada v. Nissan Canada, 2010 QCCQ 6661 and Intact compagnie d'assurances v. Mapp, 2011 QCCS 3929).
That notice needs to advise the seller of the existence of the defect, as well as to give him a reasonable period of time (usually ten days) to come inspect the premises and have the necessary corrective work performed. Said notice should also provide that the failure of the seller to remedy the situation will cause the buyer to have the remedial work done at the seller’s expense.
No corrective work should ever be undertaken by the buyer until the time period set out in the notice has elapsed, unless it is urgent (e.g. flooding). Furthermore, the work can also be carried out before the expiry of the delay provided when (a) the seller has clearly indicated that he does not intend to remedy the situation or (b) where the vendor has renounced to the notice (see Chahrouri v. Gazaille, 2011 QCCS 3911).
The discovery of hidden defects can be a traumatic experience, causing you to incur substantial expenses and disrupting your life for a significant period of time. It is nonetheless necessary to assess the situation calmly and follow the basic steps underlined above in order to ensure that your rights to file a claim against the seller are safeguarded. In that regard, contacting a lawyer from the outset might very well save you time and money in the long run.
Neutral reference:  CRL Extra 1
An edited version of this post was initially published on the legal matters page of the Montreal Gazette (http://www.montrealgazette.com/business/legal-matters/index.html). The opinions expressed therein are those of the author and do not necessarily reflect the views of the YBAM, the CRL or the team of this Blog.