The old Latin maxim Caveat Emptor means "Buyer Beware" and it is very much relevant to all real estate transactions in Ontario in 2012. The maxim means that a buyer of the property takes the property as it is and has no recourse after closing against the seller for any defects. If the buyer discovers a crack in the foundation after closing there is no recourse against the seller.
The rationale behind the rule was put this way by the Supreme Court of Canada, "The rationale stems from the laissez-faire attitudes of the eighteenth and nineteenth centuries and the notion that a purchaser must fend for himself, seeking protection by express warranty or by independent examination of the premises. If he fails to do either, he is without remedy either at law or in equity, in the absence of fraud or fundamental difference between that which was bargained for and that obtained."
In practical terms what this means is that purchasers of land should protect themselves either by insisting on an express warranty in the agreement to purchase OR by hiring an expert to examine the premises before finalizing the deal. Although the caveat emptor rule is centuries old, it has more or less survived intact in matters relating to real estate.
Now what would a legal rule be without exceptions? There are exceptions to the rigorous application of the rule in real estate transactions. The nature of these exceptions depends on whether the defect complained of is a patent defect or a latent defect. Patent defects are defects that are discoverable by inspection and ordinary vigilance on the part of the purchaser. Latent defects are defects that would not be apparent to an ordinary purchaser during an inspection.
So, if a purchaser fails to discover a patent defect before closing, he is out of luck. An obvious example would be a broken window. If the basement window was broken when the purchaser signed the agreement and the purchaser only discovered this the day after closing, the purchaser has no recourse against the vendor, absent any express warranties in the agreement. A less obvious example would be a central air conditioning unit that was broken in March when the purchaser signed the agreement, and the purchaser only discovered the defect on moving in on a hot and steamy day in June, then the purchaser has no recourse against the vendor, absent any express warranties in the agreement.
The rationale behind the rule was put this way by the Supreme Court of Canada, "The rationale stems from the laissez-faire attitudes of the eighteenth and nineteenth centuries and the notion that a purchaser must fend for himself, seeking protection by express warranty or by independent examination of the premises. If he fails to do either, he is without remedy either at law or in equity, in the absence of fraud or fundamental difference between that which was bargained for and that obtained."
In practical terms what this means is that purchasers of land should protect themselves either by insisting on an express warranty in the agreement to purchase OR by hiring an expert to examine the premises before finalizing the deal. Although the caveat emptor rule is centuries old, it has more or less survived intact in matters relating to real estate.
Now what would a legal rule be without exceptions? There are exceptions to the rigorous application of the rule in real estate transactions. The nature of these exceptions depends on whether the defect complained of is a patent defect or a latent defect. Patent defects are defects that are discoverable by inspection and ordinary vigilance on the part of the purchaser. Latent defects are defects that would not be apparent to an ordinary purchaser during an inspection.
So, if a purchaser fails to discover a patent defect before closing, he is out of luck. An obvious example would be a broken window. If the basement window was broken when the purchaser signed the agreement and the purchaser only discovered this the day after closing, the purchaser has no recourse against the vendor, absent any express warranties in the agreement. A less obvious example would be a central air conditioning unit that was broken in March when the purchaser signed the agreement, and the purchaser only discovered the defect on moving in on a hot and steamy day in June, then the purchaser has no recourse against the vendor, absent any express warranties in the agreement.